Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

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,
	2018			2017			2016
Income before income tax expense:
Domestic	$	432		$	185		$	228
Foreign	1,445			966			878
	$	1,877		$	1,151		$	1,106
Income tax expense (benefit):
Current:
Federal	$	(228	)	$	696		$	(15	)
State	(15		)	26			16
Foreign	280			335			150
Total current	37			1,057			151
Deferred:
Federal	(98		)	(111		)	40
State	106			(32		)	(13		)
Foreign	19			(36		)	(38		)
Total deferred	27			(179		)	(11		)

Income tax expense	$	64		$	878		$	140

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,
	2018					2017					2016
Federal income tax provision at statutory rate	$	394		21	%	$	403		35	%	$	387		35	%
State taxes, net of federal benefit	36			2		4			—		9			1
Research and development credits	(46		)	(2	)	(26		)	(2	)	(36		)	(3	)
Foreign rate differential	(198		)	(11	)	(271		)	(24	)	(239		)	(22	)
Change in tax reserves	265			14		291			25		210			19
Audit settlements	(115		)	(6	)	—			—		—			—
Net operating loss tax attribute assumed from the Purchase Transaction	—			—		(36		)	(3	)	(114		)	(10	)
Excess tax benefits related to share-based payments	(58		)	(3	)	(113		)	(10	)	(81		)	(7	)
U.S. Tax Reform Act	(285		)	(15	)	636			55		—			—
Change in valuation allowance	61			3		—			—		—			—
Other	10			—		(10		)	—		4			—
Income tax expense	$	64		3	%	$	878		76	%	$	140		13	%

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,
	2018			2017
Deferred tax assets:
Allowance for sales returns and price protection	$	25		$	47
Accrued expenses	26			31
Deferred revenue	136			245
Tax attributes carryforwards	81			71
Share-based compensation	69			59
Acquired intangibles	43			149
U.S. deferred taxes on foreign earnings	263			—
Other	28			61
Deferred tax assets	671			663
Valuation allowance	(61		)	—
Deferred tax assets, net of valuation allowance	610			663
Deferred tax liabilities:
Acquired intangibles	(140		)	(146		)
Capitalized software development expenses	(57		)	(55		)
Other	(26		)	(24		)
Deferred tax liabilities	(223		)	(225		)
Net deferred tax assets	$	387		$	438

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,
	2018			2017			2016
Unrecognized tax benefits balance at January 1	$	1,138		$	846		$	552
Gross increase for tax positions taken during a prior year	94			66			89
Gross decrease for tax positions taken during a prior year	(123		)	—			(17		)
Gross increase for tax positions taken during the current year	132			229			240
Settlement with taxing authorities	(312		)	(1		)	(18		)
Lapse of statute of limitations	(12		)	(2		)	—
Unrecognized tax benefits balance at December 31	$	917		$	1,138		$	846