Income Taxes

12 Months Ended

Dec. 31, 2019

Consolidated income before taxes and noncontrolling interests for domestic and foreign operations is as follows:



	Year Ended December 31,
	2019		2018		2017
	(In millions)
Foreign	$	3,145	$	3,164	$	2,806
Domestic	627		162		248
Total income before income taxes	$	3,772	$	3,326	$	3,054

The components of the income tax expense (benefit) are as follows:



	Year Ended December 31,
	2019			2018			2017
	(In millions)
Foreign:
Current	$	245		$	245		$	258
Deferred	(10		)	(12		)	12
Federal:
Current	33			15			30
Deferred	145			135			(509		)
State:
Current	33			2			—
Deferred	22			(10		)	—
Total income tax expense (benefit)	$	468		$	375		$	(209	)

The reconciliation of the statutory federal income tax rate and the Company's effective tax rate is as follows:



	Year Ended December 31,
	2019		2018		2017
Statutory federal income tax rate	21.0	%	21.0	%	35.0	%
Increase (decrease) in tax rate resulting from:
Tax exempt income of foreign subsidiary	(8.0	)%	(8.3	)%	(7.9	)%
Foreign and U.S. tax rate differential	(5.6	)%	(6.5	)%	(18.8	)%
Change in valuation allowance	2.7	%	4.5	%	18.3	%
Repatriation of foreign earnings	—	%	—	%	72.1	%
U.S. foreign tax credits	—	%	—	%	(105.9	)%
Other, net	2.3	%	0.6	%	0.4	%
Effective tax rate	12.4	%	11.3	%	(6.8	)%

The Company enjoys an income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. The Company will continue to benefit from this tax exemption through June 26, 2022, the date VML's subconcession agreement expires. Had the Company not received the income tax exemption in Macao, consolidated net income attributable to LVSC would have been reduced by $200 million, $184 million and $158 million, and diluted earnings per share would have been reduced by $0.26, $0.23 and $0.20 per share for the years ended December 31, 2019, 2018 and 2017, respectively. In April 2019, the Company entered into a renewed agreement with the Macao government, which is effective through June 26, 2022, and provides for an annual payment of 38 million patacas (approximately $5 million at exchange rates in effect on December 31, 2019) as a substitution for a 12% tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits. In September 2013, the Company and the Internal Revenue Service entered into a Pre-Filing Agreement providing the Macao special gaming tax (35% of gross gaming revenue) qualifies as a tax paid in lieu of an income tax and could be claimed as a U.S. foreign tax credit.

The Company's foreign and U.S. tax rate differential reflects the fact that U.S. tax rates are higher than the statutory tax rates in Singapore and Macao of 17% and 12%, respectively.

The Tax Cuts and Jobs Act (the "Act" or "U.S. tax reform") made significant changes to U.S. income tax laws including lowering the U.S. corporate tax rate to 21% effective beginning in 2018 and transitioning from a worldwide tax system to a territorial tax system resulting in dividends from the Company's foreign subsidiaries not being subject to U.S. income tax and therefore, no longer generating U.S. foreign tax credits. As a result, during the year ended December 31, 2017, the Company recorded a tax benefit of $526 million relating to the reduction of the valuation allowance on certain deferred tax assets previously determined not likely to be utilized and also the revaluation of its U.S. deferred tax liabilities at the reduced corporate income tax rate of 21%. The Company recorded this impact of enactment of U.S. tax reform subject to Staff Accounting Bulletin 118, which provided for a twelve-month measurement period to complete the accounting required under Accounting Standards Codification 740, Income Taxes.

During the year ended December 31, 2018, the Company recorded a tax expense of $57 million resulting from recently issued guidance by the Internal Revenue Service ("IRS") related to certain international provisions of U.S. tax reform.

