GILTI benefit reversed

[Table of Contents](#ie3b4dd133255408488aec6011c49b801_10)APPLIED MATERIALS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)Note 16     Income TaxesThe components of income before income taxes for each fiscal year were as follows: 

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
|  |  |  |  |  |  |
|   | (In millions) |
| U.S. | $ | 512  |  |  | $ | 92  |  |  | $ | 363  |  |
| Foreign | 6,259  |  |  | 4,074  |  |  | 2,906  |  |
|  | $ | 6,771  |  |  | $ | 4,166  |  |  | $ | 3,269  |  |

The components of the provision for income taxes for each fiscal year were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
|  |  |  |  |  |  |
|   | (In millions) |
| Current: |  |  |  |  |  |
| U.S. | $ | 462  |  |  | $ | 196  |  |  | $ | 240  |  |
| Foreign | 344  |  |  | 263  |  |  | 260  |  |
| State | 17  |  |  | 20  |  |  | 12  |  |
|  | 823  |  |  | 479  |  |  | 512  |  |
| Deferred: |  |  |  |  |  |
| U.S. | (3) |  |  | (3) |  |  | 8  |  |
| Foreign | 67  |  |  | 76  |  |  | 46  |  |
| State | (4) |  |  | (5) |  |  | (3) |  |
|  | 60  |  |  | 68  |  |  | 51  |  |
|  | $ | 883  |  |  | $ | 547  |  |  | $ | 563  |  |

A reconciliation between the statutory U.S. federal income tax rate and Applied’s actual effective income tax rate for each fiscal year is presented below: 

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
| Tax provision at U.S. statutory rate | 21.0  | % |  | 21.0  | % |  | 21.0  | % |
|  |  |  |  |  |  |
| Effect of foreign operations taxed at various rates | (7.0) |  |  | (5.9) |  |  | (5.9) |  |
| Changes in prior years’ unrecognized tax benefits | 0.2  |  |  | 0.5  |  |  | 2.6  |  |
| Resolutions of prior years’ income tax filings | (0.1) |  |  | (1.0) |  |  | (0.1) |  |
| Research and other tax credits | (0.9) |  |  | (1.3) |  |  | (1.1) |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
|  |  |  |  |  |  |
| Other | (0.2) |  |  | (0.2) |  |  | 0.7  |  |
|  | 13.0  | % |  | 13.1  | % |  | 17.2  | % |

Before the Tax Act, U.S. income tax had not been provided for certain unrepatriated earnings that were considered indefinitely reinvested. Income tax is now provided for all unrepatriated earnings.Applied’s effective tax rate for fiscal 2021 was slightly lower than fiscal 2020 primarily due to higher proportion of pre-tax income in lower tax jurisdictions, partially offset by resolutions of prior years’ income tax filings. The effective tax rate for fiscal 2020 was lower than fiscal 2019 primarily due to a decline in the tax expense from changes to uncertain tax provisions year-over-year, an increased tax benefit from tax credits, and increased excess stock compensation tax benefits. This benefit was partly offset by an unfavorable settlement of an uncertain tax position in fiscal 2020. On June 14, 2019, the U.S. government released regulations that significantly affect how the global intangible low-taxed income (GILTI) provision of the Tax Cuts and Jobs Act (Tax Act) is interpreted. As a result, Applied reversed a tax benefit of $96 million in the third quarter of fiscal 2019 that had been realized in the first half of fiscal 2019. An accounting policy may be selected to treat GILTI temporary differences in taxable income either as a current-period expense when incurred (period cost method) or factor such amounts into the measurement of deferred taxes (deferred method). Applied has chosen the period cost method.99
