(9) INCOME TAXES

The components of our income before provision for (benefit from) income taxes for the fiscal years ended March 31, 2017, 2016 and 2015 are as follows (in millions):



	Year Ended March 31,
	2017		2016		2015
Domestic	$	382	$	133	$	232
Foreign	828		744		693
Income before provision for (benefit from) income taxes	$	1,210	$	877	$	925

Provision for (benefit from) income taxes for the fiscal years ended March 31, 2017, 2016 and 2015 consisted of (in millions):



	Current		Deferred			Total
Year Ended March 31, 2017
Federal	$	86	$	96		$	182
State	3		9			12
Foreign	51		(2		)	49
	$	140	$	103		$	243
Year Ended March 31, 2016
Federal	$	69	$	(376	)	$	(307	)
State	5		(14		)	(9		)
Foreign	36		1			37
	$	110	$	(389	)	$	(279	)
Year Ended March 31, 2015
Federal	$	10	$	17		$	27
State	—		—			—
Foreign	21		2			23
	$	31	$	19		$	50

Excess tax benefits from stock-based compensation deductions are allocated to contributed capital before historical net operating losses are utilized to reduce tax expense. The income tax provision includes tax benefits allocated directly to contributed capital of $65 million, $83 million and $22 million for fiscal years 2017, 2016, and 2015, respectively.

The differences between the statutory tax expense rate and our effective tax expense (benefit) rate, expressed as a percentage of income before provision for (benefit from) income taxes, for the fiscal years ended March 31, 2017, 2016 and 2015 were as follows:



	Year Ended March 31,
	2017		2016		2015
Statutory federal tax expense rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	1.0	%	0.5	%	0.1	%
Differences between statutory rate and foreign effective tax rate	(19.3	)%	(22.1	)%	(22.3	)%
Valuation allowance	—	%	(51.7	)%	(9.2	)%
Research and development credits	(0.7	)%	(0.6	)%	(1.1	)%
Unremitted earnings of foreign subsidiaries	2.2	%	4.9	%	—	%
Non-deductible stock-based compensation	2.3	%	3.1	%	3.5	%
Other	(0.4	)%	(0.9	)%	(0.6	)%
Effective tax expense (benefit) rate	20.1	%	(31.8	)%	5.4	%

We generated income in lower tax jurisdictions primarily related to our European and Asia Pacific businesses that are headquartered in Switzerland.

Prior to the fourth quarter of fiscal 2016, we considered all undistributed earnings of our foreign subsidiaries to be indefinitely reinvested outside of the United States and, accordingly, no U.S. taxes had been provided thereon. During the fourth quarter of fiscal year 2016, we reevaluated our intent to indefinitely reinvest all earnings of foreign subsidiary companies, and concluded that a portion of earnings of certain subsidiaries will no longer be considered to be indefinitely reinvested. We currently intend to continue to indefinitely reinvest a substantial majority of the undistributed earnings of our foreign subsidiaries outside of the United States.

Undistributed earnings of our foreign subsidiaries that are considered to be indefinitely reinvested are $1,845 million as of March 31, 2017. As we currently have no plans to repatriate those earnings, no U.S. income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. As we do not know the time or manner in which we would repatriate those funds, it is not practicable to determine the impact of local taxes, withholding taxes and foreign tax credits associated with the future repatriation of such earnings and therefore we cannot quantify the tax liability.

The components of net deferred tax assets, as of March 31, 2017 and 2016 consisted of (in millions):



	As of March 31,
	2017			2016
Deferred tax assets:
Accruals, reserves and other expenses	$	151		$	171
Tax credit carryforwards	276			334
Stock-based compensation	37			39
Net operating loss & capital loss carryforwards	25			28
Total	489			572
Valuation allowance	(114		)	(114		)
Deferred tax assets, net of valuation allowance	375			458
Deferred tax liabilities:
Amortization and depreciation	(19		)	(27		)
Unremitted earnings of foreign subsidiaries	(70		)	(43		)
Prepaids and other liabilities	(1		)	(3		)
Total	(90		)	(73		)
Deferred tax assets, net of valuation allowance and deferred tax liabilities	$	285		$	385

In the fourth quarter of fiscal year 2016, we realized significant U.S. pre-tax income for both the fourth quarter and the fiscal year ended March 31, 2016. As a result, we released the valuation allowance against all of the U.S. federal deferred tax assets and a portion of the U.S. state deferred tax assets during the fourth quarter of fiscal year 2016.

