Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

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			2015			2016
Current taxes:
U.S. Federal	$	214		$	215		$	1,136
U.S. State	65			237			208
International	204			417			327
Current taxes	483			869			1,671
Deferred taxes:
U.S. Federal	(125		)	473			116
U.S. State	(11		)	(171		)	(31		)
International	(180		)	(221		)	(331		)
Deferred taxes	(316		)	81			(246		)
Provision for income taxes, net	$	167		$	950		$	1,425

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			2015			2016
U.S.	$	292		$	2,186		$	4,551
International	(403		)	(618		)	(659		)
Income (loss) before income taxes	$	(111	)	$	1,568		$	3,892

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			2015			2016
Income taxes computed at the federal statutory rate	$	(39	)	$	549		$	1,362
Effect of:
Impact of foreign tax differential	136			350			(69		)
State taxes, net of federal benefits	29			37			110
Tax credits	(85		)	(99		)	(119		)
Nondeductible compensation	117			149			189
Domestic production activities deduction	(20		)	(44		)	(94		)
Other, net	29			8			46
Total	$	167		$	950		$	1,425

Deferred Tax Assets and Liabilities

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



	December 31,
	2015			2016
Deferred tax assets (1):
Loss carryforwards U.S. - Federal/States (2)	$	107		$	198
Loss carryforwards - Foreign (3)	856			1,062
Accrued liabilities, reserves, & other expenses	854			968
Stock-based compensation	727			1,073
Deferred revenue	189			330
Assets held for investment	148			66
Depreciation & amortization	222			179
Other items	268			171
Tax credits (4)	41			39
Total gross deferred tax assets	3,412			4,086
Less valuation allowance (5)	(1,069		)	(1,012		)
Deferred tax assets, net of valuation allowance	2,343			3,074
Deferred tax liabilities:
Depreciation & amortization	(1,970		)	(2,332		)
Acquisition related intangible assets	(203		)	(226		)
Other items	(88		)	(62		)
Net deferred tax assets, net of valuation allowance	$	82		$	454

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


(2)	Excluding $380 million and $18 million of deferred tax assets as of December 31, 2015 and 2016, 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 $9 million of deferred tax assets as of December 31, 2015 and 2016, 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 $447 million and $659 million of deferred tax assets as of December 31, 2015 and 2016, 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			2015			2016
Gross tax contingencies – January 1	$	407		$	710		$	1,181
Gross increases to tax positions in prior periods	351			254			355
Gross decreases to tax positions in prior periods	(50		)	(22		)	(133		)
Gross increases to current period tax positions	20			242			308
Audit settlements paid	(16		)	—			—
Lapse of statute of limitations	(2		)	(3		)	(1		)
Gross tax contingencies – December 31 (1)	$	710		$	1,181		$	1,710

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(1)	As of December 31, 2016, we had $1.7 billion of accrued tax contingencies, of which $1.1 billion, if fully recognized, would decrease our effective tax rate.