The primary tax affected components of the Company's net deferred tax assets are as follows:



	December 31,
	2019			2018
	(In millions)
Deferred tax assets:
U.S. foreign tax credit carryforwards	$	4,791		$	4,919
Net operating loss carryforwards	283			271
Accrued expenses	23			16
Stock-based compensation	15			13
Allowance for doubtful accounts	14			16
Deferred gain on mall sale transactions	13			14
Pre-opening expenses	9			11
State deferred items	—			10
Other	1			1
	5,149			5,271
Less — valuation allowances	(4,786		)	(4,769		)
Total deferred tax assets	363			502
Deferred tax liabilities:
Property and equipment	(251		)	(245		)
Prepaid expenses	(5		)	(3		)
Other	(8		)	(77		)
Total deferred tax liabilities	(264		)	(325		)
Deferred tax assets, net	$	99		$	177

U.S. tax reform required the Company to compute a one-time mandatory tax on the previously unremitted earnings of its foreign subsidiaries during the year ended December 31, 2017. This one-time deemed repatriation of these earnings did not result in a cash tax liability for the Company as the incremental U.S. taxable income was fully offset by the utilization of the U.S. foreign tax credits generated as a result of the deemed repatriation. In addition, the deemed repatriation generated excess U.S. foreign tax credits, which were carried forward to tax years 2018 and beyond. The Company's U.S. foreign tax credit carryforwards were $4.84 billion and $4.99 billion as of December 31, 2019 and 2018, respectively, which will begin to expire in 2022. The Company's state net operating loss carryforward was $232 million as of December 31, 2018. As a result of the sale of Sands Bethlehem, the Company had no state net operating loss carryforward as of December 31, 2019. There was a valuation allowance of $4.51 billion and $4.50 billion as of December 31, 2019 and 2018, respectively, provided on certain net U.S. deferred tax assets, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition. Net operating loss carryforwards for the Company's foreign subsidiaries were $2.31 billion and $2.21 billion as of December 31, 2019 and 2018, respectively, which began to expire in 2020. There are valuation allowances of $279 million and $268 million as of December 31, 2019 and 2018, respectively, provided on the net deferred tax assets of certain foreign jurisdictions, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition.

Undistributed earnings of subsidiaries are accounted for as a temporary difference, except deferred tax liabilities are not recorded for undistributed earnings of foreign subsidiaries deemed to be indefinitely reinvested in foreign jurisdictions. U.S. tax reform required the Company to compute a tax on previously unremitted earnings of its foreign subsidiaries upon transition from a worldwide tax system to a territorial tax system during the year ended December 31, 2017. The Company expects these earnings to be exempt from U.S. income tax if distributed as these earnings were taxed during the year ended December 31, 2017, under U.S. tax reform. The Company does not consider current year's tax earnings and profits of its foreign subsidiaries to be indefinitely reinvested. Beginning with the year ended December 31, 2015, the Company's major foreign subsidiaries distributed, and may continue to distribute, earnings in excess of their current year's tax earnings and profits in order to meet the Company's liquidity needs. As of December 31,

2019, the amount of earnings and profits of foreign subsidiaries the Company does not intend to repatriate was $3.52 billion. The Company does not expect withholding taxes or other foreign income taxes to apply should these earnings be distributed in the form of dividends or otherwise.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, is as follows:



	December 31,
	2019		2018		2017
	(In millions)
Balance at the beginning of the year	$	118	$	92	$	74
Additions to tax positions related to prior years	1		2		1
Additions to tax positions related to current year	15		24		18
Lapse in statutes of limitations	—		—		(1		)
Balance at the end of the year	$	134	$	118	$	92

As of December 31, 2019, 2018 and 2017, unrecognized tax benefits of $53 million, $67 million and $62 million, respectively, were recorded as reductions to the U.S. foreign tax credit deferred tax asset. As of December 31, 2019, 2018 and 2017, unrecognized tax benefits of $81 million, $51 million and $30 million, respectively, were recorded in other long-term liabilities.

Included in the unrecognized tax benefit balance as of December 31, 2019, 2018 and 2017, are $115 million, $103 million and $80 million, respectively, of uncertain tax benefits that would affect the effective income tax rate if recognized.

The Company's major tax jurisdictions are the U.S., Macao and Singapore. The Company could be subject to examination for tax years beginning 2010 in the U.S. and tax years beginning in 2015 in Macao and Singapore. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance the taxing authorities will not propose adjustments that are different from the Company's expected outcome and it could impact the provision for income taxes.

The Company recognizes interest and penalties, if any, related to unrecognized tax positions in the provision for income taxes in the accompanying consolidated statement of operations. Interest and penalties of $5 million, $3 million and $1 million were accrued as of December 31, 2019, 2018 and 2017, respectively. The Company does not expect a significant increase or decrease in unrecognized tax benefits over the next twelve months.