As of March 31, 2017, we maintained a valuation allowance of $114 million, primarily related to certain U.S. state deferred tax assets and foreign capital loss carryovers, due to uncertainty about the future realization of these assets. In determining the amount of deferred tax assets that are more likely than not to be realized, we evaluated the potential to realize the assets through the utilization of tax loss and credit carrybacks, the reversal of existing taxable temporary differences, future taxable income exclusive of the reversal of existing taxable temporary differences, and certain tax planning strategies.

As of March 31, 2017, we have state net operating loss carry forwards of approximately $871 million of which approximately $99 million is attributable to various acquired companies. These carryforwards, if not fully realized, will begin to expire in 2018. We also have U.S. federal, California and Canada tax credit carryforwards of $362 million, $96 million and $7 million, respectively. The U.S. federal tax credit carryforwards will begin to expire in 2024. The California and Canada tax credit carryforwards can be carried forward indefinitely.

The total unrecognized tax benefits as of March 31, 2017, 2016 and 2015 were $389 million, $331 million and $254 million, respectively. A reconciliation of the beginning and ending balance of unrecognized tax benefits is summarized as follows (in millions):



Balance as of March 31, 2014	$	232
Increases in unrecognized tax benefits related to prior year tax positions	9
Decreases in unrecognized tax benefits related to prior year tax positions	(14		)
Increases in unrecognized tax benefits related to current year tax positions	50
Decreases in unrecognized tax benefits related to settlements with taxing authorities	(6		)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations	(7		)
Changes in unrecognized tax benefits due to foreign currency translation	(10		)
Balance as of March 31, 2015	254
Increases in unrecognized tax benefits related to prior year tax positions	33
Decreases in unrecognized tax benefits related to prior year tax positions	(4		)
Increases in unrecognized tax benefits related to current year tax positions	63
Decreases in unrecognized tax benefits related to settlements with taxing authorities	(10		)
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations	(4		)
Changes in unrecognized tax benefits due to foreign currency translation	(1		)
Balance as of March 31, 2016	331
Increases in unrecognized tax benefits related to prior year tax positions	3
Decreases in unrecognized tax benefits related to prior year tax positions	(3		)
Increases in unrecognized tax benefits related to current year tax positions	64
Decreases in unrecognized tax benefits related to settlements with taxing authorities	—
Reductions in unrecognized tax benefits due to lapse of applicable statute of limitations	(3		)
Changes in unrecognized tax benefits due to foreign currency translation	(3		)
Balance as of March 31, 2017	$	389

A portion of our unrecognized tax benefits will affect our effective tax rate if they are recognized upon favorable resolution of the uncertain tax positions. As of March 31, 2017, approximately $362 million of the unrecognized tax benefits would affect our effective tax rate and approximately $27 million would result in adjustments to the deferred tax valuation allowance.

Interest and penalties related to estimated obligations for tax positions taken in our tax returns are recognized in income tax expense in our Consolidated Statements of Operations. The combined amount of accrued interest and penalties related to tax positions taken on our tax returns and included in non-current other liabilities was approximately $14 million as of March 31, 2017 and $15 million as of March 31, 2016.

We file income tax returns in the United States, including various state and local jurisdictions. Our subsidiaries file tax returns in various foreign jurisdictions, including Canada, France, Germany, Switzerland and the United Kingdom. The IRS is currently examining our returns for fiscal years 2009 through 2011, and we remain subject to income tax examination by the IRS for fiscal years after 2013.

We are also currently under income tax examination in the United Kingdom for fiscal years 2010 through 2015, France for fiscal years 2014 through 2016, Spain for fiscal years 2014 through 2015, and India for fiscal years 2009 through 2012. We remain subject to income tax examination for several other jurisdictions including in Germany for fiscal years after 2012, France for fiscal years after 2016, the United Kingdom for fiscal years after 2015, and Canada and Switzerland for fiscal years after 2007.

The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Although potential resolution of uncertain tax positions involve multiple tax periods and jurisdictions, it is reasonably possible that a reduction of up to $50 million of unrecognized tax benefits may occur within the next 12 months, some of which, depending on the nature of the settlement or expiration of statutes of limitations, may affect the Company’s income tax provision and therefore benefit the resulting effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements.