v3.25.2
Income Tax Expense
 12 Months Ended
Jun. 27, 2025
Income Tax Disclosure [Abstract]  
Income Tax Expense Income Taxes
Income (Loss) Before Taxes

The domestic and foreign components of Income (loss) before taxes were as follows:
202520242023
(in millions)
Foreign$2,602 $(492)$(696)
Domestic(1,472)(247)(153)
Income (loss) before taxes$1,130 $(739)$(849)

Income Tax Expense (Benefit)

The components of Income tax expense (benefit) were as follows:
202520242023
(in millions)
Current:
Foreign$213 $77 $27 
Domestic - Federal90 34 28 
Domestic - State(1)6 (8)
302 117 47 
Deferred:
Foreign(1)(8)10 
Domestic - Federal(773)(68)1 
Domestic - State(41)(15)(5)
(815)(91)6 
Income tax expense (benefit)
$(513)$26 $53 

Previously, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminated the ability to deduct research and development (“R&D”) expenditures in the year incurred, requiring capitalization and amortization under Internal Revenue Code Section 174. On July 4, 2025, the One Big Beautiful Bill Act of 2025 (“OBBBA”) was signed into law, which includes broad tax reform provisions that extend and modify key elements of the TCJA. Notably, the new legislation now allows an option for the immediate expensing of domestic R&D expenditures, beginning with fiscal year 2026. The legislation also includes favorable modifications to international tax provisions, including changes to the Global Intangible Low-Taxed Income regime and enhancements to the Foreign-Derived Intangible Income deduction. Because the OBBBA provisions are not effective for the Company until fiscal year 2026 and the enactment date occurred after the balance sheet date, the tax effects of the OBBBA are not included in the operating results for the fiscal year ended June 27, 2025.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, which contained, among other things, a corporate alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial statement income (“AFSI”) exceeding $1.00 billion. The CAMT became effective for the Company beginning with fiscal year 2024. The Company was not subject to CAMT in fiscal year 2024 and does not expect to be subject to CAMT for fiscal year 2025 as its average annual AFSI did not exceed $1.00 billion for the preceding three-year period.
On December 20, 2021, the Organization for Economic Co-operation and Development G20 Inclusive Framework on Base Erosion and Profit Shifting released Model Global Anti-Base Erosion rules under Pillar Two. Several non-U.S. jurisdictions have either enacted legislation or announced their intention to enact future legislation to adopt certain or all components of Pillar Two, also known as Global Minimum Tax (“GMT”), some of which are effective for the Company in fiscal year 2025. For fiscal year 2025, the Company currently expects to be able to meet certain transitional safe harbors and does not expect any material GMT taxes. As most of the jurisdictions in which the Company operates have adopted this legislation for fiscal year 2026, the Company expects there will be increases in the Company’s future tax obligations in these jurisdictions.

Deferred Taxes

Temporary differences and carryforwards, which give rise to a significant portion of deferred tax assets and liabilities were as follows:
June 27,
2025		June 28,
2024
(in millions)
Deferred tax assets:
Sales related reserves and accrued expenses not currently deductible$38 $34 
Accrued compensation and benefits not currently deductible75 75 
Net operating loss carryforward133 134 
Business credit carryforward562 520 
Long-lived assets796 42 
Interest and hedging costs not currently deductible166 187 
Other29 11 
Total deferred tax assets1,799 1,003 
Deferred tax liabilities:
Long-lived assets(40)(33)
Unremitted earnings of certain non-U.S. entities(149)(218)
Other(12)— 
Total deferred tax liabilities(201)(251)
Valuation allowances(598)(527)
Deferred tax assets, net$1,000 $225 

The increase in the deferred tax assets is attributable primarily to one-time deferred tax benefits related to the inter-entity asset transfer in conjunction with the Separation and the mandatory capitalization of R&D expenditures. While the OBBBA allows for the immediate expensing of domestic R&D expenditures, these provisions are not effective for Company until fiscal year 2026. As such, the Company is required to capitalize a portion of its R&D expenditures in fiscal year 2025 under the prior law. The change in the deferred tax liabilities is attributable primarily to a remeasurement of the Company’s California taxes associated with its un-remitted earnings of its non-U.S. entities. This change is offset entirely by an equal and offsetting change in the valuation allowance. The Company continues to assess and adjust its valuation allowance based on operating results and market conditions. After weighing both the positive and negative evidence available, including, but not limited to, earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets, the Company determined that it is able to realize its deferred tax assets except for certain loss and credit carryforwards.

