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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | 14. Income Taxes The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018. We recognized an income tax benefit of $242 million in the year ended December 31, 2017 associated with the revaluation of our net deferred tax liability. The one-time Transition Tax, Global Intangible Low Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion and Anti-Abuse Tax (“BEAT”) and IRC Section 163(j) interest limitation do not impact our cash taxes or total tax expense for the years ended December 31, 2018 and 2017, respectively. The accounting for the initial impact of the Act is complete. SAB 118 provided for a one-year period to complete the accounting for this expansive new law. Final accounting did not have a material impact to cash tax or total tax expense, but the finalization of the transition tax inclusions in our 2017 and 2018 tax returns, along with recording the impact of tax regulations released in 2018, impacted our foreign tax credit carryforward position. However, our excess foreign tax credits carry a full valuation allowance as we currently estimate that they will expire unutilized. Accordingly, the true-ups only impact the total foreign tax credits recorded and related valuation allowance and do not impact the income tax provision on a net basis. The movement in the valuation allowance during 2018 included the impact of our foreign tax credit carryover position in response to new treasury regulations and finalization of our transition tax calculations. The domestic and foreign components of income (loss) before income taxes were as follows (in millions):
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Domestic |  | $ | (168 | ) |  | $ | (470 | ) |  | $ | (2,095 | )
Foreign |  |  | 209 |  |  |  | 78 |  |  |  | (528 | )
|  | $ | 41 |  |  | $ | (392 | ) |  | $ | (2,623 | )
The components of the provision for income taxes consisted of (in millions):
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (5 | ) |  | $ | 23 |  |  | $ | (79 | )
State |  |  | (3 | ) |  |  | 1 |  |  |  | (4 | )
Foreign |  |  | 134 |  |  |  | 161 |  |  |  | 74 |
Total current income tax provision |  |  | 126 |  |  |  | 185 |  |  |  | (9 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 11 |  |  |  | (332 | ) |  |  | (132 | )
State |  |  | - |  |  |  | (2 | ) |  |  | (7 | )
Foreign |  |  | (74 | ) |  |  | (7 | ) |  |  | (59 | )
Total deferred income tax provision |  |  | (63 | ) |  |  | (341 | ) |  |  | (198 | )
Total income tax provision |  | $ | 63 |  |  | $ | (156 | ) |  | $ | (207 | )
The difference between the effective tax rate reflected in the provision for income taxes and the U.S. federal statutory rate was as follows (in millions):
| Years Ended December 31, |
| 2018 |  |  | 2017 |  |  | 2016 |
Federal income tax at U.S. statutory rate | $ | 9 |  |  | $ | (137 | ) |  | $ | (918 | )
Foreign income tax rate differential |  | (3 | ) |  |  | (21 | ) |  |  | 32 |
Goodwill impairment |  | — |  |  |  | — |  |  |  | 271 |
Nondeductible expenses |  | 20 |  |  |  | 38 |  |  |  | 30 |
Foreign dividends, net of foreign tax credits |  | 27 |  |  |  | (132 | ) |  |  | (25 | )
Tax rate change on timing differences |  | (7 | ) |  |  | (245 | ) |  |  | (8 | )
Change in uncertain tax positions |  | (5 | ) |  |  | 81 |  |  |  | 11 |
Prior years taxes |  | (13 | ) |  |  | (26 | ) |  |  | (29 | )
Tax impact on foreign exchange |  | (3 | ) |  |  | 5 |  |  |  | (4 | )
Change in deferred tax valuation allowance |  | 49 |  |  |  | 280 |  |  |  | 476 |
State income taxes - net of federal benefit |  | (3 | ) |  |  | (1 | ) |  |  | (10 | )
Tax exempt income |  | (5 | ) |  |  | - |  |  |  | (7 | )
Income tax credits |  | (3 | ) |  |  | (4 | ) |  |  | - |
Other |  | — |  |  |  | 6 |  |  |  | (26 | )
Total income tax provision | $ | 63 |  |  | $ | (156 | ) |  | $ | (207 | )
The effective tax rate for the year ended December 31, 2018 was 153.7%, compared to 39.8% for 2017. For the year ended December 31, 2018, valuation allowances established on deferred tax assets and tax due on foreign income not offset by foreign tax credits resulted in a higher effective tax rate than the U.S. statutory rate. For the year ended December 31, 2017, the revaluation of net deferred tax liabilities in the U.S. partially offset by valuation allowances established on foreign tax credits generated during the year, when applied to losses resulted in a higher effective tax rate than the U.S. statutory rate. Significant components of our deferred tax assets and liabilities were as follows (in millions):
|  | December 31, |
|  | 2018 |  |  | 2017 |
Deferred tax assets: |  |  |  |  |  |  |  |
Allowances and operating liabilities |  | $ | 293 |  |  | $ | 355 |
Net operating loss carryforwards |  |  | 182 |  |  |  | 182 |
Postretirement benefits |  |  | 30 |  |  |  | 31 |
Tax credit carryforwards |  |  | 768 |  |  |  | 1,002 |
