Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of domestic and foreign income (loss) and income tax expense (benefit)

Domestic and foreign income (loss) before income taxes and details of the income tax expense (benefit) are as follows (amounts in millions):



	For the Years Ended December 31,
	2019			2018			2017
Income before income tax expense:
Domestic	$	328		$	432		$	185
Foreign	1,305			1,445			966
	$	1,633		$	1,877		$	1,151
Income tax expense (benefit):
Current:
Federal	$	136		$	(208	)	$	696
State	24			(15		)	26
Foreign	323			280			335
Total current	483			57			1,057
Deferred:
Federal	781			(153		)	(111		)
State	(16		)	106			(32		)
Foreign	(1,118		)	19			(36		)
Total deferred	(353		)	(28		)	(179		)

Income tax expense	$	130		$	29		$	878

Reconciliation of income taxes at the U.S. federal statutory rate to income tax expense (benefit)

The items accounting for the difference between income taxes computed at the U.S. federal statutory income tax rate and the income tax expense (benefit) at the effective tax rate for each of the years are as follows (amounts in millions):



	For the Years Ended December 31,
	2019					2018					2017
Federal income tax provision at statutory rate	$	343		21	%	$	394		21	%	$	403		35	%
State taxes, net of federal benefit	20			1		36			2		4			—
Research and development credits	(38		)	(2	)	(46		)	(2	)	(26		)	(2	)
Foreign rate differential	(104		)	(7	)	(198		)	(11	)	(271		)	(24	)
Change in tax reserves	96			6		285			15		291			25
Acquired net operating loss utilization	—			—		—			—		(36		)	(3	)
Audit settlements	54			3		(115		)	(6	)	—			—
Excess tax benefits related to share-based payments	(2		)	—		(58		)	(3	)	(113		)	(10	)
U.S. Tax Reform Act	—			—		(340		)	(18	)	636			55
Change in valuation allowance	11			1		61			3		—			—
Intra-entity IP Transfer	(230		)	(14	)	—			—		—			—
Other	(20		)	(1	)	10			1		(10		)	—
Income tax expense	$	130		8	%	$	29		2	%	$	878		76	%

Schedule of the components of the net deferred tax assets (liabilities)

The components of the net deferred tax assets (liabilities) are as follows (amounts in millions):



	As of December 31,
	2019			2018
Deferred tax assets:
Allowance for sales returns and price protection	$	19		$	25
Accrued expenses	28			26
Deferred revenue	119			136
Tax attributes carryforwards	93			81
Share-based compensation	54			69
Intangibles	1,289			43
U.S. deferred taxes on foreign earnings	—			318
Capitalized software development expenses	67			—
Other	109			28
Deferred tax assets	1,778			726
Valuation allowance	(181		)	(61		)
Deferred tax assets, net of valuation allowance	1,597			665
Deferred tax liabilities:
Intangibles	(142		)	(140		)
Capitalized software development expenses	—			(57		)
U.S. deferred taxes on foreign earnings	(594		)	—
Other	(73		)	(26		)
Deferred tax liabilities	(809		)	(223		)
Net deferred tax assets	$	788		$	442

Reconciliation of unrecognized tax benefits for the period

A reconciliation of total gross unrecognized tax benefits is as follows (amounts in millions):



	For the Years Ended December 31,
	2019			2018			2017
Unrecognized tax benefits balance at January 1	$	926		$	1,138		$	846
Gross increase for tax positions taken during a prior year	151			103			66
Gross decrease for tax positions taken during a prior year	(168		)	(123		)	—
Gross increase for tax positions taken during the current year	291			132			229
Settlement with taxing authorities	(163		)	(312		)	(1		)
Lapse of statute of limitations	—			(12		)	(2		)
Unrecognized tax benefits balance at December 31	$	1,037		$	926		$	1,138