The Company is permanently reinvested with respect to certain foreign earnings. There is no unrecognized deferred tax liability associated with the repatriation of these foreign undistributed earnings as it can be achieved without additional federal tax consequences.
Effective Tax Rate

Reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows:
202520242023
U.S. Federal statutory rate21 %21 %21 %
Tax rate differential on international income(36)(22)(22)
Tax effect of U.S. foreign income inclusion1 (1)(1)
Tax effect of U.S. foreign minimum tax25 (6)— 
Tax effect of U.S. stock-based compensation(2)(1)(1)
Tax effect of non-deductible loss on retained interest in Sandisk16 — — 
Tax effect of U.S. permanent differences— 5 (1)
State income tax, net of federal tax— 2 (1)
Change in valuation allowance6 (3)1 
Unremitted earnings of certain non-U.S. entities(2)(2)(1)
Foreign income tax credits(8)1 — 
R&D tax credits(6)5 4 
U.S. return to provision1 — (1)
Tax reserves1 (3)(3)
Inter-entity asset transfer(61)— — 
Other(1)— (1)
Effective tax rate(45)%(4)%(6)%

The tax rate differentials on international income are comprised primarily of reduced tax rates from the Company tax holidays and tax incentive programs in the Philippines and Thailand in fiscal years 2025 and 2024, and in Malaysia, the Philippines, and Thailand in fiscal 2023.

Tax Holidays and Carryforwards

A substantial portion of the Company’s manufacturing operations in the Philippines and Thailand operate under various tax holidays and tax incentive programs, which will expire in whole or in part at various dates during 2026 through 2033. Certain tax holidays and tax incentive programs may be extended if specific conditions are met. On November 1, 2023, the Company’s tax holiday in Malaysia expired. The Company has applied for an extension and continues to be engaged in active discussions with the Malaysian Investment Development Authority. Because the exact terms of an extension are not currently known, the Company is applying the Malaysia corporate statutory tax rate on its Malaysian income for the full fiscal year. If an extension is granted, the Company will make an adjustment to its effective tax rate in that period.

The direct tax impact of these tax holidays and tax incentives was an increase to the Company’s net earnings by $551 million, or $1.54 per diluted share, $209 million, or $0.64 per diluted share, and $140 million, or $0.44 per diluted share, in 2025, 2024 and 2023, respectively.
As of June 27, 2025, the Company had varying amounts of federal and state NOL/tax credit carryforwards that do not expire or, if not used, expire in various years. Following is a summary of the Company’s federal and state NOL/tax credit carryforwards and the related expiration dates of these NOL/tax credit carryforwards:
JurisdictionNOL/Tax Credit Carryforward AmountExpiration
(in millions)
Federal NOL (Pre 2017 Act Generation)$563 
2026 to 2038
California NOL
348 
2040 to 2047
Other State NOL
292 
Various
Federal tax credits89 
2027 to 2036
State tax credits750 No expiration

The federal and state NOLs and credits relating to various acquisitions are subject to limitations under Sections 382 and 383 of the U.S. Internal Revenue Code. The Company expects the total amount of federal and state NOLs ultimately realized will be reduced as a result of these provisions by $116 million and $240 million, respectively. The Company expects the total amount of federal and state credits ultimately realized will be reduced as a result of these provisions by $27 million and $2 million, respectively.

