Income Taxes (Notes)
|3 Months Ended|
Dec. 29, 2019
|Income Tax Disclosure [Abstract]|
|Income Taxes||Income Taxes
We estimate our annual effective income tax rate to be 11% for fiscal 2020, which is lower than the U.S. federal statutory rate since a significant portion of our income qualifies for preferential treatment as foreign-derived intangible income (FDII) at a 13% effective tax rate and due to benefits from our research and development tax credit. The effective tax rate of 2% for the first quarter of fiscal 2020 was lower than the estimated annual effective tax rate of 11% due to $102 million of discrete net tax benefits recorded in the first quarter of fiscal 2020, primarily related to excess tax benefits associated with share-based awards that vested in the first fiscal quarter, valuation allowance release on capital loss carryforwards and foreign currency gains on a noncurrent receivable related to our refund claim of Korean withholding tax. The effective tax rate of 91% benefit for the first quarter of fiscal 2019 included a $570 million tax benefit due to establishing new U.S. net deferred tax assets from making certain check-the-box elections.
The United States Treasury Department has issued proposed regulations on several provisions of the 2017 Tax Cuts and Jobs Act, including FDII and interest expense deduction limitations, which are expected to be finalized in the next several months. When finalized, these proposed regulations may adversely affect our provision for income taxes, results of operations and/or cash flows.
Unrecognized tax benefits were $1.8 billion and $1.7 billion at December 29, 2019 and September 29, 2019, respectively, and primarily relates 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 29, 2019 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://fasb.org/us-gaap/role/ref/legacyRef