INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2018

The income tax expense (benefit) for the year ended December 31, 2018 is as follows (in millions):



	Current		Deferred			Total
International	$	887	$	(3	)	$	884
U.S. Federal	45		(107		)	(62		)
U.S. State	55		(40		)	15
Total	$	987	$	(150	)	$	837

The income tax expense (benefit) for the year ended December 31, 2017 is as follows (in millions):



	Current		Deferred			Total
International	$	756	$	(10	)	$	746
U.S. Federal	1,327		(57		)	1,270
U.S. State	7		35			42
Total	$	2,090	$	(32	)	$	2,058

The income tax expense (benefit) for the year ended December 31, 2016 is as follows (in millions):



	Current			Deferred			Total
International	$	627		$	(14	)	$	613
U.S. Federal	64			(33		)	31
U.S. State	(1		)	(65		)	(66		)
Total	$	690		$	(112	)	$	578

Tax effects of temporary differences that give rise to significant portions of deterred tax assets and liabilities

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows (in millions):



	2018			2017
Deferred tax assets/(liabilities):
Net operating loss carryforward — U.S.	$	59		$	71
Net operating loss carryforward — International	20			28
Accrued expenses	50			57
Stock-based compensation and other stock based payments	51			48
Currency translation adjustment	27			—
Tax credits	46			15
Euro-denominated debt	5			58
Property and equipment	6			9
Subtotal - deferred tax assets	264			286

Discount on convertible notes	(22		)	(33		)
Intangible assets and other	(482		)	(517		)
State income tax on accumulated unremitted international earnings	(25		)	(37		)
Unrealized gain on investments	(2		)	(70		)
Other	(15		)	(25		)
Subtotal - deferred tax liabilities	(546		)	(682		)
Valuation allowance on deferred tax assets	(36		)	(44		)
Net deferred tax liabilities⁽¹⁾	$	(318	)	$	(440	)

(1) Includes deferred tax assets of $51 million and $41 million at December 31, 2018 and 2017, respectively, reported in "Other assets" in the Consolidated Balance Sheets.

Schedule of effective income tax rate reconciliation

The effective income tax rate of the Company is different from the amount computed using the expected U.S. statutory federal rate of 21% in 2018 and 35% in 2017 and 2016 as a result of the following items (in millions):



	2018			2017			2016
Income tax expense at federal statutory rate	$	1,015		$	1,539		$	950
Adjustment due to:
Foreign rate differential	210			(458		)	(378		)
Innovation Box Tax benefit	(435		)	(397		)	(325		)
Impairment of goodwill and cost-method investment	—			—			344
Tax Act - Remeasurement of deferred tax balances	(2		)	(217		)	—
Tax Act - U.S. transition tax and other transition impacts	(46		)	1,563			—
Other	95			28			(13		)
Income tax expense	$	837		$	2,058		$	578

Reconciliation of unrecognized tax benefits

The following is a reconciliation of the total beginning and ending amount of unrecognized tax benefits (in millions):



	2018			2017			2016
Unrecognized tax benefit — January 1	$	32		$	33		$	43
Gross increases — tax positions in current period	1			5			2
Gross increases — tax positions in prior periods	19			5			1
Gross decreases — tax positions in prior periods	(3		)	(9		)	—
Reduction due to lapse in statute of limitations	(2		)	(1		)	(9		)
Reduction due to settlements during the current period	(2		)	(1		)	(4		)
Unrecognized tax benefit — December 31	$	45		$	32		$	33