
	Year Ended December 31,
	2020		2019		2018
Current:
Federal	$	6	$	16	$	20
State	1		(1)		3
Foreign	89		81		77
Total current	$	96	$	96	$	100
Deferred:
Federal	(25)		(32)		(11)
State	(5)		(5)		5
Foreign	(10)		(5)		9
Total deferred	$	(40)	$	(42)	$	3
Total	$	56	$	54	$	103


	Year Ended December 31,
	2020		2019		2018
Provision computed at statutory rate	21.0	%	21.0	%	21.0	%
U.S. Tax Reform - one-time transition tax	—		—		(0.6)
Remeasurement of deferred taxes	(0.6)		0.2		0.7
Change in valuation allowance	0.1		(1.7)		(4.5)
U.S. impact of Enterprise acquisition	0.3		1.0		1.1
Change in contingent income tax reserves	(0.4)		(3.3)		3.2
Foreign earnings subject to U.S. taxation	1.5		1.8		2.0
Foreign rate differential	(5.5)		(0.7)		(2.0)

State income tax, net of federal tax benefit	0.4		(0.2)		0.8
Tax credits	(2.9)		(2.3)		(1.9)
Equity compensation deductions	(3.2)		(4.0)		(2.0)
Return to provision and other true ups	(2.5)		(2.0)		1.1
Permanent differences and other	1.8		(0.8)		0.8
Provision for income taxes	10.0	%	9.0	%	19.7	%

For the year ended December 31, 2020, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to lower tax rates in foreign jurisdictions, the generation of tax credits and the favorable impacts of share-based compensation benefits.

For the year ended December 31, 2019, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to the favorable impacts of share-based compensation benefits, lapses of the statute of limitations on uncertain tax positions, and the generation of tax credits. These benefits were partially offset by the impacts of foreign earnings and deemed royalties taxed in the U.S.

For the year ended December 31, 2018, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to lower tax rates in foreign jurisdictions and the generation of tax credits. These benefits were partially offset by increases related to foreign earnings subject to U.S. taxation, the U.S. impact of the Enterprise acquisition and certain discrete items. The discrete items included the favorable impacts of reductions in valuation allowances and share-based compensation benefits, which were offset by audit settlements with the U.S. Internal Revenue Service for the fiscal years 2013, 2014 and 2015 and an increase in uncertain tax positions resulting from interpretive guidance issued during the year.

On March 27, 2020, the President of the United States signed into tax law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The provisions of the CARES Act did not have a significant impact to our effective tax rate for the year ended December 31, 2020. Management continues to monitor developments and guidance on the CARES Act and other coronavirus tax relief throughout the world for potential impacts.

The Company earns a significant amount of its operating income outside of the U.S that is taxed at rates different than the U.S. federal statutory rate. The Company’s principal foreign jurisdictions that provide sources of operating income are the United Kingdom, Singapore, and Luxembourg. The Company has received an incentivized tax rate by the Singapore Economic Development Board, which reduces the income tax rate in that jurisdiction effective for calendar years 2019 to 2023. The Company has committed to making additional investments in Singapore over the period 2019 to 2022. However, should the Company not make these investments in accordance with the agreement, any incentive benefit would have to be repaid to the Singapore tax authorities.


	December 31,
	2020		2019
Deferred tax assets:
Capitalized research expenditures	$	18	$	37
Deferred revenue	38		24
Tax credits	36		29
Net operating loss carryforwards	406		410
Other accruals	31		21
Inventory items	17		18
Capitalized software costs	—		2
Sales return/rebate reserve	46		48
Share-based compensation expense	9		12
Accrued bonus	1		7
Unrealized gains and losses on securities and investments	19		4
Valuation allowance	(413)		(421)
Total deferred tax assets	$	208	$	191
Deferred tax liabilities:
Depreciation and amortization	67		62

Undistributed earnings	2		2
Total deferred tax liabilities	$	69	$	64
Net deferred tax assets	$	139	$	127

In 2019, the Company reorganized its Luxembourg holding company structure which resulted in a taxable gain in Luxembourg that was offset by operating loss carryforwards. There was no net impact to the provision for income taxes as these activities also resulted in the realization of deferred tax liabilities related to depreciation and amortization and a corresponding increase in valuation allowances.

As of December 31, 2020, the Company had approximately $406 million (tax effected) of net operating losses (“NOLs”) and $36 million of credit carryforwards. Approximately $72 million of NOLs will expire beginning in 2021 through 2040, and $29 million of credits will expire beginning in 2021 through 2037, with the remaining amounts of NOLs and credit carryforwards having no expiration dates.

The Company is subject to the GILTI, BEAT and FDII provisions, for which we recorded income tax expense of $8 million, $12 million and $10 million for the years ended December 31, 2020, 2019 and 2018, respectively. These impacts are included in the calculation of the Company’s effective tax rate.

Effective 2019, the Company was no longer permanently reinvested with respect to its U.S. directly-owned foreign subsidiary earnings. For periods after 2017, the Company is subject to U.S. income tax on substantially all foreign earnings under the GILTI provisions, while any remaining foreign earnings are eligible for the new dividends received deduction. As a result, future repatriation of earnings will no longer be subject to U.S. income tax but may be subject to currency translation gains or losses. Where required, the Company has recorded a deferred tax liability for foreign withholding taxes on current earnings. Additionally, gains and losses on any future taxable dispositions of U.S.-owned foreign affiliates continue to be subject to U.S. income tax. Thus, as a result of these changes, the assertion of permanent reinvestment is no longer applicable under current U.S. tax laws.

The Company has not recognized deferred tax liabilities in the U.S. with respect to its outside basis differences in its directly-owned foreign affiliates. It is not practicable to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings.


	Year ended December 31,
	2020		2019
Balance at beginning of year	$	10	$	50
Additions for tax positions related to the current year	—		1

Reductions for tax positions related to prior years	—		(5)
Settlements for tax positions	(1)		(16)
Lapse of statutes	(1)		(20)
Balance at end of year	$	8	$	10

As of December 31, 2020 and December 31, 2019, there were $8 million and $9 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. The Company is currently undergoing U.S. federal income tax audits for the tax years 2017 and 2018. Fiscal 2004 through 2018 remain open to examination by multiple foreign and U.S. state taxing jurisdictions.

In the fourth quarter of 2019, the Company settled and made payment for a tax dispute for $19 million. Additionally, the statute of limitations on the U.S. federal income tax audit years 2013, 2014 and 2015 lapsed, resulting in a total benefit of $20 million during 2019. As of December 31, 2020, no other significant uncertain tax positions are expected to be settled within the next twelve months. Due to uncertainties in any tax audit or litigation outcome, the Company’s estimates of the ultimate settlement or other uncertain tax positions may change and the actual tax benefits may differ significantly from estimates.