The provision for income tax from continuing operations was as follows:



	Years Ended December 31,
	2018			2017			2016
	(In millions)
Current:
U.S. federal	$	(207	)	$	(246	)	$	520
U.S. state and local	11			5			3
Non-U.S.	932			891			628
Subtotal	736			650			1,151
Deferred:
U.S. federal	342			(2,373		)	(827		)
Non-U.S.	101			253			369
Subtotal	443			(2,120		)	(458		)
Provision for income tax expense (benefit)	$	1,179		$	(1,470	)	$	693

The Company’s income (loss) from continuing operations before income tax expense (benefit) was as follows:



	Years Ended December 31,
	2018			2017		2016
	(In millions)
Income (loss) from continuing operations:
U.S.	$	(803	)	$	684	$	185
Non-U.S.	7,110			2,852		4,096
Total	$	6,307		$	3,536	$	4,281

The reconciliation of the income tax provision at the U.S. statutory rate (21% in 2018; 35% in 2017 and 2016) to the provision for income tax as reported for continuing operations was as follows:



	Years Ended December 31,
	2018			2017			2016
	(In millions)
Tax provision at U.S. statutory rate	$	1,325		$	1,238		$	1,498
Tax effect of:
Dividend received deduction	(35		)	(67		)	(69		)
Tax-exempt income	(29		)	(97		)	(86		)
Prior year tax (1)	(197		)	(27		)	(13		)
Low income housing tax credits	(284		)	(278		)	(270		)
Other tax credits	(79		)	(102		)	(98		)
Foreign tax rate differential (2), (3), (4)	335			(95		)	(332		)
Change in valuation allowance	(2		)	(8		)	(9		)
Separation tax benefits	—			(540		)	—
U.S. Tax Reform impact (5), (6)	78			(1,519		)	—
Other, net (7)	67			25			72
Provision for income tax expense (benefit)	$	1,179		$	(1,470	)	$	693

__________________


(1)	As discussed further below, for the year ended December 31, 2018, prior year tax includes a $168 million non-cash benefit related to an uncertain tax position.


(2)	For the year ended December 31, 2018, foreign tax rate differential includes tax charges of $45 million related to Global Intangible Low-Taxed Income (“GILTI”), $17 million related to a tax adjustment in Chile and $13 million from changes in the valuation of the peso in Argentina.

(3)

For the year ended December 31, 2017, foreign tax rate differential includes a net tax charge of $180 million as a result of repatriation. Included in the net tax charge of $180 million is a $444 million tax charge related to the repatriation of approximately $3.0 billion of pre-2017 earnings following the post-Separation review of the Company’s capital needs. This charge was partially offset by a $264 million tax benefit associated with dividends from other non-U.S. operations. This charge was recorded prior to U.S. Tax Reform and is incremental to the $170 million repatriation transition tax recorded for the year ended December 31, 2017.


(4)	For the year ended December 31, 2016, foreign tax rate differential includes a tax benefit of $110 million in Japan related to a change in tax rate, offset by a tax charge of $19 million in Chile related to a change in tax rate.


(5)	For the year ended December 31, 2018, U.S. Tax Reform impact includes a $468 million tax charge related to the deemed repatriation transition tax, offset by a $390 million tax benefit related to the adjustment of deferred taxes due to the U.S. tax rate change. This excludes $12 million of tax provision at the U.S. statutory rate for a total tax reform charge of $66 million.


(6)	For the year ended December 31, 2017, U.S. Tax Reform impact of ($1.5) billion excludes ($101) million of tax provision at the U.S. statutory rate for a total tax reform benefit of ($1.6) billion.

(7)

For the year ended December 31, 2018, other includes tax charges of $69 million related to the non-deductible loss incurred on the mark-to-market and exchange of FVO Brighthouse Common Stock and $18 million related to a non-deductible Patient Protection and Affordable Care Act excise tax, offset by a tax benefit of $36 million related to a non-cash transfer of assets from a wholly-owned U.K. subsidiary to its U.S. parent.

On December 22, 2017, President Trump signed into law U.S. Tax Reform. U.S. Tax Reform includes numerous changes in tax law, including a permanent reduction in the U.S. federal corporate income tax rate from 35% to 21%, which took effect for taxable years beginning on or after January 1, 2018. U.S. Tax Reform moves the United States from a worldwide tax system to a participation exemption system by providing corporations a 100% dividends received deduction for dividends distributed by a controlled foreign corporation. To transition to that new system, U.S. Tax Reform imposed a one-time deemed repatriation tax on unremitted earnings and profits at a rate of 8.0% for illiquid assets and 15.5% for cash and cash equivalents.

The incremental financial statement impact related to U.S. Tax Reform was as follows:



	Years Ended December 31,
	2018			2017
	(In millions)
Income (loss) from continuing operations before provision for income tax	$	(58	)	$	(289	)
Provision for income tax expense (benefit):
Deemed repatriation	468			170
Deferred tax revaluation	(402		)	(1,790		)
Total provision for income tax expense (benefit)	66			(1,620		)
Income (loss) from continuing operations, net of income tax	(124		)	1,331
Income tax (expense) benefit related to items of other comprehensive income (loss)	—			144
Increase to net equity from U.S. Tax Reform	$	(124	)	$	1,475

In accordance with SAB 118 issued by the SEC in December 2017, the Company recorded provisional amounts for certain items for which the income tax accounting is not complete. For these items, the Company recorded a reasonable estimate of the tax effects of U.S. Tax Reform. The estimates were reported as provisional amounts during the measurement period, which did not exceed one year from the date of enactment of U.S. Tax Reform. The Company reflected adjustments to its provisional amounts upon obtaining, preparing, or analyzing additional information about facts and circumstances that existed as of the enactment date that, if known, would have affected the income tax effects initially reported as provisional amounts.

As of December 31, 2017, the following items were considered provisional estimates due to complexities and ambiguities in U.S. Tax Reform which resulted in incomplete accounting for the tax effects of these provisions. Further guidance, either legislative or interpretive, and analysis were completed during the measurement period. As a result, the following updates were made to complete the accounting for these items as of December 31, 2018:

•

Deemed Repatriation Transition Tax - The Company recorded a $170 million charge for this item for the year ended December 31, 2017. This charge was in addition to the $180 million charge recorded in the third quarter of 2017 resulting from the post-Separation review of the Company’s capital needs. The total transition tax liability recorded for the year ended December 31, 2017 was $350 million. In 2018, the IRS issued proposed regulations related to the transition tax. As a result, for the year ended December 31, 2018, the Company recorded a $468 million charge.

•

GILTI - U.S. Tax Reform imposes a minimum tax on GILTI, which is generally the excess income of foreign subsidiaries over a 10% rate of routine return on tangible business assets. For the year ended December 31, 2017, the Company did not record a tax charge for this item. In 2018, the Company established an accounting policy in which it treats taxes due on GILTI as a current-period expense when incurred. Accordingly, for the year ended December 31, 2018, the Company recorded a $45 million tax charge related to this income.

•

Compensation and Fringe Benefits - U.S. Tax Reform limits certain employer deductions for fringe benefit and related expenses and also repeals the exception allowing the deduction of certain performance-based compensation paid to certain senior executives. The Company recorded an $8 million tax charge, included within the deferred tax revaluation as of December 31, 2017. The Company determined that no additional adjustment was required for the year ended December 31, 2018.

•

Alternative Minimum Tax Credits - U.S. Tax Reform eliminates the corporate alternative minimum tax and allows for minimum tax credit carryforwards to be used to offset future regular tax or to be refunded 50% each tax year beginning in 2018, with any remaining balance fully refunded in 2021. However, pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, refund payments issued for corporations claiming refundable prior year alternative minimum tax credits are subject to a sequestration rate of 6.2%. The application of this fee to refunds in future years is subject to further guidance. Additionally, the sequestration reduction rate in effect at the time is subject to uncertainty. For the year ended December 31, 2017, the Company recorded a $9 million tax charge, included within the deferred tax revaluation. For the year ended December 31, 2018, the Company determined that no additional adjustment was required. In early 2019, the IRS issued guidance indicating that for years beginning after December 31, 2017, refund payments and credit elect and refund offset transactions due to refundable minimum tax credits will not be subject to sequestration. The Company will incorporate the impacts of this IRS announcement in 2019.

•

Tax Credit Partnerships - The reduction in the federal corporate income tax rate due to U.S. Tax Reform required adjustments for multiple investment portfolios, including tax credit partnerships and tax-advantaged leverage leases. Certain tax credit partnership investments derive returns in part from income tax credits. The Company recognizes changes in tax attributes at the partnership level when reported by the investee in its financial information. The Company did not receive the necessary investee financial information to determine the impact of U.S. Tax Reform on the tax attributes of its tax credit partnership investments until the third quarter of 2018. Accordingly, prior to the third quarter of 2018, the Company applied prior law to these equity method investments in accordance with SAB 118. For the year ended December 31, 2018, after receiving additional investee information, a reduction in tax credit partnerships’ equity method income of $46 million, net of income tax, was included in net investment income. The tax-advantaged leveraged lease portfolio is valued on an after-tax yield-basis. In 2018, the Company received third party data that was used to complete a comprehensive review of its portfolio to determine the full and complete impact of U.S. Tax Reform on these investments. As a result of this review, a tax benefit of $125 million was recorded for the year ended December 31, 2018.

U.S. Tax Reform required the Company to recognize a transition tax on all previously unremitted non-U.S. earnings at December 31, 2017. However, the Company has not provided for U.S. deferred taxes on the remaining excess of book bases over tax bases of certain investments in non-U.S. subsidiaries that are essentially permanent in duration. The amount of deferred tax liability related to the Company’s remaining basis difference in these non-U.S. subsidiaries is $181 million at December 31, 2018.

Deferred income tax represents the tax effect of the differences between the book and tax bases of assets and liabilities. Net deferred income tax assets and liabilities consisted of the following at:



	December 31,
	2018			2017
	(In millions)
Deferred income tax assets:
Policyholder liabilities and receivables	$	2,887		$	2,654
Net operating loss carryforwards	104			512
Employee benefits	705			802
Capital loss carryforwards	—			6
Tax credit carryforwards	1,113			1,322
Litigation-related and government mandated	161			160
Other	191			657
Total gross deferred income tax assets	5,161			6,113
Less: Valuation allowance	169			189
Total net deferred income tax assets	4,992			5,924
Deferred income tax liabilities:
Investments, including derivatives	2,494			2,772
Intangibles	1,256			1,321
Net unrealized investment gains	2,898			4,783
DAC	3,263			3,206
Other	495			609
Total deferred income tax liabilities	10,406			12,691
Net deferred income tax asset (liability)	$	(5,414	)	$	(6,767	)

The Company also has recorded a valuation allowance benefit of $12 million related to certain U.S. state and non-U.S. net operating loss carryforwards for the year ended December 31, 2018. In addition, an $8 million decrease was related to foreign currency exchange rate movement for the year ended December 31, 2018. The valuation allowance reflects management’s assessment, based on available information, that it is more likely than not that the deferred income tax asset for certain U.S. state and non-U.S. net operating loss carryforwards will not be realized. The tax benefit will be recognized when management believes that it is more likely than not that these deferred income tax assets are realizable.

The following table sets forth the net operating loss carryforwards for tax return purposes at December 31, 2018.



	Net Operating Loss Carryforwards
	U.S. Federal		U.S. State		Non-U.S.
	(In millions)
Expiration:
2019-2023	$	1	$	—	$	67
2024-2028	—		—		18
2029-2033	6		—		—
2034-2038	—		140		—
Indefinite	—		—		416
	$	7	$	140	$	501

The following table sets forth the general business credits, foreign tax credits, and other credit carryforwards for tax return purposes at December 31, 2018.



	Tax Credit Carryforwards
	General Business Credits		Foreign Tax Credits		Other
	(In millions)
Expiration:
2019-2023	$	—	$	—	$	—
2024-2028	—		2		—
2029-2033	203		—		—
2034-2038	1,140		—		—
Indefinite	—		23		145
	$	1,343	$	25	$	145

The Company files income tax returns with the U.S. federal government and various U.S. state and local jurisdictions, as well as non-U.S. jurisdictions. The Company is under continuous examination by the IRS and other tax authorities in jurisdictions in which the Company has significant business operations. The income tax years under examination vary by jurisdiction and subsidiary. The Company is no longer subject to U.S. federal, state, or local income tax examinations for years prior to 2007, except for refund claims filed in 2017 with the IRS for 2000 through 2002 to recover tax and interest predominantly related to the disallowance of certain foreign tax credits for which the Company received a statutory notice of deficiency in 2015 and paid the tax thereon. The disallowed foreign tax credits relate to certain non-U.S. investments held by MLIC in support of its life insurance business through a United Kingdom investment subsidiary that was structured as a joint venture until early 2009.

For tax years 2003 through 2006, the Company entered into binding agreements with the IRS under which all remaining issues, including the foreign tax credit matter noted above, for these years were resolved. Accordingly, in the fourth quarter of 2018, the Company recorded a non-cash benefit to net income of $349 million, net of tax, comprised of a $168 million tax benefit recorded in provision for income tax expense (benefit) and a $229 million interest benefit ($181 million, net of tax) included in other expenses. For tax years 2000 through 2002 (which are closed to IRS examination except for the refund claim described above) and 2007 through 2009 (which are the subject of the current IRS examination), the Company has established adequate reserves for tax liabilities. The Company continues to pursue final resolution of disallowed foreign tax credits, as well as related issues, for the open tax years in a manner consistent with the final resolution of such issues for 2003 through 2006. Although the final timing and details of any such resolution remain uncertain, and could be affected by many factors, closure with the IRS for tax years 2000 through 2002, and 2007 through 2009, may occur in 2019. In material non-U.S. jurisdictions, the Company is no longer subject to income tax examinations for years prior to 2011.

The Company’s overall liability for unrecognized tax benefits may increase or decrease in the next 12 months. For example, federal tax legislation and regulation could impact unrecognized tax benefits. A reasonable estimate of the increase or decrease cannot be made at this time. However, the Company continues to believe that the ultimate resolution of the pending issues will not result in a material change to its consolidated financial statements, although the resolution of income tax matters could impact the Company’s effective tax rate for a particular future period.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:



	Years Ended December 31,
	2018			2017			2016
	(In millions)
Balance at January 1,	$	1,102		$	1,146		$	1,259
Additions for tax positions of prior years (1)	269			70			24
Reductions for tax positions of prior years (2)	(195		)	(101		)	(112		)
Additions for tax positions of current year (1)	226			33			23
Reductions for tax positions of current year	(3		)	(3		)	—
Settlements with tax authorities (3)	(288		)	(43		)	(48		)
Balance at December 31,	$	1,111		$	1,102		$	1,146
Unrecognized tax benefits that, if recognized, would impact the effective rate	$	1,046		$	1,073		$	1,112

__________________


(1)	The increase in 2018 is primarily related to the deemed repatriation transition tax and the IRS issued proposed regulations.


(2)	The decrease in 2018 is primarily related to the non-cash benefit from the tax audit settlement discussed above.


(3)	The decrease in 2018 is primarily related to the tax audit settlement, of which $284 million was reclassified to the current income tax payable account.

The Company classifies interest accrued related to unrecognized tax benefits in interest expense, included within other expenses, while penalties are included in income tax expense.

Interest was as follows:



	Years Ended December 31,
	2018			2017		2016
	(In millions)
Interest expense (benefit) recognized on the consolidated statements of operations (1)	$	(441	)	$	37	$	(41	)

				December 31,
				2018		2017
				(In millions)
Interest included in other liabilities on the consolidated balance sheets				$	218	$	659

__________________


(1)	The decrease in 2018 is primarily related to the tax audit settlement, of which $168 million was recorded in other expenses and $273 million was reclassified to the current income tax payable account.

The Company had insignificant penalties for the years ended December 31, 2018, 2017 and 2016.