XML 33 R16.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2018
Income Taxes |
Income Taxes | 8. Income Taxes Income Tax Expense Our income tax expense consisted of the following for the years ended December 31 (in millions):
|  | 2018 |  | 2017 |  | 2016
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 256 |  | $ | 400 |  | $ | 443
State |  |  | 132 |  |  | 56 |  |  | 88
Foreign |  |  | 40 |  |  | 37 |  |  | 38
|  |  | 428 |  |  | 493 |  |  | 569
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | 59 |  |  | (316) |  |  | 57
State |  |  | (32) |  |  | 62 |  |  | 17
Foreign |  |  | (2) |  |  | 3 |  |  | (1)
|  |  | 25 |  |  | (251) |  |  | 73
Income tax expense |  | $ | 453 |  | $ | 242 |  | $ | 642
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate for the years ended December 31 as follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
Income tax expense at U.S. federal statutory rate |  | 21.00 | % |  | 35.00 | % |  | 35.00 | %
State and local income taxes, net of federal income tax benefit |  | 4.41 |  |  | 3.25 |  |  | 3.31 |
Impacts of enactment of tax reform |  | (0.51) |  |  | (24.14) |  |  | — |
Federal tax credits |  | (2.44) |  |  | (2.31) |  |  | (3.08) |
Taxing authority audit settlements and other tax adjustments |  | (3.85) |  |  | 0.03 |  |  | (0.53) |
Tax impact of equity-based compensation transactions |  | (0.54) |  |  | (1.45) |  |  | — |
Tax impact of impairments |  | 0.03 |  |  | 0.66 |  |  | 0.80 |
Tax rate differential on foreign income |  | 0.43 |  |  | (0.55) |  |  | (0.63) |
Other |  | 0.51 |  |  | 0.55 |  |  | 0.36 |
Effective income tax rate |  | 19.04 | % |  | 11.04 | % |  | 35.23 | %
The comparability of our income tax expense for the reported periods has been primarily affected by (i) variations in our income before income taxes; (ii) impacts of enactment of tax reform; (iii) federal tax credits; (iv) tax audit settlements; (v) adjustments to our accruals and related deferred taxes; (vi) the realization of state net operating losses and credits; (vii) excess tax benefits associated with equity-based compensation transactions and (viii) the tax implications of impairments. For financial reporting purposes, income before income taxes by source for the years ended December 31 was as follows (in millions):
|  | 2018 |  | 2017 |  | 2016
Domestic |  | $ | 2,235 |  | $ | 2,040 |  | $ | 1,681
Foreign |  |  | 141 |  |  | 151 |  |  | 141
Income before income taxes |  | $ | 2,376 |  | $ | 2,191 |  | $ | 1,822
Enactment of Tax Reform – The Act was signed into law on December 22, 2017. The most significant impacts of the Act to the Company include a decrease in the federal corporate income tax rate from 35% to 21% effective January 1, 2018 and a one-time, mandatory transition tax on deemed repatriation of previously tax-deferred and unremitted foreign earnings. In accordance with ASU 2018-05 and SAB 118, the Company recognized the provisional tax impacts of the Act to the Company in 2017. For the year ended December 31, 2017, we recognized a reduction in our income tax expense of $529 million consisting of a net tax benefit of $595 million for the remeasurement of our deferred income tax assets and liabilities due to the decrease in the federal corporate income tax rate, partially offset by income tax expense of $66 million for the one-time, mandatory transition tax. For the year ended December 31, 2018, we recognized m easurement period a djustments to the provisional tax impacts, as discussed above, primarily due to the filing of our income tax returns resulting in a reduction in our income tax expense of $12 million. The reduction consisted of a net income tax benefit of (i) $7 million for the remeasurement of our deferred income tax assets and liabilities and other reserves due to the decrease in the federal corporate income tax rate and (ii) a $5 million adjustment for the one-time, mandatory transition tax. The Company has completed the accounting for the impacts of the Act, although adjustments may be necessary in future periods due to potential technical corrections to the Act and/or regulatory guidance that may be issued by the Internal Revenue Service (“IRS”). The Act provides for a territorial tax system, and it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) tax and the base erosion and anti-abuse tax (“BEAT”). For the year ended December 31, 2018, we did not have a material impact to our consolidated financial statements from GILTI and no minimum tax from BEAT. The Company does not expect that it will be subject to any material incremental U.S. tax on GILTI in future periods and has elected to account for any potential GILTI tax in the period in which it is incurred, therefore no deferred income tax impacts of GILTI are provided in our consolidated financial statements for the year ended December 31, 2018. In addition, the Company does not expect it will be subject to minimum tax pursuant to the BEAT. Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to invest in and manage low-income housing properties and a refined coal facility. On September 28, 2018 we acquired an additional noncontrolling interest in a limited liability company established to invest in and manage low-income housing properties. Our consideration for this investment totaled $157 million, which was comprised of a $139 million note payable and an initial cash payment of $18 million. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments and the coal facility’s refinement processes qualify for federal tax credits that we expect to realize through 2030 under Sections 42 and 45D, and through 2019 under Section 45, respectively, of the Internal Revenue Code. We account for our investments in these entities using the equity method of accounting, recognizing our share of each entity’s results of operations and other reductions in the value of our investments in equity in net losses of unconsolidated entities, within our Consolidated Statements of Operations. During the years ended December 31, 2018, 2017 and 2016, we recognized $30 million, $30 million and $3 1 million of net losses and a reduction in our income tax expense of $57 million, $51 million and $55 million, respectively, primarily due to tax credits realized from these investments. Interest expense associated with our investments in low-income housing properties was not material for the periods presented. See Note 18 for