v3.8.0.1

Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The consolidated income tax expense consists of the following for the years ended December 31 ($ in millions):
| 2017 |  | 2016 |  | 2015
Current provision |  |  |  |  |
Federal | $ | 421 |  |  | $ | 485 |  |  | $ | 332 |
State and local | 14 |  |  | 22 |  |  | 26 |
Total current provision | 435 |  |  | 507 |  |  | 358 |
Deferred provision | (109 | ) |  | 92 |  |  | (19 | )
Total income tax expense | $ | 326 |  |  | $ | 599 |  |  | $ | 339 |
The reconciliation of the tax provision at the U.S. federal statutory rate to income tax expense for the years ended December 31 is as follows ($ in millions):
| 2017 |  | 2016 |  | 2015
Earnings from continuing operations, before income tax expense | $ | 1,134 |  |  | $ | 1,157 |  |  | $ | 697 |
(Earnings) loss attributable to flow through noncontrolling interest | 15 |  |  | (8 | ) |  | 1 |
Earnings from continuing operations, less noncontrolling interest, before income tax expense | 1,149 |  |  | 1,149 |  |  | 698 |
Tax provision at the U.S. federal statutory rate | 402 |  |  | 402 |  |  | 244 |
State income taxes, net of federal income tax benefit | 11 |  |  | 10 |  |  | 15 |
Nondeductible compensation | 58 |  |  | 23 |  |  | 2 |
ACA Health Insurer Fee | — |  |  | 162 |  |  | 75 |
Income Tax Reform | (125 | ) |  | — |  |  | — |
Other, net | (20 | ) |  | 2 |  |  | 3 |
Income tax expense | $ | 326 |  |  | $ | 599 |  |  | $ | 339 |
The tax effects of temporary differences which give rise to deferred tax assets and liabilities are presented below for the years ended December 31 ($ in millions):
| 2017 |  | 2016
Deferred tax assets: |  |  |
Medical claims liability | $ | 46 |  |  | $ | 66 |
Nondeductible liabilities | 41 |  |  | 39 |
Net operating loss and tax credit carryforwards | 94 |  |  | 101 |
Compensation accruals | 129 |  |  | 156 |
Premium and trade receivables | 45 |  |  | 79 |
Other | 11 |  |  | 14 |
Deferred tax assets | 366 |  |  | 455 |
Valuation allowance | (81 | ) |  | (86 | )
Net deferred tax assets | $ | 285 |  |  | $ | 369 |
Deferred tax liabilities: |  |  |
Intangible assets | $ | 342 |  |  | $ | 577 |
Prepaid assets | 23 |  |  | 17 |
Fixed assets | 84 |  |  | 65 |
Investments in joint ventures | 20 |  |  | 11 |
Deferred revenue | 26 |  |  | — |
Other | 17 |  |  | 2 |
Deferred tax liabilities | 512 |  |  | 672 |
Net deferred tax assets (liabilities) | $ | (227 | ) |  | $ | (303 | )
Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized. The valuation allowances primarily relate to future tax benefits on certain federal, state and foreign net operating loss and tax credit carryforwards. The $5 million decrease in valuation allowance primarily relate s to the effect of the tax rate change due to The Tax Cuts and Jobs Act (Income Tax Reform), which was passed in December 2017, offset partially by an increase due to losses from entities that file nonconsolidated federal tax returns. Federal net operating loss carryforwards of $44 million expire beginning in 2020 through 2037; state net operating loss and tax credit carryforwards of $42 million expire beginning in 2018 through 2037. Substantially all of the non-U.S. tax loss carryforwards have indefinite carryforward periods. The Company maintains a reserve for uncertain tax positions that may be challenged by a tax authority. A rollforward of the beginning and ending amount of uncertain tax positions, exclusive of related interest and penalties, is as follows:
| Year Ended December 31,
| 2017 |  | 2016
Gross unrecognized tax benefits, beginning of period | $ | 102 |  |  | $ | 5 |
Gross increases: |  |  |
Current year tax positions | 43 |  |  | 6 |
Prior year tax positions | 113 |  |  | 93 |
Gross decreases: |  |  |
Prior year tax positions | — |  |  | (1 | )
Statute of limitation lapses | (1 | ) |  | (1 | )
Gross unrecognized tax benefits, end of period | $ | 257 |  |  | $ | 102 |
Uncertain tax positions increased $143 million to reflect the impact of a multi-year reserve for deductions related to domestic production activities. As of December 31, 2017, $225 million of unrecognized tax benefits would impact the Company's effective tax rate in future periods, if recognized. The Company believes it is reasonably possible that its liability for unrecognized tax benefits will decrease in the next twelve months by $8 million as a result of the expiration of statutes of limitations in certain jurisdictions. The table above excludes interest, net of related tax benefits, which is treated as income tax expense (benefit) under the Company's accounting policy. For the year ended December 31, 2017, the Company recognized net interest expense and penalties related to uncertain positions of $4 million. The Company had $9 million and $5 million of accrued interest and penalties for uncertain tax positions as of December 31, 2017 and 2016, respectively. The Company files tax returns for federal as well as numerous state tax jurisdictions. As of December 31, 2017, Health Net is under federal examination for tax years 2011 through its final return in 2016. Additionally, Centene's tax returns for years 2014 through 2016 are subject to federal examination. Income Tax Reform Income Tax Reform was enacted on December 22, 2017. Income Tax Reform reduces the U.S. federal corporate tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax-deferred, and creates new taxes on foreign sourced earnings. As of December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of Income Tax Reform; however, as described below, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. As a result of the enactment, the Company recognized a provisional tax benefit of $125 million, which is included as a component of income tax expense from continuing operations. The Company remeasured deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is now 21% for federal tax purposes. However, the Company is still analyzing certain aspects of Income Tax Reform and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional tax benefit recorded related to the remeasurement of the Company's net deferred tax liability balance was $126 million. The one-time transition tax is based on the Company's total post-1986 earnings and profits (E&P) for which the Company had previously deferred from U.S. income taxes. The Company recorded a provisional amount for the one-time transition tax liability for its foreign subsidiaries, resulting in an increase in income tax expense of $1 million.

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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 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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