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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax provision consists of the following amounts:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| (in millions)
Current income taxes: |
Federal | $ | 37 |  |  | $ | 139 |  |  | $ | 123 |
State | 21 |  |  | 42 |  |  | 36 |
Foreign | 106 |  |  | 36 |  |  | 28 |
Total current income taxes | 164 |  |  | 217 |  |  | 187 |
Deferred income taxes: |  |  |  |  |
Federal | (97 | ) |  | (18 | ) |  | (13 | )
State | (35 | ) |  | (1 | ) |  | (2 | )
Foreign | (4 | ) |  | 5 |  |  | 9 |
Total deferred income taxes | (136 | ) |  | (14 | ) |  | (6 | )
Total income tax provision | $ | 28 |  |  | $ | 203 |  |  | $ | 181 |
We have determined that undistributed earnings of certain non-U.S. subsidiaries will be reinvested for an indefinite period of time. We have both the intent and ability to indefinitely reinvest these earnings. At December 31, 2016, the cumulative amount of undistributed earnings in these subsidiaries is approximately $144 million. Given our intent to reinvest these earnings for an indefinite period of time, we have not accrued a deferred tax liability for U.S. federal income taxes on these earnings. A determination of unrecognized deferred tax liability related to these earnings is not practicable. A reconciliation of the income tax provision, based on the U.S. federal statutory rate, to our actual income tax provision for the years ended December 31, 2016, 2015 and 2014 is as follows:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Federal income tax provision at the statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State income tax provision, net of federal effect | (6.7 | )% |  | 3.9 | % |  | 3.4 | %
Non-U.S. subsidiary earnings | (7.3 | )% |  | (6.4 | )% |  | (7.0 | )%
Tax credits and deductions | (5.1 | )% |  | (0.8 | )% |  | (0.6 | )%
Change in unrecognized tax benefits | 4.2 | % |  | 0.3 | % |  | (3.0 | )%
Other, net | 0.5 | % |  | 0.2 | % |  | 2.7 | %
Actual income tax provision | 20.6 | % |  | 32.2 | % |  | 30.5 | %
The lower effective tax rate in 2016 when compared to 2015 is primarily due to a shift in the geographic mix of earnings, largely driven by the write-off of the eSpeed trade name, partially offset by an unfavorable ruling from the Finnish Supreme Administrative Court. The higher effective tax rate in 2015 when compared with 2014 was primarily due to a decrease in unrecognized tax benefits in 2014. The temporary differences, which give rise to our deferred tax assets and (liabilities), consisted of the following:
| December 31,
| 2016 |  | 2015
| (in millions)
Deferred tax assets: |  |  |
Deferred revenues | $ | 39 |  |  | $ | 46 |
U.S. federal net operating loss | 2 |  |  | 5 |
Foreign net operating loss | 37 |  |  | 92 |
State net operating loss | 1 |  |  | 2 |
Compensation and benefits | 99 |  |  | 86 |
Foreign currency translation | 528 |  |  | 458 |
Tax credits | 7 |  |  | 7 |
Other | 34 |  |  | 32 |
Gross deferred tax assets | 747 |  |  | 728 |
Deferred tax liabilities: |  |  |
Amortization of software development costs and depreciation | (63 | ) |  | (56 | )
Amortization of acquired intangible assets | (596 | ) |  | (522 | )
Investments | (37 | ) |  | (35 | )
Other | (24 | ) |  | (13 | )
Gross deferred tax liabilities | (720 | ) |  | (626 | )
Net deferred tax assets before valuation allowance | 27 |  |  | 102 |
Less: valuation allowance | (30 | ) |  | (85 | )
Net deferred tax assets (liabilities) | $ | (3 | ) |  | $ | 17 |
A valuation allowance has been established with regards to the tax benefits primarily associated with certain net operating losses, or NOLs, as it is more likely than not that these benefits will not be realized in the foreseeable future. As of December 31, 2016, the expiration dates for the NOLs, and credits are as follows:
Jurisdiction |  | Amount |  | Expiration Date
|  | (in millions) |  |
U.S. Federal NOL |  | $ | 2 |  |  | 2027
Foreign NOL |  | 3 |  |  | 2018-2025
Foreign NOL |  | 34 |  |  | No expiration date
State NOL |  | 1 |  |  | 2017-2035
U.S. Federal Tax credits |  | 7 |  |  | 2018-2027
The following represents the domestic and foreign components of income before income tax provision:
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
| (in millions)
Domestic | $ | (155 | ) |  | $ | 393 |  |  | $ | 349 |
Foreign | 291 |  |  | 237 |  |  | 245 |
Income before income tax provision | $ | 136 |  |  | $ | 630 |  |  | $ | 594 |
We recorded income tax benefits of $41 million in 2016, $34 million in 2015 and $9 million in 2014, primarily related to share-based compensation. These amounts were recorded as additional paid-in-capital in the Consolidated Balance Sheets. We are subject to examination by federal, state and local, and foreign tax authorities. We regularly assess the likelihood of additional assessments by each jurisdiction and have established tax reserves that we believe are adequate in relation to the potential for additional assessments. We believe that the resolution of tax matters will not have a material effect on our financial condition but may be material to our operating results for a particular period and the effective tax rate for that period. There are $40 million as of December 31, 2016 and $33 million as of December 31, 2015 of unrecognized tax benefits that if recognized would affect our effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Year Ended December 31,
| 2016 |  | 2015
| (in millions)
Beginning balance | $ | 40 |  |  | $ | 41 |
Additions as a result of tax positions taken in prior periods | 9 |  |  | 3 |
Additions as a result of tax positions taken in the current period | 3 |  |  | 3 |
Reductions related to settlements with taxing authorities | (4 | ) |  | (2 | )
Reductions as a result of lapses of the applicable statute of limitations | — |  |  | (5 | )
Ending balance | $ | 48 |  |  | $ | 40 |
Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. We have accrued $8 million as of December 31, 2016 and $7 million as of December 31, 2015 for interest and penalties, net of tax effect. Nasdaq and its eligible subsidiaries file a consolidated U.S. federal income tax return and applicable state and local income tax returns and non-U.S. income tax returns. Federal income tax returns for the years 2011 through 2015 are subject to examination by the Internal Revenue Service. Several state tax returns are currently under examination by the respective tax authorities for the years 2005 through 2014 and we are subject to examination for the year 2015. Due to the uncertainty of the outcome of matters in certain states, in 2016 we recorded a reserve of $5 million. This reserve is mostly offset by the recognition of $4 million of previously unrecognized tax benefits, in 2016, due to settlements of audits in various states. Non-U.S. tax returns are subject to examination by the respective tax authorities for the years 2008 through 2015. In 2015, we received an assessment of $6 million from the Swedish Tax Agency for the year 2013. We have appealed this assessment to the Swedish Courts. Due to the uncertainty of the outcome of this matter, in 2015 we recorded a reserve of $6 million. This reserve is mostly offset by the recognition of $5 million of previously unrecognized tax benefits, in 2015, due to the lapse of the statute of limitations related to tax examinations in various jurisdictions in the U.S. We anticipate that the amount of unrecognized tax benefits at December 31, 2016 will significantly decrease in the next twelve months as we expect to settle certain tax audits. The final outcome of such audits cannot yet be determined. We anticipate that such adjustments will not have a material impact on our consolidated financial position or results of operations. In the fourth quarter of 2010, we received an appeal from the Finnish Tax Authority challenging certain interest expense deductions claimed by Nasdaq in Finland for the year 2008. The appeal also demanded certain penalties be paid with regard to the company’s tax return filing position. In October 2012, the Finnish Appeals Board disagreed with the company’s tax return filing position for years 2009 through 2011, even though the tax return position with respect to this deduction was previously reviewed and approved by the Finnish Tax Authority. In June 2014, the Finnish Administrative Court also disagreed with the company’s tax return filing position for these years. We appealed this ruling to the Finnish Supreme Administrative Court. Through March 31, 2016, we recorded tax benefits of $30 million associated with this filing position. We paid $41 million to the Finnish tax authorities, which includes $11 million in interest and penalties. In May 2016, we received an unfavorable ruling from the Finnish Supreme Administrative Court, in which the Court disagreed with our position. As such, in the second quarter of 2016 we recorded tax expense of $28 million, or $0.17 per diluted share. This expense reflects the reversal of previously recorded Finnish tax benefits, and related interest and penalties, of $38 million through the first quarter of 2016, net of a related U.S. tax benefit of $10 million. The tax expense recorded reflects the impact of foreign currency translation. We expect to record future quarterly net tax expense of approximately $1 million as a result of this ruling. From 2009 through 2012, we recorded tax benefits associated with certain interest expense incurred in Sweden. Our position is supported by a 2011 ruling we received from the Swedish Supreme Administrative Court. However, under new legislation effective January 1, 2013, limitations are imposed on certain forms of interest expense. Because this legislation is unclear with regard to our ability to continue to claim such interest deductions, Nasdaq filed an application for an advance tax ruling with the Swedish Tax Council for Advance Tax Rulings. In June 2014, we received an unfavorable ruling from the Swedish Tax Council for Advance Tax Rulings. We appealed this ruling to the Swedish Supreme Administrative Court; however the Swedish Supreme Administrative Court denied our request for a ruling based on procedural requirements. In the third quarter of 2015, and in October 2016, we received notices from the Swedish Tax Agency that interest deductions for the years 2013 and 2014, respectively, have been disallowed. We have appealed to the Swedish Lower Administrative Court and continue to expect a favorable decision. Since January 1, 2013, we have recorded tax benefits of $50 million associated with this matter. We continue to pay all assessments from the Swedish Tax Agency while this matter is pending. If the Swedish Courts agree with our position we will receive a refund of all paid assessments; if the Swedish Courts disagree with our position, we will record tax expense of $38 million, or $0.22 per diluted share, which is gross of any related U.S. tax benefits and reflects the impact of foreign currency translation. We expect to record recurring quarterly tax benefits of $1 million to $2 million with respect to this matter for the foreseeable future. Other Tax Matter In December 2012, the Swedish Tax Agency approved our 2010 amended VAT tax return and we received a cash refund for the amount claimed. In 2013, we filed amended VAT tax returns for 2011 and 2012 and utilized the same approach which was approved for the 2010 filing. We also utilized this approach in our 2013 and 2014 filings. However, even though the VAT return position was previously reviewed and approved by the Swedish Tax Agency, the Swedish Tax Agency challenged our approach. The revised position of the Swedish Tax Agency was upheld by the Lower Administrative Court in 2015. As a result, in 2015, we reversed the previously recorded benefit of $12 million, based on the court decision. We have appealed the ruling of the Lower Administrative Court to the Court of Appeals.

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- 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 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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