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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income Before Income Tax Provision The following table presents the domestic and foreign components of income before income tax provision:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
| (in millions)
Domestic | $ | 1,216 |  |  | $ | 1,299 |  |  | $ | 898 |
Foreign | 259 |  |  | 235 |  |  | 314 |
Income before income tax provision | $ | 1,475 |  |  | $ | 1,534 |  |  | $ | 1,212 |
Income Tax Provision The income tax provision consists of the following amounts:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
| (in millions)
Current income taxes provision: |  |  |  |  |
Federal | $ | 170 |  |  | $ | 144 |  |  | $ | 114 |
State | 67 |  |  | 45 |  |  | 50 |
Foreign | 77 |  |  | 64 |  |  | 74 |
Total current income taxes provision | 314 |  |  | 253 |  |  | 238 |
Deferred income taxes provision (benefit): |  |  |  |  |
Federal | 36 |  |  | 82 |  |  | 37 |
State | 6 |  |  | 22 |  |  | 6 |
Foreign | (4) |  |  | (10) |  |  | (2) |
Total deferred income taxes provision | 38 |  |  | 94 |  |  | 41 |
Total income tax provision | $ | 352 |  |  | $ | 347 |  |  | $ | 279 |
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. As of December 31, 2022, the cumulative amount of undistributed earnings in these subsidiaries is $273 million. Given our intent and ability to reinvest these earnings for an indefinite period of time, we have not accrued a deferred tax liability on these earnings. A determination of an 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, 2022, 2021 and 2020 is as follows:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Federal income tax provision at the statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income tax provision, net of federal effect | 3.8 | % |  | 3.9 | % |  | 4.2 | %
Excess tax benefits related to employee share-based compensation | (0.9) | % |  | (1.3) | % |  | (0.6) | %
Non-U.S. subsidiary earnings | 0.5 | % |  | 0.3 | % |  | 0.5 | %
Tax credits and deductions | (0.3) | % |  | (0.3) | % |  | (0.2) | %
Change in unrecognized tax benefits | 1.1 | % |  | 0.6 | % |  | (0.6) | %
Other, net | (1.3) | % |  | (1.6) | % |  | (1.3) | %
Actual income tax provision | 23.9 | % |  | 22.6 | % |  | 23.0 | %
The increase in our effective tax rate in 2022 compared to 2021 was primarily due to an increase in state unrecognized tax benefits. The decrease in our effective tax rate in 2021 compared to 2020 was primarily due to a tax benefit related to federal, state and local provision to return adjustments, which is included in other, net in the table above and excess tax benefits related to employee share-based compensation. The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses. These same and other factors, including history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets. President Biden signed into law the Inflation Reduction Act of 2022 on August 16, 2022. Nasdaq does not expect any material impact to the financial statements or our effective tax rate in future periods. Deferred Income Taxes The temporary differences, which give rise to our deferred tax assets and (liabilities), consisted of the following:
| December 31,
| 2022 |  | 2021
| (in millions)
Deferred tax assets: |  |  |
Deferred revenues | $ | 18 |  |  | $ | 12 |
U.S. federal net operating loss | 5 |  |  | — |
Foreign net operating loss | 12 |  |  | 4 |
State net operating loss | 3 |  |  | 1 |
Compensation and benefits | 42 |  |  | 32 |
Tax credits | 3 |  |  | — |
Federal benefit of uncertain tax positions | 9 |  |  | 6 |
Operating lease liabilities | 118 |  |  | 99 |
Unrealized losses | — |  |  | 2 |
Other | 33 |  |  | 30 |
Gross deferred tax assets | 243 |  |  | 186 |
Less: valuation allowance | (4) |  |  | (4) |
Total deferred tax assets, net of valuation allowance | $ | 239 |  |  | $ | 182 |
Deferred tax liabilities: |  |  |
Amortization of software development costs and depreciation | $ | (65) |  |  | $ | (65) |
Amortization of acquired intangible assets and goodwill | (375) |  |  | (322) |
Investments | (105) |  |  | (99) |
Unrealized gains | (29) |  |  | — |
Operating lease assets | (103) |  |  | (84) |
Other | (15) |  |  | (16) |
Gross deferred tax liabilities | $ | (692) |  |  | $ | (586) |
Net deferred tax liabilities | $ | (453) |  |  | $ | (404) |
Reported as: |  |  |
Non-current deferred tax assets | $ | 3 |  |  | $ | 2 |
Deferred tax liabilities, net | (456) |  |  | (406) |
Net deferred tax liabilities | $ | (453) |  |  | $ | (404) |
In the table above, non-current deferred tax assets are included in other non-current assets in the Consolidated Balance Sheets. We recognized a valuation allowance of $4 million as of December 31, 2022 and 2021 due to recurring operating losses in a foreign jurisdiction. Based on all available positive and negative evidence, we believe the sources of future taxable income are sufficient to realize the remainder of Nasdaq's deferred tax asset inventory. Nasdaq has deferred tax assets associated with NOLs in U.S. state and local and non-U.S. jurisdictions with the following expiration dates:
Jurisdiction | December 31, 2021 | Expiration Date
| (in millions) |
Foreign NOL | $ | 12 |  | No expiration
Federal NOL | 5 |  | No expiration
State NOL | 3 |  | 2025-2040
Unrecognized Tax Benefits A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
| (in millions)
Beginning balance | $ | 57 |  |  | $ | 42 |  |  | $ | 48 |
Additions as a result of tax positions taken in prior periods | 13 |  |  | 16 |  |  | 9 |
Additions as a result of tax positions taken in the current period | 9 |  |  | 11 |  |  | 2 |
Reductions related to settlements with taxing authorities | (7) |  |  | (6) |  |  | (6) |
Reductions as a result of lapses of the applicable statute of limitations | (2) |  |  | (6) |  |  | (11) |
Ending balance | $ | 70 |  |  | $ | 57 |  |  | $ | 42 |
We had $70 million of unrecognized tax benefits as of December 31, 2022, $57 million as of December 31, 2021, and $42 million as of December 31, 2020 which, if recognized in the future, would affect our effective tax rate. Nasdaq does not believe that our unrecognized tax benefits will materially change over the next 12 months. We recognize interest and/or penalties related to income tax matters in the provision for income taxes in our Consolidated Statements of Income, which was less than $1 million tax expense for the year ended December 31, 2022, and a tax benefit of $2 million for both years ended December 31, 2021 and 2020. Accrued interest and penalties, net of tax effect were $5 million as of December 31, 2022 and $4 million as of December 31, 2021. Tax Audits 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. We are subject to examination by federal, state and local, and foreign tax authorities. Our Federal income tax return for the years 2019 through 2021 is subject to examination by the Internal Revenue Service. Several state tax returns are currently under examination by the respective tax authorities for the years 2012 through 2021. Non-U.S. tax returns are subject to examination by the respective tax authorities for the years 2017 through 2022. 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. Examination outcomes and the timing of examination settlements are subject to uncertainty. Although the results of such examinations may have an impact on our unrecognized tax benefits, we do not anticipate that such impact will be material to our consolidated financial position or results of operations. We do not expect to settle any material tax audits in the next twelve months.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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