Components of income (loss) from operations before income taxes are as follows:



	Year Ended December 31,
(millions)	2018			2017			2016
Domestic	$	(953	)	$	(2,831	)	$	(1,859	)
Foreign	1,093			640			87
Total	$	140		$	(2,191	)	$	(1,772	)

The income tax provision (benefit) consists of the following:



	Year Ended December 31,
(millions, except percentages)	2018			2017			2016
Current Taxes
Federal	$	22		$	(11	)	$	(4	)
State	2			1			5
Foreign	172			96			196
Total Current	$	196		$	86		$	197
Deferred Taxes
Federal	$	(123	)	$	(1,258	)	$	(784	)
State	(7		)	(8		)	(24		)
Foreign	60			39			(176		)
Total Deferred	$	(70	)	$	(1,227	)	$	(984	)
Total Income Tax Provision (Benefit) Attributable to Noble Energy	$	126		$	(1,141	)	$	(787	)
Effective Tax Rate	90.0		%	52.1		%	44.4		%

A reconciliation of the federal statutory tax rate to the effective tax rate is as follows:



	Year Ended December 31,
(percentages)	2018		2017		2016
Federal Statutory Rate ⁽¹⁾	21.0	%	35.0	%	35.0	%
Effect of
Goodwill Impairment	192.5		—		—
Change in Valuation Allowance ⁽¹⁾	(170.2	)	(17.4	)	(2.0	)
US and Foreign Statutory Rate Change ⁽¹⁾	80.7		23.5		1.6
Accumulated Undistributed Foreign Earnings ⁽¹⁾	—		11.0		7.2
Transition Tax ⁽¹⁾	—		(4.8	)	—
Difference Between US and Foreign Rates	17.9		1.8		(0.1	)
Earnings of Equity Method Investees	(20.1	)	1.9		1.0
Noncontrolling Interests	(12.1	)	1.1		0.4
State Taxes, Net of Federal Benefit	0.9		0.3		1.3
Foreign Exploration Loss	(35.6	)	—		—
Global Intangible Low-Taxed Income (GILTI)⁽¹⁾	24.2		—		—
Return to Provision	(17.1	)	(0.1	)	(0.2	)
Audit Settlement	5.1		0.1		(0.2	)
Oil Profits Tax - Israel	3.3		(0.1	)	—
Other, Net	(0.5	)	(0.2	)	0.4
Effective Rate	90.0	%	52.1	%	44.4	%



	December 31,
(millions)	2018			2017
Deferred Tax Assets
Loss Carryforwards	$	589		$	902
Employee Compensation and Benefits	92			97
Mark to Market of Commodity Derivative Instruments	(27		)	7
Foreign Tax Credits	138			366
Other	157			104
Total Deferred Tax Assets	$	949		$	1,476
Valuation Allowance - Foreign Loss Carryforwards and Foreign Tax Credits	(320		)	(549		)
Net Deferred Tax Assets	$	629		$	927
Deferred Tax Liabilities
Property, Plant and Equipment, Principally Due to Differences in Depreciation, Amortization, Lease Impairment and Abandonments	(1,669		)	(2,029		)
Total Deferred Tax Liability	$	(1,669	)	$	(2,029	)
Net Deferred Tax Liability	$	(1,040	)	$	(1,102	)

Net deferred tax assets and liabilities were classified in the consolidated balance sheets as follows:



	December 31,
(millions)	2018			2017
Deferred Income Tax Asset - Noncurrent	$	21		$	25
Deferred Income Tax Liability - Noncurrent	(1,061		)	(1,127		)
Net Deferred Tax Liability	$	(1,040	)	$	(1,102	)

Tax Reform Legislation On December 22, 2017, the US Congress enacted Tax Reform Legislation, which made significant changes to US federal income tax law, including a reduction in the federal corporate tax rate to 21% effective January 1, 2018. The SEC staff issued SAB 118 which allowed registrants to report provisional amounts for the income tax effects specific to Tax Reform Legislation for which accounting was incomplete but a reasonable estimate could be determined. We reported certain provisional amounts in fourth quarter 2017, some of which were adjusted in 2018 based on changes in estimates, including changes based on further guidance provided by the Internal Revenue Service (IRS).

