INCOME TAXES

The provision for income taxes consisted of the following for the years ended December 31, 2018, 2017 and 2016:



	2018		2017		2016
	(in millions)
Current provision:
Federal	$	139	$	1,324	$	921
States and Puerto Rico	58		116		88
Total current provision	197		1,440		1,009
Deferred expense (benefit)	194		132		(71		)
Provision for income taxes	$	391	$	1,572	$	938

The provision for income taxes was different from the amount computed using the federal statutory rate for the years ended December 31, 2018, 2017 and 2016 due to the following:



	2018			2017			2016
	(in millions)
Income tax provision at federal statutory rate	$	436		$	1,407		$	543
States, net of federal benefit, and Puerto Rico	42			80			41
Tax exempt investment income	(11		)	(22		)	(20		)
Health insurance industry fee	243			—			336
Nondeductible executive compensation	17			36			30
Tax reform	(39		)	133			—
KMG sale	(272		)	—			—
Other, net	(25		)	(62		)	8
Provision for income taxes	$	391		$	1,572		$	938

The tax reform law enacted on December 22, 2017 (the "Tax Reform Law") reduced the statutory federal corporate income tax rate to 21 percent from 35 percent, beginning in 2018, and required a mandatory deemed repatriation of undistributed foreign earnings. The rate reduction required a remeasurement of our net deferred tax asset. These items resulted in an estimated increase in our 2017 tax provision of approximately $133 million, including approximately $10 million for the deemed repatriation tax imposed on the undistributed earnings of our Puerto Rico operations. Revisions to our prior estimate for the income tax effects of the Tax Reform Law decreased our 2018 tax provision by approximately $39 million.

The incremental tax benefit on the sale of KMG of $272 million resulted from a tax loss higher than the loss recorded in the statement of income for the year ended December 31, 2018 due to a higher tax basis in KMG than book basis. In addition, the amount reflects our ability to carryback the capital loss to tax years 2015, 2016 and 2017 at the historical tax rate of 35 percent instead of the current tax rate of 21 percent.

Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or liabilities and their reported amounts in our consolidated financial statements, and are stated at enacted tax rates expected to be in effect when the reported amounts are actually recovered or settled.

Principal components of our net deferred tax balances at December 31, 2018 and 2017 were as follows:



	Assets (Liabilities)
	2018			2017
	(in millions)
Compensation and other accrued expense	$	89		$	138
Benefits payable	79			113
Investment securities	44			—
Net operating loss carryforward	38			53
Capital loss carryforward	15			—
Deferred acquisition costs	17			48
Unearned revenues	9			12
Other	8			1
Future policy benefits payable	—			231
Total deferred income tax assets	299			596
Valuation allowance	(54		)	(49		)
Total deferred income tax assets, net of valuation allowance	245			547
Depreciable property and intangible assets	(273		)	(237		)
Prepaid expenses	(52		)	(44		)
Future policy benefits payable	(5		)	—
Investment securities	—			(49		)
Total deferred income tax liabilities	(330		)	(330		)
Total net deferred income tax assets/(liabilities)	$	(85	)	$	217

All deferred tax liabilities and assets are classified as noncurrent in our consolidated balance sheets as other long-term liabilities at December 31, 2018 and as other long-term assets at December 31, 2017.

At December 31, 2018, we had approximately $104 million of net operating losses and $64 million of capital losses to carry forward. These loss carryforwards, if not used to offset future taxable income or capital gain, will expire from 2019 through 2037. Due to limitations and uncertainty regarding our ability to use some of the loss carryforwards and certain other deferred tax assets, a valuation allowance of $54 million was established. For the remainder of the net operating loss carryforwards and other cumulative temporary differences, based on our historical record of producing taxable income and profitability, we have concluded that future operating income will be sufficient to give rise to tax expense to recover these deferred tax assets.

We file income tax returns in the United States and Puerto Rico. The U.S. Internal Revenue Service, or IRS, has completed its examinations of our consolidated income tax returns for 2016 and prior years. Our 2017 tax return is in the post-filing review period under the Compliance Assurance Process, or CAP. Our 2018 tax return is under advance review by the IRS under CAP. With a few exceptions, which are immaterial in the aggregate, we no longer are subject to state, local and foreign tax examinations for years before 2015. We are not aware of any material adjustments that may be proposed as a result of any ongoing or future examinations. We do not have material uncertain tax positions reflected in our consolidated balance sheets.