The 2017 Tax Act was enacted on December 22, 2017. The 2017 Tax Act reduced the U.S. federal corporate income tax rate to 21 percent from 35 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-sourced earnings. In 2017 and through December 22, 2018, Kodak recorded provisional amounts for certain enactment-date effects of the 2017 Tax Act because it had not yet completed the enactment-date accounting for these effects. Kodak recorded the following impacts:

Kodak’s deferred tax assets and liabilities were remeasured to reflect the reduction in the U.S. corporate income tax rate from 35 percent to 21 percent, resulting in a $202 million decrease in the Kodak’s net deferred tax assets for the year ended December 31, 2017. This reduction in deferred tax assets was mainly offset by Kodak’s U.S. valuation allowance except for the impact on deferred tax liabilities related to the goodwill and the Kodak tradename, which resulted in a benefit of approximately $7 million. An adjustment made to the provisional amount allowed under SAB 118 was identified and recorded as a discrete adjustment during the year ended December 31, 2018 and was immaterial.

Kodak recognized a provisional income tax expense of $14 million for the year ended December 31, 2017 related to the one-time transition tax on certain foreign earnings which will be offset by the utilization of foreign tax credits. Upon further analysis of the 2017 Tax Act, Notices and Regulations issued and proposed by the U.S. Department of the Treasury and the Internal Revenue Service, Kodak finalized its calculations of the transition tax liability in the year ended December 31, 2018 resulting in no net tax provision.

The 2017 Tax Act subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. Under the 2017 Tax Act, an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. Kodak was still evaluating the GILTI provisions as of December 31, 2017, therefore no GILTI-related deferred amount was recorded as of the year ended December 31, 2017. As of the year ended December 31, 2018, Kodak has elected to account for GILTI as a period cost in the year the tax is incurred.

The SEC staff issued SAB 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. Kodak recognized the provisional tax impacts related to deemed repatriated earnings and the re-measurement of deferred tax assets and liabilities to the extent needed and included these amounts in its consolidated financial statements through December 22, 2018, the end of the measurement period for purposes of SAB 118. Kodak completed its analysis based on legislative updates relating to the 2017 Tax Act available by the end of 2018 resulting in adjustments which were fully offset by Kodak’s U.S. valuation allowance, resulting in no net tax provision or (benefit).

The components of Loss from continuing operations before income taxes and the related benefit for U.S. and other income taxes were as follows (in millions):

	Year Ended December 31,
	2018			2017
(Loss) earnings from continuing operations before income taxes:
U.S.	$	(46	)	$	(59	)
Outside the U.S.		33			33
Total	$	(13	)	$	(26	)
U.S. income taxes:
Current (benefit) provision	$	(30	)	$	1
Deferred provision (benefit)		1			(31	)
Income taxes outside the U.S.:
Current provision		4			6
Deferred provision benefit		21			(95	)
State and other income taxes:
Current benefit		—			(1	)
Total provision	$	(4	)	$	(120	)

The differences between income taxes computed using the U.S. federal income tax rate and the benefit for income taxes for continuing operations were as follows (in millions):

	Year Ended December 31,
	2018			2017
Amount computed using the statutory rate	$	(3	)	$	(9	)
Increase (reduction) in taxes resulting from:
Unremitted foreign earnings		2			2
Impact of goodwill and intangible impairments		—			(21	)
Operations outside the U.S.		28			14
Legislative tax law and rate changes		7			150
Valuation allowance		(18	)		(266	)
Tax settlements and adjustments, including interest		(33	)		(11	)
Discharge of debt and other reorganization related items		13			39
Embedded derivative liability conversion		—			(17	)
Other, net		—			(1	)
Benefit from income taxes	$	(4	)	$	(120	)

In June 2012, Kodak filed a Request for Competent Authority Assistance with the United States Internal Revenue Service (IRS). The request related to a potential double taxation issue with respect to patent licensing royalty payments received by Kodak in 2010. In October 2018, an agreement was reached by the IRS and Korean National Tax Service, resulting in a partial refund of Korean withholding taxes in the amount of $32 million. Kodak had previously agreed with the licensee that made the royalty payments that any refunds of the related Korean withholding taxes would be shared equally between Kodak and the licensee. Kodak received the $16 million net payment in the fourth quarter of 2018. The full $32 million refund was reflected as an income tax benefit in the fourth quarter of 2018. The $16 million payment to the licensee was reported in other operating expenses, resulting in a net benefit to net income of $16 million.