Remeasurement of Deferred Taxes In accordance with US GAAP, we recognized the effect of the rate change on deferred tax assets and liabilities in the period in which the tax rate change was enacted, resulting in the recognition of a provisional deferred tax benefit of $500 million at December 31, 2017. Further remeasurements of these deferred taxes in 2018 were associated with the return to provision resulted in a $10 million deferred tax benefit.

Transition Tax (Toll Tax) Tax Reform Legislation provided for a toll tax on a one-time “deemed repatriation” of accumulated foreign earnings for the year ended December 31, 2017. Based on early interpretations of the law, we recognized additional taxable income in 2017 of $767 million associated with the toll tax, which was fully offset by net operating losses (NOLs), and recorded corresponding deemed foreign tax credits of $164 million, against which we recorded a full valuation allowance.

On April 2, 2018, the US Department of the Treasury and the IRS released Notice 2018-26, signaling intent to issue regulations related to the toll tax for the year ended December 31, 2017. Notice 2018-26 clarified that an Internal Revenue Code Section 965(n) election is available with respect to both current and prior year NOLs. As a result, we released $252 million of the valuation allowance recorded against foreign tax credits to be utilized against the estimated $268 million toll tax liability recorded as of December 31, 2017. This resulted in a $252 million tax benefit and a corresponding expense of $107 million for the tax rate change adjustment on the previously utilized NOL's. The impact on first quarter 2018 total tax expense, related to this additional guidance, was a net $145 million discrete tax benefit.

During fourth quarter 2018, the toll tax calculations were finalized in conjunction with filing of the US tax return, resulting in a $261 million toll tax against which $240 million of foreign tax credits were utilized. This resulted in a $21 million liability

Global Intangible Low-Taxed Income (GILTI) Tax Reform Legislation also introduced a new tax on global intangible low-taxed income (GILTI). Further analysis and legal interpretation has resulted in identifying certain foreign oil related income (FORI) activity as GILTI income which will be offset by NOL carryforwards rather than the 50% deduction and related foreign tax credits. As a result of utilizing our NOL to offset the GILTI inclusion, we recognized tax expense of $34 million for 2018 GILTI associated with FORI from investments in operating assets in Equatorial Guinea and operations in Israel. We are making an accounting policy election to not record deferred taxes related to GILTI.

Other Provisions Tax Reform Legislation is a comprehensive bill containing other provisions that do not materially affect us. The ultimate impact may differ from our estimates if additional regulatory guidance is issued. We are closely monitoring the provision which revised and broadened the former Section 163(j) interest expense limitation rules. In tax years subsequent to 2021 the basis of the limitation calculation will change to be roughly equivalent to EBIT at which time we expect to be subject to an interest expense limitation. The interest expense not deducted due to limitation has an indefinite carryover period.

Deferred Tax Assets Our estimated pre-tax NOL carryforwards totaled approximately $2.4 billion at December 31, 2018, of which US federal income tax NOL carryforwards totaled approximately $1.7 billion and foreign NOL carryforwards were $670 million.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the appropriate tax jurisdictions during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, current financial position, results of operations, projected future taxable income and tax planning strategies as well as current and forecasted business economics in the oil and gas industry. Based on the level of historical taxable income and projections for future taxable income, we believe it is more likely than not that we will realize the benefits of these NOL carryforwards. However, the amount of the deferred tax assets considered realizable could be reduced in the future if estimates of future taxable income during the carryforward period are reduced.

