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Income Taxes
 6 Months Ended
May 05, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the fiscal quarter and two fiscal quarters ended May 5, 2019, our benefit from income taxes was $36 million and $239 million, respectively, compared to $2,637 million and $8,423 million for the fiscal quarter and two fiscal quarters ended May 6, 2018, respectively.
The benefit for the fiscal quarter ended May 5, 2019 was primarily due to $137 million of excess tax benefits from stock-based awards that vested or were exercised during the period, partially offset by $113 million of expense from a change in estimate of our fiscal year 2018 provision resulting from regulations issued related to the U.S. Tax Cuts and Jobs Act (the “2017 Tax Reform Act”).
The benefit from income taxes for the corresponding 2018 fiscal quarter included the impact of the Redomiciliation Transaction and related internal reorganizations. This impact included tax benefits from the reduction of $1,063 million in unrecognized federal tax benefits related to a one-time transition tax (the “Transition Tax”), $431 million in the Transition Tax payable and $1,162 million from the remeasurement of withholding taxes on undistributed earnings, partially offset by a $91 million tax provision on foreign earnings and profits subject to U.S. tax.
The benefit for the two fiscal quarters ended May 5, 2019 was primarily due to $172 million of excess tax benefits from stock-based awards that vested or were exercised during the period, the recognition of gross uncertain tax benefits as a result of audit settlements and lapses of statutes of limitations, and the partial release of $54 million of our valuation allowance as a result of the CA Merger, partially offset by $113 million of expense from a change in estimate of our fiscal year 2018 provision resulting from regulations issued related to the 2017 Tax Reform Act.
On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118. This guidance allowed registrants a “measurement period,” not to exceed one year from the date of enactment, to complete their accounting for the tax effects of the 2017 Tax Reform Act. We relied on this guidance to refine our estimates of the impact of the 2017 Tax Reform Act during the measurement period. The measurement period ended during our fiscal quarter ended February 3, 2019, and no adjustments were recorded. As a result, we consider our accounting for the tax effects of the 2017 Tax Reform Act to be complete based on our interpretation of the law and subsequently issued guidance. However, it is expected that the U.S. Treasury will continue to issue regulations and other guidance on the application of certain provisions of the 2017 Tax Reform Act that may impact our interpretation of the rules and our calculation of the tax impact of the Transition Tax or other provisions of the 2017 Tax Reform Act. We recorded income tax expense of $113 million during the fiscal quarter ended May 5, 2019 as a result of the issuance of such regulations during the period.
The two fiscal quarters ended May 5, 2019 also included the impact of several provisions of the 2017 Tax Reform Act that take effect for us for the first time in fiscal year 2019, including a new minimum tax on certain foreign earnings, known as Global Intangible Low-taxed Income (“GILTI”), a new incentive for foreign-derived intangible income, changes to the limitation on the deductibility of certain executive compensation, and new limitations on the deductibility of interest expense. We have elected to account for GILTI as a period cost rather than on a deferred basis.
In connection with CA Merger in November 2018, we established $2,369 million of net deferred tax liabilities on the excess of the book basis over the tax basis of acquired identified intangible assets and investments in certain foreign subsidiaries that had not been indefinitely reinvested, partially offset by acquired tax attributes. The net deferred tax liabilities are based upon certain assumptions underlying our preliminary purchase price allocation. Upon finalization of the purchase price allocation, additional adjustments to the amount of our net deferred taxes may be required, provided we are within the measurement period.
The benefit from income taxes for the corresponding 2018 fiscal period was principally a result of provisional income tax benefits realized from the enactment of the 2017 Tax Reform Act. The 2017 Tax Reform Act made significant changes to the U.S. Internal Revenue Code, including, but not limited to, a decrease in the U.S. corporate tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a participation exemption regime, and the transition tax on the mandatory deemed repatriation of accumulated non-U.S. earnings of U.S. controlled foreign corporations as of December 31, 2017.
As a result of the 2017 Tax Reform Act, we recorded a total provisional benefit of $7,303 million during the two fiscal quarters ended May 6, 2018. This provisional benefit included $91 million related to the remeasurement of certain deferred tax assets and liabilities, which was based on the tax rates at which they were expected to be reversed in the future. The provisional benefit also included $7,212 million related to the Transition Tax, which was primarily due to a reduction of $10,392 million in our federal deferred income tax liabilities on accumulated non-U.S. earnings, partially offset by $2,116 million of federal provisional long-term Transition Tax payable and $1,116 million of unrecognized federal tax benefits related to the Transition Tax.
We also recognized an income tax benefit for $127 million and $155 million of excess tax benefits from stock-based awards that vested or were exercised during the fiscal quarter and two fiscal quarters ended May 6, 2018, respectively.
Uncertain Tax Positions
The balance of gross unrecognized tax benefits was $4,107 million and $4,030 million as of May 5, 2019 and November 4, 2018, respectively. This increase was primarily due to the recognition of uncertain tax positions related to the CA Merger, which were initially estimated as of the CA Acquisition Date, offset by audit settlements and lapses of statutes of limitations. We continue to reevaluate these items with any adjustments to our preliminary estimates recognized, provided we are within the measurement period and we continue to collect information in order to determine their estimated values.
Accrued interest and penalties are included in other long-term liabilities on the condensed consolidated balance sheets. As of May 5, 2019 and November 4, 2018, the combined amount of cumulative accrued interest and penalties was approximately $307 million and $190 million, respectively.
As of May 5, 2019 and November 4, 2018, approximately $4,414 million and $4,220 million, respectively, of the unrecognized tax benefits, including accrued interest and penalties, would affect our effective tax rate if favorably resolved.
We are subject to U.S. income tax examination for fiscal years 2013 and later. Certain of our acquired companies are subject to tax examinations in major jurisdictions outside of the U.S. for fiscal years 2008 and later. It is possible that our existing unrecognized tax benefits may change up to $123 million as a result of lapses of the statute of limitations for certain audit periods and/or audit examinations expected to be completed within the next 12 months.