Income Taxes

12 Months Ended

Dec. 31, 2019

The Tax Act was enacted in December 2017. The Tax Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign earnings. We completed our accounting for the tax effects of enactment of the Tax Act in 2018. During the year ended December 31, 2017, we recognized the reasonably estimated (i) effects on our existing deferred tax balances and (ii) one-time transition tax. During the year ended December 31, 2018, we finalized the accounting for the enactment of the Tax Act. The following table presents the impact of the accounting for the enactment of the Tax Act on our provision (benefit) for income taxes for the years ended December 31, 2018 and 2017:



	Year ended December 31,
	2018		2017
Revaluation of deferred tax balances (1)	$	1	$	(746	)
One-time transition tax (2)	5		57
Total provision (benefit) for income taxes impact	$	6	$	(689	)

_________________


(1)	Reflects the revaluation of our net deferred tax liability based on a U.S. federal tax rate of 21 percent.


(2)	Reflects a one-time transition tax on our unremitted foreign earnings and profits. See below for further discussion addressing our unremitted foreign earnings and profits.

The substantial 2017 impact of the enactment of the Tax Act discussed above is reflected in the tables below. The components of the provision (benefit) for income taxes for each of the three years in the period ended December 31, 2019 are

as follows:



	Year ended December 31,
	2019			2018		2017
Current
Federal	$	97		$	47	$	190
Foreign	(6		)	18		15
State and local	45			58		30
	136			123		235
Deferred
Federal	185			243		(580		)
Foreign	14			3		(2		)
State and local	5			11		49
	204			257		(533		)
Total	$	340		$	380	$	(298	)

A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rates (21 percent for the years ended December 31, 2019 and 2018 and 35 percent for the year ended December 31, 2017) to the income before provision (benefit) for income taxes for each of the three years in the period ended December 31, 2019 is as follows:



	Year ended December 31,
	2019			2018		2017
Computed tax at statutory tax rate	$	318		$	310	$	367
State income taxes, net of federal tax benefit	43			54		34
Other permanent items	(20		)	6		(3		)
Enactment of the Tax Act	—			6		(689		)
Foreign tax rate differential	(1		)	4		(7		)
Total	$	340		$	380	$	(298	)

The components of deferred income tax assets (liabilities) are as follows:



	December 31, 2019			December 31, 2018
Reserves and allowances	$	111		$	126
Debt cancellation and other	8			11
Net operating loss and credit carryforwards	371			435
Operating lease assets (1)	182			—
Total deferred tax assets	672			572
Less: valuation allowance (2)	(43		)	(46		)
Total net deferred tax assets	629			526
Property and equipment	(2,135		)	(1,976		)
Operating lease liabilities (1)	(182		)	—
Intangibles	(199		)	(237		)
Total deferred tax liability	(2,516		)	(2,213		)
Total net deferred tax liability	$	(1,887	)	$	(1,687	)

_________________

(1) As discussed in note 13 to the consolidated financial statements, in 2019, we adopted an updated lease accounting standard that resulted in the recognition of operating lease right-of-use assets and lease liabilities. We adopted this standard using a transition method that does not require application to periods prior to adoption.

(2) Relates to foreign tax credits, state net operating loss carryforwards, and state tax credits that may not be realized.

We file income tax returns in the U.S., Canada and Europe. Without exception, we have completed our domestic and international income tax examinations, or the statute of limitations has expired in the respective jurisdictions, for years prior to 2010.

For financial reporting purposes, income before provision for income taxes for our foreign subsidiaries was $62, $71 and $48 for the years ended December 31, 2019, 2018 and 2017, respectively.

We have historically considered the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested, and, accordingly, no taxes have been provided on such earnings. We continue to evaluate our plans for reinvestment or repatriation of unremitted foreign earnings and have not changed our previous indefinite reinvestment determination following the enactment of the Tax Act. We have not repatriated funds to the U.S. to satisfy domestic liquidity needs, nor do we anticipate the need to do so. The Tax Act required a one-time transition tax for deemed repatriation of accumulated undistributed earnings of certain foreign investments, and, as discussed above, we completed the accounting for the transition tax in 2018. If we determine that all or a portion of our foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. At December 31, 2019, unremitted earnings of foreign subsidiaries were $726. Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.

We have net operating loss carryforwards (“NOLs”) of $1.217 billion for federal income tax purposes that expire from 2023 through 2037, $15 for foreign income tax purposes that expire from 2024 through 2037 and $994 for state income tax purposes that expire from 2020 through 2037.