Income Taxes

12 Months Ended

Oct. 02, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income TaxesComponents of earnings before income taxes (in millions):

Fiscal Year Ended	Oct 2, 2022		Oct 3, 2021		Sep 27, 2020
United States	$	3,484.9	$	4,138.5	$	904.6
Foreign	747.0		1,218.4		259.8
Total earnings before income taxes	$	4,231.9	$	5,356.9	$	1,164.4

Provision/(benefit) for income taxes (in millions):

Fiscal Year Ended	Oct 2, 2022		Oct 3, 2021		Sep 27, 2020
Current taxes:
U.S. federal	$	477.6	$	681.8	$	49.9
U.S. state and local	164.0		190.0		36.9
Foreign	283.8		409.8		181.4
Total current taxes	925.4		1,281.6		268.2
Deferred taxes:
U.S. federal	92.6		10.4		(8.4)
U.S. state and local	10.5		(6.4)		(4.8)
Foreign	(80.0)		(129.0)		(15.3)
Total deferred taxes	23.1		(125.0)		(28.5)
Total income tax expense	$	948.5	$	1,156.6	$	239.7

Reconciliation of the statutory U.S. federal income tax rate with our effective income tax rate:

Fiscal Year Ended	Oct 2, 2022		Oct 3, 2021		Sep 27, 2020
Statutory rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal tax benefit	3.3		2.7		2.2
Foreign rate differential	0.3		0.5		(3.2)
Foreign derived intangible income	(0.8)		(0.5)		(1.4)
Valuation allowances	(0.7)		0.2		10.0
Excess tax benefits of stock-based compensation	(0.5)		(0.9)		(4.2)
Charitable contributions	(0.3)		(0.4)		(1.7)
Change in tax rates	0.0		(1.3)		(2.2)
Other, net	0.1		0.3		0.1
Effective tax rate	22.4	%	21.6	%	20.6	%

As of October 2, 2022, in certain foreign subsidiaries in which we are partially indefinitely reinvested, the gross taxable temporary difference between the accounting basis and tax basis was approximately $1.5 billion for which there could be up to approximately $230 million of unrecognized tax liability.

Tax effect of temporary differences and carryforwards that comprise significant portions of deferred tax assets and liabilities (in millions):

	Oct 2, 2022		Oct 3, 2021
Deferred tax assets:
Operating lease liabilities	$	2,289.1	$	2,395.2
Stored value card liability and deferred revenue	1,662.6		1,679.4
Intangible assets and goodwill	313.6		317.7
Other	605.7		641.0
Total	$	4,871.0	$	5,033.3
Valuation allowance	(228.7)		(275.3)
Total deferred tax asset, net of valuation allowance	$	4,642.3	$	4,758.0
Deferred tax liabilities:
Operating lease, right-of-use assets	(2,194.3)		(2,296.5)
Property, plant and equipment	(482.2)		(451.2)
Other	(284.7)		(284.0)
Total	(2,961.2)		(3,031.7)
Net deferred tax asset (liability)	$	1,681.1	$	1,726.3
Reported as:
Deferred income tax assets	1,799.7		1,874.8
Deferred income tax liabilities (included in Other long-term liabilities)	(118.6)		(148.5)
Net deferred tax asset (liability)	$	1,681.1	$	1,726.3

The valuation allowances as of October 2, 2022 and October 3, 2021 were primarily related to net operating losses and other deferred tax assets of consolidated foreign subsidiaries.

As of October 2, 2022, we had federal net operating loss carryforwards of $70.8 million which have an indefinite carryforward period, state net operating loss carryforwards of $78.6 million which will begin to expire in fiscal 2024, federal tax credit carryforwards of $31.8 million which will begin to expire in fiscal 2030, state tax credit carryforwards of $1.4 million which will begin to expire in fiscal 2024 and foreign net operating loss carryforwards of $369.1 million, of which $102.0 million have an indefinite carryforward period and the remainder expire at various dates starting from fiscal 2023.

Uncertain Tax Positions

As of October 2, 2022, we had $89.7 million of gross unrecognized tax benefits of which $65.1 million, if recognized, would affect our effective tax rate. We recognized an expense of $2.3 million, a benefit of $4.6 million and an expense of $3.0 million of interest and penalties in income tax expense, prior to the benefit of the federal tax deduction, for fiscal 2022, 2021 and 2020, respectively. As of October 2, 2022 and October 3, 2021, we had accrued interest and penalties of $9.4 million and $7.1 million, respectively, within our consolidated balance sheets.

The following table summarizes the activity related to our unrecognized tax benefits (in millions):

	Oct 2, 2022		Oct 3, 2021		Sep 27, 2020
Beginning balance	$	82.6	$	123.7	$	132.1
Increase related to prior year tax positions	0.2		4.8		11.1
Decrease related to prior year tax positions	(0.7)		(11.9)		(0.5)
Increase related to current year tax positions	9.0		8.9		9.8
Decreases related to settlements with taxing authorities	—		(4.4)		—
Decrease related to lapsing of statute of limitations	(1.4)		(38.5)		(28.8)
Ending balance	$	89.7	$	82.6	$	123.7

We are currently under examination, or may be subject to examination, by various U.S. federal, state, local and foreign tax jurisdictions for fiscal 2016 through 2021. We are no longer subject to U.S. federal examination for years prior to fiscal 2018, U.S. state and local examinations for years prior to fiscal 2016 or examination in any material international markets prior to fiscal 2017.

We do not expect a significant amount of Company's gross unrecognized tax benefits to be recognized by the end of fiscal 2023 for reasons such as a lapse of the statute of limitations or resolution of examinations with tax authorities.