Income Taxes (Tables)

12 Months Ended

Dec. 31, 2014

Components of Income Tax Expense (Benefit)

The components of the provision for income taxes, net are as follows (in millions):



	Year Ended December 31,
	2014			2013			2012
Current taxes:
U.S. Federal	$	214		$	99		$	528
U.S. State	65			45			34
International	204			173			131
Current taxes	483			317			693
Deferred taxes:
U.S. Federal	(125		)	(114		)	(129		)
U.S. State	(11		)	(19		)	(27		)
International	(180		)	(23		)	(109		)
Deferred taxes	(316		)	(156		)	(265		)
Provision for income taxes, net	$	167		$	161		$	428

Income before Income Tax, Domestic and Foreign

U.S. and international components of income before income taxes are as follows (in millions):



	Year Ended December 31,
	2014			2013			2012
U.S.	$	292		$	704		$	882
International	(403		)	(198		)	(338		)
Income (loss) before income taxes	$	(111	)	$	506		$	544

Effective Income Tax Rate Reconciliation

The items accounting for differences between income taxes computed at the federal statutory rate and the provision recorded for income taxes are as follows (in millions):



	Year Ended December 31,
	2014			2013			2012
Income taxes computed at the federal statutory rate	$	(39	)	$	177		$	191
Effect of:
Impact of foreign tax differential	136			(41		)	172
State taxes, net of federal benefits	29			14			1
Tax credits	(85		)	(84		)	(24		)
Nondeductible compensation	117			86			72
Domestic production activities deduction	(20		)	(11		)	—
Other, net	29			20			16
Total	$	167		$	161		$	428

Deferred Tax Assets and Liabilities

Deferred income tax assets and liabilities are as follows (in millions):



	December 31,
	2014 (1)			2013
Deferred tax assets:
Net operating losses U.S. - Federal/States (2)	$	357		$	53
Net operating losses foreign (3)	669			427
Accrued liabilities, reserves, & other expenses	780			590
Stock-based compensation	534			396
Deferred revenue	156			249
Assets held for investment	154			164
Other items	242			177
Tax credits (4)	115			107
Total gross deferred tax assets	3,007			2,163
Less valuation allowance (5)	(901		)	(698		)
Deferred tax assets, net of valuation allowance	2,106			1,465
Deferred tax liabilities:
Depreciation & amortization	(1,609		)	(1,021		)
Acquisition related intangible assets	(195		)	(201		)
Other items	(31		)	(16		)
Net deferred tax assets, net of valuation allowance	$	271		$	227

___________________


(1)	Deferred tax assets related to net operating losses and tax credits are presented net of tax contingencies.


(2)	Excluding $261 million and $81 million of deferred tax assets as of December 31, 2014 and 2013, related to net operating losses that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.


(3)	Excluding $2 million and $2 million of deferred tax assets as of December 31, 2014 and 2013, related to net operating losses that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.


(4)	Excluding $268 million and $227 million of deferred tax assets as of December 31, 2014 and 2013, related to tax credits that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.


(5)	Relates primarily to deferred tax assets that would only be realizable upon the generation of net income in certain foreign taxing jurisdictions and future capital gains.

Summary of Income Tax Contingencies

The reconciliation of our tax contingencies is as follows (in millions):



	December 31,
	2014			2013			2012
Gross tax contingencies – January 1	$	407		$	294		$	229
Gross increases to tax positions in prior periods	351			78			91
Gross decreases to tax positions in prior periods	(50		)	(18		)	(47		)
Gross increases to current period tax positions	20			54			26
Audit settlements paid	(16		)	(1		)	(4		)
Lapse of statute of limitations	(2		)	—			(1		)
Gross tax contingencies – December 31 (1)	$	710		$	407		$	294

___________________


(1)	As of December 31, 2014, we had $710 million of tax contingencies, of which $604 million, if fully recognized, would decrease our effective tax rate.

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

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