additional information related to these unconsolidated variable interest entities. Other Federal Tax Credits — During 2018, 2017 and 2016, we recognized federal tax credits in addition to the tax credits realized from our investments in low-income housing properties and the refined coal facility, resulting in a reduction in our income tax expense of $10 million, $13 million and $14 million, respectively. Tax Audit Settlements — We file income tax returns in the U.S. and Canada, as well as various state and local jurisdictions. We are currently under audit by the IRS, the Canada Revenue Agency and various state and local taxing authorities. Our audits are in various stages of completion. During the reported periods, we closed various tax audits and the settlements resulted in a reduction in our income tax expense of $40 million, $2 million and $11 million for the years ended December 31, 2018, 2017 and 2016, respectively. We participate in the IRS’s Compliance Assurance Process, which means we work with the IRS throughout the year towards resolving any material issues prior to the filing of our annual tax return. Any unresolved issues as of the tax return filing date are subject to routine examination procedures. We are currently in the examination phase of IRS audits for the 2017 and 2018 tax years and expect these audits to be completed within the next 15 months. We are also currently undergoing audits by various state and local jurisdictions for tax years that date back to 2011. Additionally, we are under audit by the Canada Revenue Agency for the 2014 tax year. Adjustments to Accruals and Related Deferred Taxes — Adjustments to our accruals and related deferred taxes due to the filing of our income tax returns and changes in state laws resulted in a reduction in our income tax expense of $35 million, $5 million and $10 million for the years ended December 31, 2018, 2017 and 2016, respectively. An adjustment to our deferred taxes to reduce our deferred tax liability based on an analysis of certain deferred tax balances also resulted in a net reduction of our income tax expense of $17 million for the year ended December 31, 2018 and is not material to our consolidated financial statements for the reported period. State Net Operating Losses and Credits — During 2018, 2017 and 2016, we recognized state net operating losses and credits resulting in a reduction in our income tax expense of $22 million, $12 million and $10 million, respectively. Equity-Based Compensation — During 2018 and 2017, we recognized excess tax benefits related to the vesting or exercise of equity-based compensation awards resulting in a reduction in our income tax expense of $17 million and $37 million, respectively. Tax Implications of Impairments — Portions of the impairment charges recognized during the reported periods are not deductible for tax purposes. Had the charges been fully deductible, our income tax expense would have been reduced by $1 million, $15 million and $15 million for the years ended December 31, 2018, 2017 and 2016, respectively. See Note 11 for more information related to our impairment charges. Unremitted Earnings in Foreign Subsidiaries — No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the one-time, mandatory transition tax, or any additional outside basis difference, as these amounts continue to be indefinitely reinvested in foreign operations. Deferred Tax Assets (Liabilities) The components of net deferred tax liabilities as of December 31 are as follows (in millions):
|  | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |  |
Net operating loss, capital loss and tax credit carry-forwards |  | $ | 258 |  | $ | 259
Landfill and environmental remediation liabilities |  |  | 143 |  |  | 121
Miscellaneous and other reserves, net |  |  | 175 |  |  | 96
Subtotal |  |  | 576 |  |  | 476
Valuation allowance |  |  | (261) |  |  | (264)
Deferred tax liabilities: |  |  |  |  |  |
Property and equipment |  |  | (752) |  |  | (595)
Goodwill and other intangibles |  |  | (854) |  |  | (865)
Net deferred tax liabilities |  | $ | (1,291) |  | $ | (1,248)
The valuation allowance decreased by $3 million in 2018 primarily due to non-benefited foreign tax credit carry-forwards. As of December 31, 2018, we had $1.9 billion of state net operating loss carry-forwards with expiration dates through 2038. We also had $443 million of federal capital loss carry-forwards with expiration dates through 2021, $35 million of foreign tax credit carry-forwards with expiration dates through 2028 and $20 million of state tax credit carry-forwards with expiration dates through 2034. We have established valuation allowances for uncertainties in realizing the benefit of certain tax loss and credit carry-forwards and other deferred tax assets. While we expect to realize the deferred tax assets, net of the valuation allowances, changes in estimates of future taxable income or in tax laws may alter this expectation. Liabilities for Uncertain Tax Positions A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, including accrued interest, is as follows (in millions):
|  | 2018 |  | 2017 |  | 2016
Balance as of January 1 |  | $ | 109 |  | $ | 82 |  | $ | 71
Additions based on tax positions related to the current year |  |  | 6 |  |  | 19 |  |  | 19
Additions based on tax positions of prior years |  |  | 12 |  |  | 11 |  |  | 4
Accrued interest |  |  | 2 |  |  | 4 |  |  | 2
Reductions for tax positions of prior years |  |  | — |  |  | — |  |  | (7)
Settlements |  |  | (88) |  |  | (1) |  |  | —
Lapse of statute of limitations |  |  | (5) |  |  | (6) |  |  | (7)
Balance as of December 31 |  | $ | 36 |  | $ | 109 |  | $ | 82
These liabilities are included as a component of other long-term liabilities in our Consolidated Balance Sheets because the Company does not anticipate that settlement of the liabilities will require payment of cash within the next 12 months. As of December 31, 2018, we have $3 1 million of net unrecognized tax benefits that, if recognized in future periods, would impact our effective income tax rate. We recognize interest expense related to unrecognized tax benefits in our income tax expense, which was not material for the reported periods. We did not have any accrued liabilities or expense for penalties related to unrecognized tax benefits for the reported periods.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration