

	Twelve Months Ended July 31,
(In millions)	2019			2018			2017
Current:
Federal	$	271		$	197		$	345
State	67			38			36
Foreign	14			14			8
Total current	352			249			389
Deferred:
Federal	(23		)	(14		)	12
State	(4		)	2			2
Foreign	(1		)	—			2
Total deferred	(28		)	(12		)	16
Total provision for income taxes	$	324		$	237		$	405

Our tax provision for the twelve months ended July 31, 2018 and 2017 have been restated to reflect the full retrospective application of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” See Note 1, “Description of Business and Summary of Significant Accounting Policies - Accounting Standards Recently Adopted,” for more information.

We recognized excess tax benefits on share-based compensation of $120 million, $100 million, and $72 million in the provision for income taxes for the twelve months ended July 31, 2019, 2018, and 2017, respectively.



	Twelve Months Ended July 31,
(In millions)	2019		2018		2017
United States	$	1,826	$	1,528	$	1,383
Foreign	55		38		7
Total	$	1,881	$	1,566	$	1,390

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



	Twelve Months Ended July 31,
(In millions)	2019			2018			2017
Income before income taxes	$	1,881		$	1,566		$	1,390

U.S. federal statutory rate	21		%	26.9		%	35		%

Statutory federal income tax	$	395		$	420		$	486
State income tax, net of federal benefit	50			29			24
Federal research and experimentation credits	(48		)	(38		)	(24		)
Domestic production activities deduction	—			(28		)	(34		)
Share-based compensation	15			11			14
Federal excess tax benefits related to share-based compensation	(106		)	(94		)	(69		)
2017 Tax Act - Deferred tax re-measurement	—			(29		)	—
Capital loss on subsidiary reorganization	—			(35		)	—
Effects of non-U.S. operations	13			1			6
Other, net	5			—			2
Total provision for income taxes	$	324		$	237		$	405

The Tax Cuts and Jobs Act (2017 Tax Act) was enacted on December 22, 2017 and reduced 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

We recorded a provisional benefit of $29 million for fiscal 2018 related to the re-measurement of certain deferred tax balances as a result of the 2017 Tax Act. In the second quarter of fiscal 2019, we completed our accounting for the income tax effects of the 2017 Tax Act, and there have been no material adjustments during the fiscal 2019 period.

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 $14 million, $6 million and $3 million for the twelve months ended July 31, 2019, 2018 and 2017, respectively.



	July 31,
(In millions)	2019			2018
Deferred tax assets:
Accruals and reserves not currently deductible	$	13		$	12
Deferred rent	8			8
Accrued and deferred compensation	48			41
Loss and tax credit carryforwards	117			97
Share-based compensation	47			49
Other, net	3			3
Total gross deferred tax assets	236			210
Valuation allowance	(107		)	(93		)
Total deferred tax assets	129			117
Deferred tax liabilities:
Deferred revenue	66			91
Intangible assets	71			65
Property and equipment	20			19
Other, net	8			8
Total deferred tax liabilities	165			183
Net deferred tax liabilities	$	(36	)	$	(66	)

The components of total net deferred tax liabilities, net of valuation allowances, as shown on our consolidated balance sheets were as follows at the dates indicated:



	July 31,
(In millions)	2019			2018
Long-term deferred income taxes included in other assets	$	1		$	2
Long-term deferred income tax liabilities	(37		)	(68		)
Net deferred tax liabilities	$	(36	)	$	(66	)

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, 2019 were primarily related to an increase in the valuation allowance for state research and experimentation tax credit. Changes in valuation allowance during the twelve months ended July 31, 2018 were primarily related to an increase in the valuation allowance for state research and experimentation tax credit and foreign loss carryforwards.

At July 31, 2019, we had total federal net operating loss carryforwards of approximately $42 million that will start to expire in fiscal 2032. 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, 2019, we had total state net operating loss carryforwards of approximately $133 million for which we have recorded a deferred tax asset of $9 million and a valuation allowance of $7 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, 2019, we had Singapore operating loss carryforwards of approximately $62 million and Brazil operating loss carryforwards of approximately $34 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, 2019, we had California research and experimentation credit carryforwards of approximately $129 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)	2019			2018			2017
Gross unrecognized tax benefits, beginning balance	$	90		$	61		$	60
Increases related to tax positions from prior fiscal years, including acquisitions	13			10			8
Decreases related to tax positions from prior fiscal years	—			(3		)	(8		)
Increases related to tax positions taken during current fiscal year	23			23			9
Settlements with tax authorities	(1		)	(1		)	(8		)
Lapse of statute of limitations	$	(5	)	$	—		$	—
Gross unrecognized tax benefits, ending balance	$	120		$	90		$	61

The total amount of our unrecognized tax benefits at July 31, 2019 was $120 million. Net of related deferred tax assets, unrecognized tax benefits were $75 million at that date. If we were to recognize these net benefits, our income tax expense would reflect a favorable net impact of $75 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 jurisdiction is the U.S. federal jurisdiction. For U.S. federal tax returns we are no longer subject to tax examinations for years prior to fiscal 2014.

We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes. Amounts accrued at July 31, 2019 and July 31, 2018 for the payment of interest and penalties were not significant. The amounts of interest and penalties that we recognized during the twelve months ended July 31, 2019, 2018 and 2017 were also not significant.