Income Taxes

12 Months Ended

Dec. 31, 2017

INCOME TAXES

Income Tax Provision

Our income tax provision consisted of the following:



	Year Ended December 31,
(in millions)	2017			2016			2015
Current tax (provision) benefit:
Federal	$	(4	)	$	—		$	(23	)
State and local	5			(28		)	(25		)
International	(54		)	(12		)	(2		)
Deferred tax provision:
Federal	(1,911		)	(2,080		)	(2,409		)
State and local	(160		)	(143		)	(172		)
Income tax provision	$	(2,124	)	$	(2,263	)	$	(2,631	)

The following table presents the principal reasons for the difference between the effective tax rate and the U.S. federal statutory income tax rate:



	Year Ended December 31,
	2017		2016		2015
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	1.8		1.8		1.8
Decrease in valuation allowance	—		—		(0.2	)
Foreign tax rate differential	(2.2	)	(2.0	)	—
Tax Cuts and Jobs Act adjustment	2.6		—		—
Other	—		(0.7	)	0.2
Effective income tax rate	37.2	%	34.1	%	36.8	%

Following the enactment of the Tax Cuts and Jobs Act of 2017, we recorded a provisional tax expense estimate of $150 million resulting in a 2.6% increase in our effective tax rate. The provisional estimate includes recognition of tax expense related to certain of our undistributed foreign earnings and tax expense to decrease our federal net deferred tax asset to a 21% statutory tax rate. We are evaluating our share of undistributed earnings from certain of our foreign investments and will reflect the impact, if any, in 2018 when such impact is finalized.

As a result of the Tax Cuts and Jobs Act of 2017, we assessed tax on $732 million of foreign earnings which would have otherwise been indefinitely reinvested outside the U.S. At December 31, 2016, we had $379 million of undistributed foreign earnings.

Deferred Taxes

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. The following table shows significant components of our deferred tax assets and liabilities:



	December 31,
(in millions)	2017			2016
Deferred tax assets:
Net operating loss carryforwards	$	1,440		$	2,485
Pension, postretirement and other benefits	2,545			5,259
Alternative minimum tax credit carryforward	379			379
Deferred revenue	1,024			1,544
Other	746			1,075
Valuation allowance	(19		)	(40		)
Total deferred tax assets	$	6,115		$	10,702
Deferred tax liabilities:
Depreciation	$	3,936		$	5,701
Intangible assets	1,070			1,691
Other	174			246
Total deferred tax liabilities	$	5,180		$	7,638

Net deferred tax assets	$	935		$	3,064

At December 31, 2017, we had $379 million of federal alternative minimum tax credit carryforwards. As a result of the Tax Cuts and Jobs Act of 2017, this credit becomes refundable to us if not used by 2021. We have $5.1 billion of federal pre-tax net operating loss carryforwards, which will not begin to expire until 2027.

Income Tax Allocation

We consider all income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations (the "Income Tax Allocation"). At the end of 2017, the Tax Cut and Jobs Act of 2017 reduced the statutory tax rate in the U.S. from 35% to 21%. GAAP requires that the tax expense related to tax law changes be recognized in current earnings, even when a portion of the related deferred tax asset originated through amounts recognized in AOCI. As a result, $700 million of income tax expense remains in AOCI, primarily related to pension obligations, and will not be recognized in net income until the pension obligations are fully extinguished, which will not occur for approximately 25 years.

Other

The amount of, and changes to, our uncertain tax positions were not material in any of the years presented. We are currently under audit by the IRS for the 2017, 2016 and 2015 tax years.