Income Taxes (Notes)
|3 Months Ended|
Dec. 27, 2020
|Income Tax Disclosure [Abstract]|
|Income Taxes||Income Taxes
As of the first quarter of fiscal 2021, we estimated our annual effective income tax rate to be 11% for fiscal 2021, which is lower than the U.S. federal statutory rate, primarily due to a significant portion of our income qualifying for preferential treatment as foreign-derived intangible income (FDII) at a 13% effective tax rate and due to benefits from our federal research and development tax credit. The effective tax rate of 6% for the first quarter of fiscal 2021 was lower than the estimated annual effective tax rate of 11% primarily due to $212 million of discrete net tax benefits recorded in the first quarter of fiscal 2021, which principally related to excess tax benefits associated with share-based awards that vested in the first fiscal quarter, foreign currency gains on a noncurrent receivable related to our refund claim of Korean withholding tax and valuation allowance release on foreign tax credit carryforwards. The effective tax rate of 2% for the first quarter of fiscal 2020 included $102 million of discrete net tax benefits recorded in the first quarter of fiscal 2020, which principally related to excess tax benefits associated with share-based awards that vested in the first fiscal quarter of fiscal 2020, valuation allowance release on capital loss carryforwards and foreign currency gains on a noncurrent receivable related to our refund claim of Korean withholding tax.
In the first quarter of fiscal 2021, the United States Treasury Department issued final regulations on the foreign tax credit, which generally are applicable beginning in fiscal 2021, with certain provisions retroactive to fiscal 2019. As a result of these regulations, our fiscal 2021 estimated annual effective tax rate increased by approximately 1%. The retroactive impact resulting from these new regulations, which was related to fiscal 2019 and fiscal 2020 and recorded discretely in the first quarter of fiscal 2021, was not significant.Unrecognized tax benefits were $2.0 billion and $1.9 billion at December 27, 2020 and September 27, 2020, respectively, and primarily related to our refund claim of Korean withholding tax. If successful, the refund will result in a corresponding reduction in U.S. foreign tax credits. We expect that the total amount of unrecognized tax benefits at December 27, 2020 will increase in the next 12 months as licensees in Korea continue to withhold taxes on future payments due under their licensing agreements at a rate higher than we believe is owed; such increase is not expected to have a significant impact on our income tax provision.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef