
	Year Ended December 31,
	2018		2019		2020
Domestic operations	$	15,779	$	16,426	$	37,576
Foreign operations	19,134		23,199		10,506
Total	$	34,913	$	39,625	$	48,082


	Year Ended December 31,
	2018		2019		2020
Current:
Federal and state	$	2,153	$	2,424	$	4,789

Foreign	1,251		2,713		1,687
Total	3,404		5,137		6,476
Deferred:
Federal and state	907		286		1,552

Foreign	(134)		(141)		(215)
Total	773		145		1,337
Provision for income taxes	$	4,177	$	5,282	$	7,813


	Year Ended December 31,
	2018		2019		2020
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
Foreign income taxed at different rates	(4.4)		(4.9)		(0.3)
Foreign-derived intangible income deduction	(0.5)		(0.7)		(3.0)
Stock-based compensation expense	(2.2)		(0.7)		(1.7)
Federal research credit	(2.4)		(2.5)		(2.3)
Impact of the Tax Cuts and Jobs Act	(1.3)		(0.6)		0.0
European Commission fines	3.1		1.0		0.0
Deferred tax asset valuation allowance	(2.0)		0.0		1.4
State and local income taxes	(0.4)		1.1		1.1
Other adjustments	1.1		(0.4)		0.0
Effective tax rate	12.0	%	13.3	%	16.2	%

Our effective tax rate for 2018 and 2019 was affected significantly by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate because substantially all of the income from foreign operations was earned by an Irish subsidiary. As of December 31, 2019, we have simplified our corporate legal entity structure and now license intellectual property from the U.S. that was previously licensed from Bermuda resulting in an increase in the portion of our income earned in the U.S.

On July 27, 2015, the United States Tax Court, in an opinion in Altera Corp. v. Commissioner, invalidated the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. The U.S. Tax Court issued the final decision on December 28, 2015. As a result of that decision, we recorded a tax benefit related to the anticipated reimbursement of cost share payment for previously shared stock-based compensation costs.

On June 7, 2019, the United States Court of Appeals for the Ninth Circuit overturned the 2015 Tax Court decision in Altera Corp. v. Commissioner, and upheld the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost sharing arrangement to share stock-based compensation costs. As a result of the Ninth Circuit court decision, our cumulative net tax benefit of $418 million related to previously shared stock-based compensation costs was reversed in the year ended December 31, 2019.

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows (in millions):


	As of December 31,
	2019		2020
Deferred tax assets:
Stock-based compensation expense	$	421	$	518



Accrued employee benefits	463		580
Accruals and reserves not currently deductible	1,047		1,049

Tax credits	3,264		3,723
Net operating losses	771		1,085
Operating leases	1,876		2,620
Intangible assets	164		1,525
Other	226		463
Total deferred tax assets	8,232		11,563
Valuation allowance	(3,502)		(4,823)
Total deferred tax assets net of valuation allowance	4,730		6,740
Deferred tax liabilities:
Property and equipment, net	(1,798)		(3,382)

Renewable energy investments	(466)		(415)
Foreign Earnings	(373)		(383)
Net investment gains	(1,074)		(1,901)
Operating leases	(1,619)		(2,354)
Other	(380)		(782)
Total deferred tax liabilities	(5,710)		(9,217)
Net deferred tax assets (liabilities)	$	(980)	$	(2,477)

As of December 31, 2020, our federal, state and foreign net operating loss carryforwards for income tax purposes were approximately $3.1 billion, $3.1 billion, and $1.4 billion respectively. If not utilized, the federal net operating loss carryforwards will begin to expire in 2023, foreign net operating loss carryforwards will begin to expire in 2024 and the state net operating loss carryforwards will begin to expire in 2028. It is more likely than not that certain net operating loss carryforwards will not be realized; therefore, we have recorded a valuation allowance against them. The net operating loss carryforwards are subject to various annual limitations under the tax laws of the different jurisdictions.

As of December 31, 2020, our California research and development credit carryforwards for income tax purposes were approximately $3.7 billion that can be carried over indefinitely. We believe the state tax credit is not likely to be realized.

As of December 31, 2020, we maintained a valuation allowance with respect to California deferred tax assets, certain federal net operating losses, certain state tax credits, net deferred tax assets relating to certain of our Other Bets, and certain foreign net operating losses that we believe are not likely to be realized. We continue to reassess the remaining valuation allowance quarterly and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly.


	Year Ended December 31,
	2018		2019		2020
Beginning gross unrecognized tax benefits	$	4,696	$	4,652	$	3,377
Increases related to prior year tax positions	321		938		372
Decreases related to prior year tax positions	(623)		(143)		(557)
Decreases related to settlement with tax authorities	(191)		(2,886)		(45)
Increases related to current year tax positions	449		816		690
Ending gross unrecognized tax benefits	$	4,652	$	3,377	$	3,837

The total amount of gross unrecognized tax benefits was $4.7 billion, $3.4 billion, and $3.8 billion as of December 31, 2018, 2019, and 2020, respectively, of which, $2.9 billion, $2.3 billion, and $2.6 billion, if recognized, would affect our effective tax rate, respectively. The decrease in gross unrecognized tax benefits in 2019 was primarily as a result of the resolution of multi-year audits.

We file income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions, our two major tax jurisdictions are the U.S. federal and Ireland. We are subject to the continuous examination of our income tax returns by the IRS and other tax authorities. The IRS is currently examining our 2016 through 2018 tax returns. We have also received tax assessments in multiple foreign jurisdictions asserting transfer pricing adjustments or permanent establishment. We continue to defend any and all such claims as presented.

The tax years 2011 through 2019 remain subject to examination by the appropriate governmental agencies for Irish tax purposes. There are other ongoing audits in various other jurisdictions that are not material to our financial statements.

We regularly assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes. We continue to monitor the progress of ongoing discussions with tax authorities and the effect, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.

We believe that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in our tax audits are resolved in a manner not consistent with management's expectations, we could be required to adjust our provision for income taxes in the period such resolution occurs. Although the timing of resolution, settlement, and closure of audits is not certain, we do not believe it is reasonably possible that our unrecognized tax benefits will materially change in the next 12 months.