The significant components of deferred tax assets and liabilities were as follows (in millions):

	As of December 31,
	2018		2017
Deferred tax assets
Pension and postretirement obligations	$	62	$	96
Restructuring programs		1		1
Foreign tax credit		357		343
Inventories		9		10
Investment tax credit		48		58
Employee deferred compensation		23		25
Depreciation		64		68
Research and development costs		67		80
Tax loss carryforwards		338		307
Other deferred revenue		1		4
Other		69		73
Total deferred tax assets	$	1,039	$	1,065

Deferred tax liabilities
Leasing	$	2	$	2
Goodwill/intangibles		16		16
Unremitted foreign earnings		22		20
Total deferred tax liabilities		40		38
Net deferred tax assets before valuation allowance		999		1,027
Valuation allowance		853		856
Net deferred tax assets	$	146	$	171

Deferred tax assets (liabilities) are reported in the following components within the Consolidated Statement of Financial Position (in millions):

As of December 31, 2018, Kodak had available domestic and foreign NOL carry-forwards for income tax purposes of approximately $1,503 million, of which approximately $746 million have an indefinite carry-forward period. The remaining $757 million expire between the years 2019 and 2037. As of December 31, 2018, Kodak had unused foreign tax credits and investment tax credits of $357 million and $48 million, respectively, with various expiration dates through 2033.

Utilization of post-emergence NOL carry-forwards and tax credits may be subject to limitations in the event of significant changes in stock ownership of the Company in the future. Section 382 of the Internal Revenue Code of 1986, as amended, imposes annual limitations on the utilization of NOL carryforwards, other tax carryforwards, and certain built-in losses as defined under that Section, upon an ownership change. In general terms, an ownership change may result from transactions that increase the aggregate ownership of certain stockholders in Kodak’s stock by more than 50 percentage points over a three-year testing period.

The 2017 Tax Act includes a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The one-time transition tax as of December 31, 2017 resulted in the recognition of a previously recorded deferred tax liability on the undistributed foreign earnings of $56 million (net of related foreign tax credits) and was fully offset by Kodak’s U.S. valuation allowance, resulting in no net tax benefit. Kodak had deferred tax liabilities of $22 million and $20 million for potential taxes on the undistributed earnings, including foreign withholding taxes, as of December 31, 2018 and 2017, respectively.

Kodak’s valuation allowance as of December 31, 2018 was $853 million. Of this amount, $155 million was attributable to Kodak’s net deferred tax assets outside the U.S. of $323 million, and $698 million related to Kodak’s net deferred tax assets in the U.S. of $676 million, for which Kodak believes it is not more likely than not that the assets will be realized.

During 2018, Kodak determined that it was more likely than not that a portion of the deferred tax assets outside the U.S. would be realized as a result of increased profits in locations outside the U.S. and accordingly recorded a benefit of $4 million associated with the release of a valuation allowance on those deferred tax assets. Additionally, during 2018, Kodak determined that it was more likely than not that a portion of the deferred tax assets outside the U.S. would not be realized due to reduced sales volumes in a location outside the U.S. and accordingly recorded a provision of $15 million associated with the establishment of a valuation allowance on those deferred tax assets.

Kodak’s valuation allowance as of December 31, 2017 was $856 million. Of this amount, $159 million was attributable to Kodak’s net deferred tax assets outside the U.S. of $352 million, and $697 million related to Kodak’s net deferred tax assets in the U.S. of $675 million, for which Kodak believes it is not more likely than not that the assets will be realized.