Other |  |  | 95 |  |  |  | 78 |
Valuation allowance |  |  | (955 | ) |  |  | (1,202 | )
Total deferred tax assets |  |  | 413 |  |  |  | 446 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Tax over book depreciation |  |  | 139 |  |  |  | 174 |
Intangible assets |  |  | 688 |  |  |  | 716 |
Deferred income |  |  | 70 |  |  |  | 111 |
Accrued tax on unremitted earnings |  |  | 17 |  |  |  | 17 |
Other |  |  | 52 |  |  |  | 92 |
Total deferred tax liabilities |  |  | 966 |  |  |  | 1,110 |
Net deferred tax liability |  | $ | 553 |  |  | $ | 664 |
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
|  | 2018 |  |  | 2017 |  |  | 2016 |
Unrecognized tax benefit at beginning of year |  | $ | 132 |  |  | $ | 78 |  |  | $ | 46 |
Gross increase for current period tax positions |  |  | 15 |  |  |  | 10 |  |  |  | 3 |
Gross increase for tax positions in prior years |  |  | 31 |  |  |  | 64 |  |  |  | 65 |
Gross decrease for tax positions in prior years |  |  | (10 | ) |  |  | (14 | ) |  |  | (21 | )
Settlements |  |  | (69 | ) |  |  | — |  |  |  | (3 | )
Lapse of statute of limitations |  |  | (1 | ) |  |  | (6 | ) |  |  | (12 | )
Unrecognized tax benefit at end of year |  | $ | 98 |  |  | $ | 132 |  |  | $ | 78 |
The balance of unrecognized tax benefits at December 31, 2018, 2017 and 2016 was $98 million, $132 million and $78 million, respectively. For the year ended December 31, 2018, the settlement of a foreign jurisdiction audit resulted in a $69 million decrease in uncertain tax provisions. Accruals related to foreign jurisdiction audits of prior years resulted in uncertain tax position increases of $64 million and $65 million in 2017 and 2016. Substantially all of the unrecognized tax benefits, if ultimately realized, would be recorded as a benefit to the effective tax rate. The Company anticipates that it is reasonably possible that the amount of unrecognized tax benefits may decrease by up to $7 million in the next twelve months due to settlements and conclusions of tax examinations. To the extent penalties and interest would be assessed on any underpayment of income tax, such accrued amounts have been classified as a component of income tax expense in the financial statements consistent with the Company’s policy. For the years ended December 31, 2018, 2017 and 2016, we recorded income tax expense of nil, $17 million and $10 million, respectively, for interest and penalty related to unrecognized tax benefits. As of December 31, 2018 and 2017, the Company had accrued $12 million and $32 million, respectively, of interest and penalty relating to unrecognized tax benefits. The Company is subject to taxation in the United States, various states and foreign jurisdictions. The Company has significant operations in the United States, Norway, Canada, the United Kingdom, the Netherlands, France and Denmark. Tax years that remain subject to examination by major tax jurisdictions vary by legal entity, but are generally open in the U.S. for tax years ending after 2013 and outside the U.S. for tax years ending after 2010. Net operating loss carryforwards by jurisdiction and expiration as of December 31, 2018 were as follows (in millions):
|  | Federal |  |  | State |  |  | Foreign |  |  | Total |
2019 - 2021 Expiration |  | $ | 6 |  |  | $ | 2 |  |  | $ | 51 |  |  | $ | 59 |
2022 - 2033 Expiration |  |  | 16 |  |  |  | 20 |  |  |  | 142 |  |  |  | 178 |
2034 - 2038 Expiration |  |  | 12 |  |  |  | 122 |  |  |  | 94 |  |  |  | 228 |
Unlimited Expiration |  |  | — |  |  |  | — |  |  |  | 428 |  |  |  | 428 |
Total Net Operating Loss (NOL) |  | $ | 34 |  |  | $ | 144 |  |  | $ | 715 |  |  | $ | 893 |
Tax Effected NOL |  | $ | 7 |  |  | $ | 8 |  |  | $ | 167 |  |  | $ | 182 |
Valuation Allowance (VA) |  |  | (6 | ) |  |  | (8 | ) |  |  | (140 | ) |  |  | (154 | )
Tax Effected NOL Net of VA |  | $ | 1 |  |  | $ | — |  |  | $ | 27 |  |  | $ | 28 |
The Company has $766 million of excess foreign tax credits in the United States as of December 31, 2018, of which $10 million, $141 million, $286 million, $142 million, and $187 million will expire in 2020, 2022, 2026, 2027, and 2028, respectively. As of December 31, 2018, the Company has remaining tax-deductible goodwill of $133 million, resulting from acquisitions. The amortization of this goodwill is deductible over various periods ranging up to 12 years. Undistributed earnings of certain of the Company’s foreign subsidiaries amounted to $3,254 million at December 31, 2018. These earnings are considered to be indefinitely reinvested and no provision for U.S. federal and state income taxes has been made. Distribution of these earnings in the form of dividends or otherwise could result in incremental U.S. federal and state taxes at statutory rates and withholding taxes payable in various foreign countries.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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