As of June 27, 2025, the Company had varying amounts of foreign NOL carryforwards that do not expire or, if not used, expire in various years, depending on the country. The major jurisdictions that the Company receives foreign NOL carryforwards and the related amounts and expiration dates of these NOL carryforwards are as follows:
JurisdictionNOL Carryforward AmountExpiration
(in millions)
Malaysia$69 2029
Japan42 2026

Uncertain Tax Positions

With the exception of certain unrecognized tax benefits that are directly associated with the tax position taken, unrecognized tax benefits are presented gross in the Consolidated Balance Sheets.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits excluding accrued interest and penalties:
202520242023
(in millions)
Unrecognized tax benefit, beginning balance$721 $1,021 $1,047 
Gross increases related to current year tax positions11 25 7 
Gross increases related to prior year tax positions26 73 22 
Gross decreases related to prior year tax positions(13)(32)(47)
Settlements(40)(363)(5)
Lapse of statute of limitations(10)(3)(3)
Distribution in connection with the Separation
(126)— — 
Unrecognized tax benefit, ending balance$569 $721 $1,021 
As of June 27, 2025, June 28, 2024 and June 30, 2023, the portion of the gross unrecognized tax benefits, if recognized, that would affect the effective tax rate is $416 million, $555 million and $855 million, respectively. It is the Company’s policy to include interest and penalties related to its gross unrecognized tax benefits as a component of the provision for income taxes. Accrued interest and penalties included in the Company’s liability related to unrecognized tax benefits as of June 27, 2025, June 28, 2024 and June 30, 2023 was $82 million, $181 million and $289 million, respectively. As of June 27, 2025, June 28, 2024 and June 30, 2023, the Company’s payables related to unrecognized tax benefits, including accrued interest and penalties, were $498 million, $736 million and $1.14 billion, respectively. Of these amounts, approximately $332 million, including interest and penalties, could result in potential cash payments to be made within the next twelve months and have been included in Income taxes payable on the Consolidated Balance Sheets as of June 27, 2025. The remaining payables related to unrecognized tax benefits, including accrued interest and penalties, are included in Other liabilities on the Consolidated Balance Sheets as of June 27, 2025 and June 28, 2024.

This potential cash payment is expected to be netted with offsetting favorable tax receivables totaling $148 million, including among other things, a reduction to our mandatory deemed repatriation tax obligations related to the settlement for the years 2008 through 2015, for a potential net cash payment of $184 million. These tax receivables are classified in Other current assets on the Consolidated Balance Sheets as of June 27, 2025.

The Company files U.S. Federal, U.S. state and foreign tax returns. For both federal and state tax returns, with few exceptions, the Company is subject to examination for 2016 through 2024. The Company is no longer subject to examination by the IRS for periods prior to 2016, although carry forwards generated prior to those periods may still be adjusted upon examination by the IRS or state taxing authority if they either have been or will be used in a subsequent period. In the following major foreign jurisdictions where there is no tax holiday, the Company could be subject to examination as noted below:
JurisdictionPeriod Subject to Examination
China (calendar)
2014-2024
India (fiscal)
2017-2024
Japan (fiscal)
2016-2024
Malaysia (fiscal)
2018-2024
Thailand (fiscal)
2014-2024
Singapore (fiscal)
2021-2024
United Kingdom (fiscal)
2023-2024

The Company had previously reached a final agreement with the IRS regarding notices of deficiency with respect to years 2008 through 2012 and in February 2024, the Company also reached a final agreement for resolving the notices of proposed adjustments with respect to years 2013 through 2015. During the year ended June 27, 2025, the Company made payments of $130 million for interest with respect to years 2008 through 2012 and $32 million for tax and interest with respect to years 2013 through 2015, resulting in no remaining liability as of June 27, 2025 related to all years from 2008 through 2015.

In connection with settlements for the years 2008 through 2015, the Company expects to realize reductions to its mandatory deemed repatriation tax obligations and tax savings from interest deductions in future years aggregating to approximately $166 million. Of this amount, $65 million of interest savings from the interest paid with respect to years 2008 through 2015 is classified as a deferred tax asset due to interest expense limitation rules.

The Company believes that adequate provision has been made for any adjustments that may result from any other tax examinations. However, the outcome of such tax examinations cannot be predicted with certainty. If any issues addressed in the Company’s tax examinations are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. As of June 27, 2025, with the exception of the net potential payment of $183 million, it was not possible to estimate the amount of change, if any, in the unrecognized tax benefits that is reasonably possible within the next twelve months. Any significant change in the amount of the Company’s liability for unrecognized tax benefits would most likely result from additional information relating to the examination of the Company’s tax returns.