We currently have a valuation allowance on the deferred tax assets associated with foreign loss carryforwards and foreign tax credits. The valuation allowance on foreign loss carryforwards totaled $187 million and $183 million in 2018 and 2017, respectively. The valuation allowance on foreign tax credits totaled $132 million and $366 million in 2018 and 2017, respectively. As noted above, in first quarter 2018 we released $252 million of the valuation allowance recorded against the foreign tax credits and in fourth quarter 2018, we made further return to provision adjustments based on the tax return filing.

Clayton Williams Energy Acquisition On April 24, 2017, we completed the Clayton Williams Energy Acquisition. For federal income tax purposes, the transaction qualified as a tax free merger and we acquired carryover tax basis in Clayton Williams Energy's assets and liabilities. Our purchase price allocation is finalized and we recorded a deferred tax liability of $307 million, adjusted for the new US statutory rate, which includes a deferred tax asset for federal pre-tax NOLs of approximately $450 million. The merger resulted in a change of control for federal income tax purposes, and the NOL usage will be subject to an annual limitation in part based on Clayton Williams Energy's value at the date of the merger. We anticipate full utilization of the total NOL prior to expiration.

Effective Tax Rate Our effective tax rate increased in 2018 as compared with 2017, primarily due to the fourth quarter 2018 goodwill impairment for which there is no tax benefit and the deferred tax expense of $34 million for GILTI. This increase was reduced by a deferred tax benefit of $145 million recorded discretely in the current year, as discussed above, and a deferred tax benefit of $50 million associated with a write-off of foreign exploration losses. The increase in current income tax expense during 2018 as compared with 2017 is primarily due to foreign taxes on the gain recognized with the first quarter 2018 divestiture of a 7.5% working interest in the Tamar field. The decrease in deferred income tax benefit during 2018 as compared to 2017 is due to the significant deferred tax benefit recorded in 2017 associated with the revaluation of the US deferred tax liability at the reduced future tax rate.

Accumulated Undistributed Earnings of Foreign Subsidiaries During 2016, we reduced the deferred tax liability associated with unremitted foreign earnings, net of foreign tax credits, to $240 million. In 2017, as a result of Tax Reform Legislation, which established a new territorial tax regime, we reversed the deferred tax liability recorded in 2016, resulting in a deferred tax benefit of $240 million. As of December 31, 2018, there is no expected withholding tax impact upon actual distribution of earnings and as such, we have not recorded any tax associated with unremitted earnings.

Israeli Tax Law Effective December 21, 2016, the Israeli government decreased the corporate income tax rate from 25% to 24% for 2017 and from 24% to 23% effective January 2018. The full impact of the rate reduction was recognized in 2017, decreasing deferred tax expense by $12 million.

Furthermore, our Israeli operations are subject to the Natural Resources Profits Taxation Law, 2011 (the Law), which imposes a separate additional tax on profits from oil and gas activities (Oil Profits Tax). The Oil Profits Tax is calculated by dividing net

accumulated revenue generated by each separate project by its cumulative investments as defined within the Law. Once the revenue factor (R Factor) reaches 1.5, a tax rate of 20% is imposed; as the ratio increases to a maximum of 2.3, the Oil Profits Tax increases progressively up to a maximum rate of 50%. The Oil Profits Tax provides for a corporate tax rate adjustment based on the corporate income tax rate, which is currently 23%. To the extent the corporate income tax rate exceeds 18%, a reduction in the Oil Profits Tax rate is calculated. At the current corporate tax rate, the Oil Profits Tax rate is 46.8%. The Oil Profits Tax is deductible for Israeli corporate tax purposes. Our Tamar and Leviathan projects are both subject to the Oil Profits Tax and are expected to pay at the maximum rate.

Unrecognized Tax Benefits We file a consolidated income tax return in the US federal jurisdiction, and we file income tax returns in various states and foreign jurisdictions. Our income tax returns are routinely audited by the applicable revenue authorities, and provisions are made in the financial statements for differences between positions taken in tax returns and amounts recognized in the financial statements in anticipation of audit results.