During 2017, Kodak determined that it was more likely than not that a portion of the deferred tax assets outside the U.S. would be realized as a result of increased profits in a location outside the U.S. and accordingly, recorded a benefit of $101 million associated with the release of a valuation allowance on those deferred tax assets. Additionally, during 2017, Kodak determined that it was more likely than not that a portion of the deferred tax assets outside the U.S. would not be realized due to reduced manufacturing volumes negatively impacting profitability in a location outside the U.S. and accordingly, recorded a provision of $7 million associated with the establishment of a valuation allowance on those deferred tax assets.

The net deferred tax assets in excess of the valuation allowance of approximately $146 million and $171 million as of December 31, 2018 and December 31, 2017, respectively, relate primarily to NOL carry-forwards, certain tax credits, and pension related tax benefits for which Kodak believes it is more likely than not that the assets will be realized.

A reconciliation of the beginning and ending amount of Kodak’s liability for income taxes associated with unrecognized tax benefits is as follows

	Year Ended December 31,
	2018			2017
Balance as of January 1	$	61		$	84
Tax positions related to the current year:
Additions		—			7
Tax positions related to prior years:
Additions		1			6
Reductions		(5	)		(28	)
Settlements with taxing jurisdictions		—			(4	)
Lapses in statute of limitations		—			(4	)
Balance as of December 31	$	57		$	61

Kodak’s policy regarding interest and/or penalties related to income tax matters is to recognize such items as a component of income tax (benefit) expense. Kodak had approximately $16 million and $17 million of interest and penalties associated with uncertain tax benefits accrued as of December 31, 2018 and 2017, respectively.

Kodak had uncertain tax benefits of approximately $26 and $29 million as of December 31, 2018 and 2017, respectively, that, if recognized, would affect the effective income tax rate. Kodak has classified certain income tax liabilities as current or noncurrent based on management’s estimate of when these liabilities will be settled. The current liabilities are recorded in Other current liabilities in the Consolidated Statement of Financial Position. Noncurrent income tax liabilities are recorded in Other long-term liabilities in the Consolidated Statement of Financial Position.

It is reasonably possible that the liability associated with Kodak’s unrecognized tax benefits will increase or decrease within the next twelve months. These changes may be the result of settling ongoing audits or the expiration of statutes of limitations. Such changes to the unrecognized tax benefits could range from $0 to $15 million based on current estimates. Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although management believes that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on the earnings of Kodak. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.

During 2018, Kodak agreed to terms with a tax authority outside of the U.S. and settled audit issues related to calendar years 2006-2007. Kodak originally recorded liabilities for uncertain tax positions (“UTPs”) totaling $1 million (plus interest of approximately $1 million). The settlement resulted in a reduction in Other current liabilities in the Consolidated Statement of Financial Position and other taxes and the recognition of a $2 million tax benefit.

The 2017 Tax Act corporate tax rate decrease from 35% to 21% resulted in the re-measurement of UTPs, reducing a reserve held in the U.S. by approximately $22 million. UTPs are presented in the financial statements as a reduction to deferred tax assets for a NOL carryforward, a similar tax loss or a tax credit carryforward. As a result, the reduction of this UTP has been recorded as a reduction in Kodak’s deferred tax asset and is fully offset by valuation allowance, therefore there is no net tax provision associated with this change.

During 2017, Kodak agreed to terms with a tax authority outside of the U.S. and settled audits for calendar years 2008 through 2012. For these years, Kodak originally recorded liabilities for a UTP totaling $6 million (plus interest of approximately $2 million). The settlement resulted in a reduction in Other current liabilities in the Consolidated Statement of Financial Position and the recognition of a $1 million tax benefit.

Kodak is subject to taxation and files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. Kodak has substantially concluded all U.S. federal and state income tax matters for years through 2012 with respective tax authorities. Kodak is currently under examination by the Internal Revenue Service for years 2013 and 2014. With respect to countries outside the U.S., Kodak has substantially concluded all material foreign income tax matters through 2011 with respective foreign tax jurisdiction authorities.