

	Twelve Months Ended July 31,
(In millions)	2018			2017		2016
Current:
Federal	$	197		$	345	$	401
State	38			36		33
Foreign	14			8		13
Total current	249			389		447
Deferred:
Federal	44			4		(42		)
State	(1		)	1		(7		)
Foreign	—			2		(1		)
Total deferred	43			7		(50		)
Total provision for income taxes from continuing operations	$	292		$	396	$	397

We recognized excess tax benefits associated with share-based compensation of $100 million in the provision for income taxes for the twelve months ended July 31, 2018, and $72 million in the provision for income taxes for the twelve months ended July 31, 2017. Prior to our adoption of ASU 2016-09 in the first quarter of fiscal 2017, excess tax benefits associated with share-based compensation deductions were credited to stockholders’ equity rather than current tax expense. The reduction of income taxes payable resulting from share-based compensation deductions that were credited to stockholders’ equity was approximately $59 million for the twelve months ended July 31, 2016.

Differences between income taxes calculated using the federal statutory income tax rate and the provision for income taxes from continuing operations were as follows for the periods indicated:



	Twelve Months Ended July 31,
(In millions)	2018			2017			2016
Income from continuing operations before income taxes	$	1,503		$	1,367		$	1,203

Statutory federal income tax	$	404		$	479		$	421
State income tax, net of federal benefit	27			24			17
Federal research and experimentation credits	(38		)	(24		)	(33		)
Domestic production activities deduction	(28		)	(34		)	(34		)
Share-based compensation	11			14			16
Federal excess tax benefits related to share-based compensation	(94		)	(69		)	—
2017 Tax Act - Deferred tax re-measurement	43			—			—
Capital loss on subsidiary reorganization	(35		)	—			—
Effects of non-U.S. operations	1			5			11
Other, net	1			1			(1		)
Total provision for income taxes from continuing operations	$	292		$	396		$	397

The Tax Cuts and Jobs Act (2017 Tax Act) was enacted on December 22, 2017 and reduces the U.S. statutory federal corporate tax rate from 35% to 21%. The effective date of the tax rate change was January 1, 2018. The change resulted in a blended lower U.S. statutory federal rate of 26.9% for fiscal year 2018. As a result, we adjusted our annual effective tax rate for the year ended July 31, 2018, as well as adjusted our U.S. net deferred tax asset balance at the lower rates.

As of July 31, 2018, we have not completed our accounting for the tax effects of enactment of the 2017 Tax Act; however, we have made a reasonable estimate of the effects on our existing deferred tax balances. We recorded a provisional charge of $43 million for fiscal year 2018, including a provisional charge reduction of $1 million during the fourth quarter related to the re-measurement of certain deferred tax balances.

Additionally, we have made provisional estimates of the impact of the 2017 Tax Act’s changes to our fiscal 2018 annual effective tax rate for items such as meals and entertainment and executive deferred compensation deductions. We do not expect to have any material tax impact from the foreign tax provisions of the 2017 Tax Act.

On December 22, 2017 the SEC issued Staff Accounting Bulletin No. 118 (SAB 118), which provides guidance for companies that are not able to complete their accounting for the income tax effects of the Act in the period of enactment. The guidance allows us to record provisional amounts to the extent a reasonable estimate can be made and provides us with up to one year from enactment date to finalize accounting for the impacts of the 2017 Tax Act. Since the 2017 Tax Act was passed in Intuit’s second quarter, the deferred tax re-measurements and other items are considered provisional due to the forthcoming guidance and ongoing analysis of the final year-end data and tax positions. The analysis is expected to be completed within the 12-month measurement period in accordance with SAB 118.

During fiscal year 2018, we completed a reorganization which resulted in a taxable liquidation of a subsidiary. The transaction gave rise to a capital loss which is available for carryback to prior years to offset capital gain income previously recognized. As a result, we recognized a tax benefit of $35 million during the fourth quarter of fiscal 2018.

The state income tax line in the table above includes excess tax benefits related to share-based compensation of $6 million and $3 million for the twelve months ended July 31, 2018 and 2017, respectively.

