|9 Months Ended|
Jun. 25, 2023
|Income Tax Disclosure [Abstract]|
|Income Taxes||Income Taxes
We estimate our annual effective income tax rate to be 6% for fiscal 2023, which is lower than the U.S. federal statutory rate, primarily due to (i) a significant portion of our income qualifying for preferential treatment as foreign-derived intangible income (FDII) at a 13% effective tax rate, which includes certain benefits discussed below from the new requirement to capitalize research and development expenditures for federal income tax purposes, (ii) a benefit from our federal research and development tax credit, (iii) benefits from fiscal 2021 and 2022 FDII deductions related to a change in sourcing of research and development expenditures and (iv) a benefit related to foreign currency gains on a noncurrent receivable related to our refund claim of Korean withholding tax. Our effective tax rate of 1% for the third quarter of fiscal 2023 was lower than our estimated annual effective tax rate of 6% primarily due to benefits from fiscal 2021 and 2022 FDII deductions related to a change in sourcing of research and development expenditures recognized discretely in the third quarter.
Beginning in fiscal 2023, for federal income tax purposes, we are required to capitalize and amortize domestic research and development expenditures over five years and foreign research and development expenditures over fifteen years (such expenditures were previously deducted as incurred). Our cash flows from operations will be adversely affected due to significantly higher cash tax payments. However, since the resulting deferred tax asset is established at the statutory rate of 21% (rather than the effective tax rate of 13% to 16% after considering the FDII deduction), capitalization favorably affects our provision for income taxes and results of operations. The adverse cash flow impact and favorable tax provision impact will diminish in future years as capitalized research and development expenditures continue to amortize.Income taxes payable (recorded in other current liabilities) were $1.4 billion and $634 million at June 25, 2023 and September 25, 2022, respectively. This increase was primarily due to an announcement (IR-2023-33) by the Internal Revenue Service (IRS), which postponed our remaining current year U.S. federal income tax-payment deadlines until October 2023.
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