Unrecognized tax benefit that could be reduced in next 12 months

  
Unrecognized Tax Benefits The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Years Ended | July 30, 2022 |  | July 31, 2021 |  | July 25, 2020 |
| Beginning balance | $ | 3,106  |  |  | $ | 2,518  |  |  | $ | 1,925  |  |
| Additions based on tax positions related to the current year | 157  |  |  | 224  |  |  | 188  |  |
| Additions for tax positions of prior years | 74  |  |  | 618  |  |  | 554  |  |
| Reductions for tax positions of prior years | (81) |  |  | (122) |  |  | (136) |  |
| Settlements | (69) |  |  | (93) |  |  | (4) |  |
| Lapse of statute of limitations | (86) |  |  | (39) |  |  | (9) |  |
| Ending balance | $ | 3,101  |  |  | $ | 3,106  |  |  | $ | 2,518  |  |

As of July 30, 2022, $2.2 billion of the unrecognized tax benefits would affect the effective tax rate if realized. We recognized net interest expense of $33 million, $74 million and $104 million during fiscal 2022, 2021, and 2020, respectively. Our net penalty expense for fiscal 2022, 2021, and 2020 was not material. Our total accrual for interest and penalties was $486 million, $444 million, and $340 million as of the end of fiscal 2022, 2021, and 2020, respectively. We are no longer subject to U.S. federal income tax audit for returns covering tax years through fiscal 2013. We are no longer subject to foreign or state income tax audits for returns covering tax years through fiscal 2003 and fiscal 2008, respectively.We regularly engage in discussions and negotiations with tax authorities regarding tax matters in various jurisdictions. We believe it is reasonably possible that certain federal, foreign, and state tax matters may be concluded in the next 12 months. Specific positions that may be resolved include issues involving transfer pricing and various other matters. We estimate that the unrecognized tax benefits at July 30, 2022 could be reduced by $1 billion in the next 12 months.(b)Deferred Tax Assets and LiabilitiesThe following table presents the breakdown for net deferred tax assets (in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | July 30, 2022 |  | July 31, 2021 |
| Deferred tax assets | $ | 4,449  |  |  | $ | 4,360  |  |
| Deferred tax liabilities | (55) |  |  | (134) |  |
| Total net deferred tax assets | $ | 4,394  |  |  | $ | 4,226  |  |

  
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