McDermott International, Inc. is a Panamanian corporation that earns all of its income outside of Panama and, as a result, is not subject to income tax in Panama. During 2018, subsequent to the Combination, McDermott became a tax resident of the United Kingdom. We operate in various taxing jurisdictions around the world. Each of these jurisdictions has a regime of taxation that varies, not only with respect to nominal rate, but also with respect to the basis on which these rates are applied. These variations, aligned with the changes in our mix of income or loss from these jurisdictions, may contribute to shifts, sometimes significant, in our effective tax rate.

	Year Ended December 31,
	2019			2018		2017
	(In millions)
U.S.:
Current	$	(16	)	$	-	$	-
Deferred		6			-		-
Other than U.S.:
Current		62			82		62
Deferred		6			22		7
Total provision for income taxes	$	58		$	104	$	69

	Year Ended December 31,
	2019			2018			2017
	(In millions)
U.S.	$	(2,031	)	$	(2,450	)	$	123
Other than U.S.		(795	)		(121	)		126
(Loss) income before provision for income taxes	$	(2,826	)	$	(2,571	)	$	249

The following is a reconciliation of the U.K. statutory federal tax rate for 2019 and 2018 and the Panamanian statutory federal tax rate for 2017 to the consolidated effective tax rates:

	Year Ended December 31,
	2019			2018			2017
Federal statutory rate		19	%		19	%		25	%
Goodwill impairment		(11	%)		(14	%)		-
Non-Panama operations		-			-			16	%
Change in valuation allowance for deferred tax assets - the U.S.		(4	%)		(7	%)		(18	%)
Change in valuation allowance for deferred tax assets - Others		(3	%)		(3	%)		3	%
Audit settlements and reserves		-			-			1	%
Other		(3	%)		1	%		1	%
Effective tax rate		(2	%)		(4	%)		28	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes, as well as operating loss and tax credit carryforwards.

	December 31,
	2019			2018
	(In millions)
Deferred tax assets:
U.S. Federal net operating loss carryforward and other credits	$	454		$	294
State net operating loss carryforward and other credits		196			248
Non-U.S. net operating losses		233			189
Accounts receivable basis difference		114			161
Partnership investments		75			153
Depreciation and amortization		115			64
Disallowed interest		108			51
Pension liability		49			49
Accrued liabilities for incentive compensation		20			32
Contract revenue and cost/long-term contracts		69			17
Insurance and legal reserves		20			17
Operating lease liability		66			-
Other		20			32
Total deferred tax assets		1,539			1,307
Valuation allowance for deferred tax assets		(1,472	)		(1,307	)
Deferred tax assets	$	67		$	-

Deferred tax liabilities:
Investments in foreign subsidiaries		38			33
Depreciation and amortization		15			7
Pension liability		2			-
Right of use assets		67			-
Other		4			7
Total deferred tax liabilities		126			47

Net deferred tax liabilities	$	(59	)	$	(47	)

Deferred tax assets and liabilities are recorded net by tax jurisdiction in the accompanying Consolidated Balance Sheets. Deferred tax assets and liabilities were as follows:

	December 31,
	2019			2018
	(In millions)
Deferred tax assets	$	-		$	-

Deferred tax liabilities		59			47

Net deferred tax liabilities	$	(59	)	$	(47	)

At December 31, 2019, we had a VA of approximately $1.47 billion for DTAs that we expect cannot be realized through carrybacks, future reversals of existing taxable temporary differences or based on our estimate of future taxable income. After completion of the Combination in 2018, we incurred losses primarily resulting from goodwill impairments (See Note 9, Goodwill and Other Intangible Assets) and project charges (see Note 5, Revenue Recognition). As a result of such losses, we have a cumulative consolidated loss for the three years ended December 31, 2019. Accordingly, in assessing the positive and negative evidence related to the likelihood of utilizing the U.S. DTAs, and giving consideration to all such evidence, we believe we are precluded from using projections of future book income to support our DTAs because we believe the negative evidence outweighs the positive and have concluded that it is not more likely than not that we would utilize our DTAs as of December 31, 2019.

	Year Ended December 31,
	2019			2018		2017
	(In millions)
Balance at beginning of period	$	1,307		$	200	$	335
Addition due to the Combination		39			836		-
2018 Federal benefit of state adjustment ⁽¹⁾		(62	)		-		-
Charged to costs and expenses		206			250		(32	)
Charged to other accounts		(18	)		21		(103	)
Balance at end of period	$	1,472		$	1,307	$	200

Our net operating loss DTAs, valuation allowance and expiration dates for Non-U.S., U.S. and State DTAs were as follows:

As of December 31, 2019, we did not provide deferred income taxes on temporary differences of our subsidiaries which are indefinitely reinvested. The amount of those temporary differences is approximately $210 million, the reversal of which would result in withholding tax of $18 to $20 million. We do not foresee having to reverse the outside basis differences in those entities as a result of the current bankruptcy filing. Our cash and debt structure allows us to access funds outside the U.S. and its foreign subsidiaries, which can be used to fund the U.S. and non-U.S. operations and service the debt. Deferred income taxes are provided as necessary with respect to basis differences that are not indefinitely reinvested.

We operate under a tax holiday in Malaysia, effective through December 31, 2020, which may be extended for an additional five years if we satisfy certain requirements. The Malaysian tax holiday reduced our foreign income tax expense by $17.4 million and $17.5 million in 2019 and 2018, respectively. The benefit of the tax holiday on net income per share (diluted) was $0.10 for 2019.

We conduct business globally and, as a result, we or our various affiliated entities file income tax returns in a number of jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Malaysia, Australia, Indonesia, Singapore, Saudi Arabia, Kuwait, India, Qatar, Brunei, the U.K., Canada and the United States. With few exceptions, we are no longer subject to tax examinations for years prior to 2011.

	Year Ended December 31,
	2019			2018			2017
	(In millions)
Balance at beginning of period	$	58		$	39		$	41
Changes due to the Combination		-			14			-
Changes due to exchange rate fluctuations		-			(1	)		1
Increases based on tax positions taken in the current year		4			2			1
Increases based on tax positions taken in prior years		5			9			4
Decreases based on tax positions taken in prior years		(9	)		(5	)		(2	)
Decreases due to settlements		-			-			(6	)
Decreases due to lapse of applicable statute of limitation		(2	)		-			-
Balance at end of period	$	56		$	58		$	39

Approximately $52 million of the balance of unrecognized tax benefits at December 31, 2019 would reduce our effective tax rate if recognized. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2019, 2018 and 2017, we had recorded liabilities of approximately $12 million, $20 million and $24 million, respectively, for the payment of tax-related interest and penalties.