v3.23.3
Income Taxes
 12 Months Ended
Aug. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

Our income tax (provision) benefit consisted of the following:
For the year ended202320222021
Income (loss) before income taxes and equity in net income (loss) of equity method investees
U.S.$235 $112 $(211)
Foreign(5,893)9,459 6,429 
 $(5,658)$9,571 $6,218 
Income tax (provision) benefit
Current
U.S. federal$(5)$(65)$(42)
State(1)(1)(1)
Foreign(178)(528)(370)
 (184)(594)(413)
Deferred
U.S. federal(84)(166)(9)
State— (225)28 
Foreign91 97 — 
7 (294)19 
Income tax (provision) benefit$(177)$(888)$(394)
The table below reconciles our tax (provision) benefit based on the U.S. federal statutory rate to our effective rate:
For the year ended202320222021
U.S. federal income tax (provision) benefit at statutory rate
$1,188 21.0 %$(2,010)21.0 %$(1,306)21.0 %
U.S. tax on foreign operations6 0.1 %(322)3.4 %(226)3.6 %
Change in valuation allowance(50)(0.9)%(241)2.5 %54 (0.9)%
Change in unrecognized tax benefits(30)(0.5)%(67)0.7 %(238)3.8 %
Foreign tax rate differential(1,285)(22.8)%1,601 (16.7)%951 (15.4)%
Research and development tax credits43 0.8 %66 (0.7)%123 (2.0)%
State taxes, net of federal benefit37 0.7 %— — %59 (0.9)%
Debt premium deductions— — %— — %130 (2.1)%
Other(86)(1.5)%85 (0.9)%59 (0.8)%
Income tax (provision) benefit$(177)(3.1)%$(888)9.3 %$(394)6.3 %

We operate in a number of jurisdictions outside the United States, including Singapore, where we have tax incentive arrangements. These incentives expire, in whole or in part, at various dates through 2034 and are conditional, in part, upon meeting certain business operations and employment thresholds. As a result of a loss before taxes and geographic mix of income, the benefit from tax incentive arrangements was not material for 2023. These arrangements reduced our tax provision by $1.12 billion (benefiting our diluted earnings per share by $1.00) for 2022 and by $758 million ($0.66 per diluted share) for 2021.

As of August 31, 2023, certain non-U.S. subsidiaries had cumulative undistributed earnings of $4.28 billion that were deemed to be indefinitely reinvested. A provision has not been recognized to the extent that distributions from such subsidiaries are subject to additional foreign withholding or state income tax. Determination of the amount of unrecognized deferred tax liabilities related to investments in these foreign subsidiaries is not practicable.
Deferred income taxes reflect the net tax effects of temporary differences between the bases of assets and liabilities for financial reporting and income tax purposes as well as carryforwards. Deferred tax assets and liabilities consist of the following:
As ofAugust 31,
2023		September 1,
2022
Deferred tax assets
Net operating loss and tax credit carryforwards$1,112 $796 
Accrued salaries, wages, and benefits39 157 
Operating lease liabilities135 138 
Inventories52 77 
Property, plant, and equipment— 44 
Other75 142 
Gross deferred tax assets1,413 1,354 
Less valuation allowance(528)(471)
Deferred tax assets, net of valuation allowance885 883 
Deferred tax liabilities
Right-of-use assets(115)(126)
Property, plant, and equipment
(31)— 
Other(100)(68)
Deferred tax liabilities(246)(194)
Net deferred tax assets$639 $689 
Reported as
Deferred tax assets$756 $702 
Deferred tax liabilities (included in other noncurrent liabilities)(117)(13)
Net deferred tax assets$639 $689 

We assess positive and negative evidence for each jurisdiction to determine whether it is more likely than not that existing deferred tax assets will be realized. As of August 31, 2023, and September 1, 2022, we had a valuation allowance of $528 million and $471 million, respectively, against our net deferred tax assets, primarily related to carryforwards in U.S. states and Malaysia. Changes in 2023 in the valuation allowance were due to adjustments based on management's assessment of the realizability of tax credits, allowances and net operating losses based on a level that is more likely than not to be realized.

As of August 31, 2023, our net operating loss carryforward amounts and expiration periods, as reported to tax authorities, were as follows:
Year of Expiration
Singapore
Malaysia
State
Japan
OtherTotal
2024 - 2028$— $— $47 $336 $25 $408 
2029 - 2033— — 348 321 109 778 
2034 - 2038— — 237 — — 237 
2039 - 2043— — 183 — — 183 
Indefinite1,688 1,025 60 — 202 2,975 
$1,688 $1,025 $875 $657 $336 $4,581 
As of August 31, 2023, our federal and state tax credit carryforward amounts and expiration periods, as reported to tax authorities, were as follows:
Year of Tax Credit ExpirationU.S. FederalStateTotal
2024 - 2028$— $51 $51 
2029 - 2033— 120 120 
2034 - 2038— 137 137 
2039 - 2043306 5 311 
Indefinite— 131 131 
$306 $444 $750 

Below is a reconciliation of the beginning and ending amount of our unrecognized tax benefits:
For the year ended202320222021
Beginning unrecognized tax benefits$731 $660 $411 
Increases related to tax positions from prior years2 14 2 
Increases related to prior year tax positions taken in current year
27 — — 
Increases related to tax positions taken in current year17 80 260 
Decreases related to tax positions from prior years(33)(23)(13)
Ending unrecognized tax benefits$744 $731 $660 

As of August 31, 2023, gross unrecognized tax benefits were $744 million, which would have an impact of approximately $581 million on our effective tax rate in the future, if recognized. Amounts accrued for interest and penalties related to uncertain tax positions were not significant for any period presented. The resolution of tax audits or expiration of statute of limitations could also reduce our unrecognized tax benefits. Although the timing of final resolution is uncertain, the estimated potential reduction in our unrecognized tax benefits in the next 12 months would not be significant.

We and our subsidiaries file income tax returns with the U.S. federal government, various U.S. states, and various foreign jurisdictions throughout the world. We regularly engage in discussions and negotiations with tax authorities regarding tax matters, including transfer pricing, and we continue to defend any and all such claims presented. Our U.S. federal and state tax returns remain open to examination for 2018 through 2023. We are currently under audit by the Internal Revenue Service for our 2018 and 2019 tax years. In addition, tax returns that remain open to examination in Singapore, Taiwan and Japan range from the years 2014 to 2023. We believe that adequate amounts of taxes and related interest and penalties have been provided, and any adjustments as a result of examinations are not expected to materially adversely affect our business, results of operations, or financial condition.