In December 2015 the Consolidated Appropriations Act, 2016 was signed into law, and includes a permanent reinstatement of the federal research and experimentation credit that was retroactive to January 1, 2015. We recorded a discrete tax benefit of approximately $12 million for the retroactive effect during the twelve months ended July 31 2016.

The U.S. deferred income taxes as of July 31, 2018 reflect the reduction in the U.S. statutory tax rate from 35% to 21% resulting from the 2017 Tax Act. Significant deferred tax assets and liabilities were as follows at the dates indicated:



	July 31,
(In millions)	2018			2017
Deferred tax assets:
Accruals and reserves not currently deductible	$	12		$	35
Deferred revenue	46			74
Deferred rent	8			13
Accrued and deferred compensation	41			62
Loss and tax credit carryforwards	97			71
Share-based compensation	49			70
Other, net	4			14
Total gross deferred tax assets	257			339
Valuation allowance	(93		)	(64		)
Total deferred tax assets	164			275
Deferred tax liabilities:
Intangible assets	65			93
Property and equipment	19			57
Total deferred tax liabilities	84			150
Net deferred tax assets	$	80		$	125



	July 31,
(In millions)	2018			2017
Long-term deferred income taxes	$	87		$	132
Long-term deferred income taxes included in other long-term obligations	(7		)	(7		)
Net deferred tax assets	$	80		$	125

We have provided a valuation allowance related to state research and experimentation tax credit carryforwards, foreign loss carryforwards, and state operating and capital loss carryforwards that we believe are unlikely to be realized. Changes in the

valuation allowance during the twelve months ended July 31, 2018 and July 31, 2017 were primarily related to an increase in the valuation allowance for state research and experimentation tax credit and foreign loss carryforwards.

At July 31, 2016, the income tax expense associated with the net gain from discontinued operations consisted of $179 million related to the sale of Demandforce, QuickBase, and Quicken, and $2 million related to the increase of valuation allowance on state capital loss carryforwards. See Note 7, “Discontinued Operations,” for more information.

At July 31, 2018, we had total federal net operating loss carryforwards of approximately $16 million that will start to expire in fiscal 2028. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization.

At July 31, 2018, we had total state net operating loss carryforwards of approximately $93 million for which we have recorded a deferred tax asset of $6 million and a valuation allowance of $5 million. The state net operating losses will start to expire in fiscal 2027. Utilization of the net operating losses is subject to annual limitation. The annual limitation may result in the expiration of net operating losses before utilization.

At July 31, 2018, we had Singapore operating loss carryforwards of approximately $84 million and Brazil operating loss carryforwards of approximately $23 million which have an indefinite carryforward period. We maintain a full valuation allowance with respect to operating losses in these jurisdictions, as there is not sufficient evidence of future sources of taxable income required to utilize such carryforwards.

At July 31, 2018, we had California research and experimentation credit carryforwards of approximately $100 million. We recorded a full valuation on the related deferred tax asset, as we believe it is more likely than not that these credits will not be utilized.



	Twelve Months Ended July 31,
(In millions)	2018			2017			2016
Gross unrecognized tax benefits, beginning balance	$	61		$	60		$	56
Increases related to tax positions from prior fiscal years, including acquisitions	10			8			7
Decreases related to tax positions from prior fiscal years	(3		)	(8		)	(7		)
Increases related to tax positions taken during current fiscal year	23			9			15
Settlements with tax authorities	(1		)	(8		)	(11		)
Gross unrecognized tax benefits, ending balance	$	90		$	61		$	60

The total amount of our unrecognized tax benefits at July 31, 2018 was $90 million. Net of related deferred tax assets, unrecognized tax benefits were $57 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $57 million. We do not believe that it is reasonably possible that there will be a significant increase or decrease in unrecognized tax benefits over the next 12 months.

We file U.S. federal, U.S. state, and foreign tax returns. Our major tax jurisdictions are U.S. federal and the State of California. For U.S. federal tax returns we are no longer subject to tax examinations for years prior to fiscal 2013. For California tax returns we are currently under tax examinations for fiscal 2013 to fiscal 2015.