Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Components of Provision for Income Taxes, Net

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



	Year Ended December 31,
	2016			2017			2018
Current taxes:
U.S. Federal	$	1,136		$	(137	)	$	(129	)
U.S. State	208			211			322
International	327			724			563
Current taxes	1,671			798			756
Deferred taxes:
U.S. Federal	116			(202		)	565
U.S. State	(31		)	(26		)	5
International	(331		)	199			(129		)
Deferred taxes	(246		)	(29		)	441
Provision for income taxes, net	$	1,425		$	769		$	1,197

Components of Income Before Income Taxes, Domestic and Foreign

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



	Year Ended December 31,
	2016			2017			2018
U.S.	$	4,551		$	5,630		$	11,157
International	(659		)	(1,824		)	104
Income before income taxes	$	3,892		$	3,806		$	11,261

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,
	2016			2017			2018
Income taxes computed at the federal statutory rate (1)	$	1,362		$	1,332		$	2,365
Effect of:
Tax impact of foreign earnings	(69		)	1,178			119
State taxes, net of federal benefits	110			114			263
Tax credits	(119		)	(220		)	(419		)
Stock-based compensation (2)	189			(917		)	(1,086		)
Domestic production activities deduction	(94		)	—			—
2017 Impact of U.S. Tax Act	—			(789		)	(157		)
Other, net	46			71			112
Total	$	1,425		$	769		$	1,197

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(1)	The U.S. Tax Act reduced the U.S. federal statutory rate from 35% to 21% beginning in 2018.


(2)	Includes non-deductible stock-based compensation and beginning in 2017, excess tax benefits from stock-based compensation. For 2017 and 2018, our tax provision includes $1.3 billion and $1.6 billion of excess tax benefits from stock-based compensation.

Deferred Tax Assets and Liabilities

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



	December 31,
	2017			2018
Deferred tax assets (1):
Loss carryforwards U.S. - Federal/States	$	211		$	222
Loss carryforwards - Foreign	2,149			2,551
Accrued liabilities, reserves, and other expenses	901			1,064
Stock-based compensation	1,026			1,293
Deferred revenue	349			321
Assets held for investment	35			69
Depreciation and amortization	279			2,386
Other items	167			94
Tax credits	381			734
Total gross deferred tax assets	5,498			8,734
Less valuation allowance (2)	(2,538		)	(4,950		)
Deferred tax assets, net of valuation allowance	2,960			3,784
Deferred tax liabilities:
Depreciation and amortization	(2,568		)	(3,579		)
Acquisition related intangible assets	(531		)	(682		)
Other items	(58		)	(67		)
Net deferred tax assets (liabilities), net of valuation allowance	$	(197	)	$	(544	)

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(1)	Deferred tax assets are presented net of tax contingencies.


(2)	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.

Reconciliation of Tax Contingencies

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



	December 31,
	2016			2017			2018
Gross tax contingencies – January 1	$	1,181		$	1,710		$	2,309
Gross increases to tax positions in prior periods	355			223			164
Gross decreases to tax positions in prior periods	(133		)	(139		)	(90		)
Gross increases to current period tax positions	308			518			1,088
Settlements with tax authorities	—			—			(36		)
Lapse of statute of limitations	(1		)	(3		)	(21		)
Gross tax contingencies – December 31 (1)	$	1,710		$	2,309		$	3,414

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(1)	As of December 31, 2018, we had approximately $3.4 billion of accrued tax contingencies, of which $1.7 billion, if fully recognized, would decrease our effective tax rate.