Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 27, 2025
Income Tax Disclosure [Abstract]  
Income Taxes [Text Block]
Note 8 : Income Taxes
Provision for (Benefit From) Taxes
Years Ended ($ In Millions) Dec 27, 2025 Dec 28, 2024 Dec 30, 2023
Income (losses) before taxes:
U.S.
 $ (3,231) $ (13,450) $ (4,749)
Non-U.S.
 4,788  2,241 5,511
Total income before taxes $ 1,557  $ (11,210) $ 762
Provision for (benefit from) taxes:
Current:
Federal $ 310  $ 600 $ 538
State (18) (8) 23
Non-U.S.
 910  1,364 535
Total current provision for (benefit from) taxes 1,202  1,956 1,096
Deferred:
Federal 245  6,192 (2,048)
State (11) 67 (21)
Non-U.S.
 95  (192) 60
Total deferred provision for (benefit from) taxes 329  6,067 (2,009)
Total provision for (benefit from) taxes $ 1,531  $ 8,023 $ (913)
Effective tax rate 98.3  % 71.6  % (119.8) %
We adopted ASU 2023-09 "Income Taxes (Topic 740): Improvements To Income Tax Disclosures" on a prospective basis beginning with the year ended December 27, 2025. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our actual global effective amount and rate for the year ended December 27, 2025:
Dec 27, 2025
Year Ended ($ In Millions) Amount Percent
U.S. federal statutory tax $ 327  21.0  %
State and local income tax, net of federal income tax effect (23) (1.5) %
Foreign tax effects:
 China:
  Withholding tax 314  20.2  %
  Other adjustments (51) (3.3) %
 Other foreign jurisdictions (205) (13.2) %
Effects of cross-border tax laws:
 Subpart F income inclusion 248  15.9  %
 Foreign tax credit (707) (45.4) %
 Other 145  9.3  %
Tax credits:
Research and development credit (977) (62.7) %
Changes in valuation allowances 2,629  168.9  %
Nontaxable or nondeductible items:
 Share-based compensation 120  7.7  %
 Altera divestiture and deconsolidation (1,357) (87.2) %
 Mark to market on equity securities 377  24.2  %
 Other 97  6.2  %
Changes in unrecognized tax benefits 334  21.5  %
Other adjustments 260  16.7  %
Global effective tax $ 1,531  98.3  %
The following table presents the required disclosures prior to our adoption of ASU 2023-09 and reconciles the U.S. federal statutory income tax rate to the actual global effective income tax rate for the years ended December 28, 2024 and December 30, 2023:
Years Ended
 Dec 28, 2024 Dec 30, 2023
Expected provision (benefit) at statutory federal income tax rate
 (21.0) % 21.0  %
Increase (reduction) in rate resulting from:
Federal valuation allowance
 93.2  — 
Goodwill impairment
 2.1  — 
Share-based compensation
 4.2  34.3 
Unrecognized tax benefits and settlements 1.3  16.3 
Non-U.S. income taxed at different rates
 (5.3) (60.6)
Research and development tax credits (5.6) (99.0)
Foreign derived intangible income benefit
 —  (25.1)
Restructuring of certain non-U.S. subsidiaries
—  (15.8)
Non-deductibility of European Commission fine
 —  11.1 
Other 2.7  (2.0)
Effective tax rate 71.6  % (119.8) %
On July 4, 2025, the One Big Beautiful Bill Act (Act) was signed into law. The Act makes permanent key elements of the Tax Cuts and Jobs Act, including 100 percent bonus depreciation, domestic research cost expensing, increases the AMIC to 35 percent from 25 percent and makes modifications to the international tax framework. The Act includes multiple effective dates, with certain provisions effective in 2025 and others phased in through 2027. We continue to evaluate the impact of the Act's provisions that take effect in future years.
As noted in the 2025 rate reconciliation above, we derive the effective tax rate benefit, or detriment, attributed to non-U.S. income taxed at different rates primarily from our operations in China, among others. We are subject to reduced tax rates in Israel and Malaysia as long as we conduct certain eligible activities and make certain capital investments. We have conditional reduced tax rates that expire at various dates through 2056, and we expect to apply for renewals upon expiration, if available. In 2025, the tax benefit specifically attributable to tax holidays was $79 million ($67 million in 2024 and $129 million in 2023) with a $0.02 benefit to diluted EPS ($0.02 in 2024 and $0.03 in 2023).
Deferred and Current Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and liabilities at the end of each period were as follows:
(In Millions)
 Dec 27, 2025 Dec 28, 2024
Deferred tax assets:
R&D expenditures capitalization $ 12,203  $ 10,709 
State credits and net operating losses 3,165  2,830 
Inventory 628  1,054 
Accrued compensation and other benefits 921  970 
Share-based compensation 481  444 
Litigation charge 320  447 
Other, net 1,547  1,510 
Gross deferred tax assets 19,265  17,964 
Valuation allowance (16,402) (13,974)
Total deferred tax assets 2,863  3,990 
Deferred tax liabilities:
Property, plant and equipment
 (3,294) (4,063)
Licenses and intangibles (466) (159)
Unrealized gains on investments and derivatives (168) (224)
Other, net (51) (403)
Total deferred tax liabilities (3,979) (4,849)
Net deferred tax assets (liabilities) $ (1,116) $ (859)
Reported as:
Deferred tax assets $ 570  $ 603 
Deferred tax liabilities (1,686) (1,462)
Net deferred tax assets (liabilities) $ (1,116) $ (859)
Changes in the valuation allowance for deferred tax assets were as follows:
Years Ended (In Millions) Dec 27, 2025 Dec 28, 2024 Dec 30, 2023
Balance at Beginning of Year
 $ 13,974  $ 3,047  $ 2,586 
Additions charged to expenses/other accounts
 2,428  10,927  461 
(Deductions) recoveries, net
 —  —  — 
Balance at End of Year
 $ 16,402  $ 13,974  $ 3,047 
Deferred tax assets are included within other long-term assets on the Consolidated Balance Sheets. Deferred tax liabilities are included within other long-term liabilities on the Consolidated Balance Sheets.
The $2.4 billion change in valuation allowance from December 28, 2024 to December 27, 2025 is substantially attributable to the uncertainty regarding the realizability of our U.S. deferred tax assets.
As of December 27, 2025, our federal and non-U.S. net operating loss carryforwards for income tax purposes were $261 million and $2.9 billion, respectively. The majority of the federal and non-U.S. net operating loss carryforwards have no expiration date. The remaining federal and non-U.S. net operating loss carryforwards expire at various dates through 2040.
As of December 27, 2025, we have undistributed earnings of certain foreign subsidiaries of $22.2 billion that we have indefinitely invested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.
Current income taxes receivable of $7.6 billion as of December 27, 2025 ($2.6 billion as of December 28, 2024) are included in other current assets.
Long-term income taxes payable of $1.5 billion as of December 27, 2025 ($1.6 billion as of December 28, 2024) are primarily composed of uncertain tax positions, reduced by the associated deduction for state taxes and non-U.S. tax credits.
Uncertain Tax Positions
Years Ended (In Millions) Dec 27, 2025 Dec 28, 2024 Dec 30, 2023
Beginning gross unrecognized tax benefits $ 1,130  $ 1,124  $ 1,229 
Settlements and effective settlements with tax authorities (52) (59) (288)
Changes in balances related to tax position taken during prior periods 201  (8) — 
Changes in balances related to tax position taken during current period 105  73 183
Ending gross unrecognized tax benefits $ 1,384  $ 1,130  $ 1,124 
If the remaining balance of unrecognized tax benefits were recognized in a future period, it would result in a tax benefit of $949 million as of December 27, 2025 ($946 million as of December 28, 2024) and a reduction in the effective tax rate. Interest, penalties and accrued interest related to unrecognized tax benefits were insignificant in the periods presented.
We file federal, state and non-U.S. tax returns. We are no longer subject to U.S. federal and non-U.S. tax examinations for years prior to 2018 and 2015, respectively. For U.S. state tax returns, we are no longer subject to tax examination for years prior to 2015.
Cash Taxes Paid
We adopted ASU 2023-09 on a prospective basis for the year ended December 27, 2025 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended December 27, 2025:
Year Ended (In Millions) Dec 27, 2025
Federal taxes $ 1,393 
State taxes (7)
Foreign taxes:
China 276 
Israel 197 
Other foreign jurisdictions 440 
Total cash taxes paid $ 2,299 
Below is a summary of income taxes paid for the years ended December 28, 2024 and December 30, 2023:
Years Ended (In Millions)
 Dec 28, 2024 Dec 30, 2023
Cash paid during the year for:
  Income taxes, net of refunds
 $ 2,202  $ 2,621