Income Taxes

9 Months Ended

Sep. 30, 2019

The Company’s income tax provision and effective income tax rate were as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2019			2018			2019			2018
Income tax provision	$	53		$	78		$	144		$	290
Effective income tax rate	20.7		%	25.7		%	17.9		%	24.5		%

The income tax provision as a percentage of income before income from investments in unconsolidated affiliates was 20.7% and 25.7% in the three months ended September 30, 2019 and 2018, respectively, and was 17.9% and 24.5% in the nine months ended September 30, 2019 and 2018, respectively. The decrease in the effective tax rate for the three months ended September 30, 2019 compared to the prior year period is primarily related to equity compensation related tax benefits. The effective tax rate in the nine months ended September 30, 2019 includes discrete benefits due to a loss from subsidiary restructuring. The effective tax rate in the nine months ended September 30, 2018 includes $77 million of income tax expense associated with the $227 million gain on the sale of a 55% interest of the Company’s Lending Solutions business (see Note 6).

Deferred tax assets and liabilities reported in the consolidated balance sheets were as follows:



(In millions)	September 30, 2019			December 31, 2018
Noncurrent assets	$	51		$	20
Noncurrent liabilities	(4,110		)	(745		)
Total	$	(4,059	)	$	(725	)

In connection with the acquisition of First Data (see Note 4), the Company recorded, on a preliminary basis, $3.4 billion of deferred tax liabilities for the deferred tax effects associated with the fair value of assets acquired and liabilities assumed using the applicable tax rates, with a corresponding adjustment to goodwill.

The tax effects described above, as well as other changes in deferred tax assets and liabilities as a result of the acquisition of First Data, may be adjusted as additional information becomes available during the measurement period.

The Company maintains its assertion that the original investment in its foreign subsidiaries is intended to be indefinitely reinvested. However, undistributed historical and future earnings of its foreign subsidiaries are not considered to be indefinitely reinvested. Should these earnings be distributed in the future in the form of dividends or otherwise, the Company may be subject to foreign withholding taxes. The Company has the ability and intent to limit distributions so as to not make a distribution in excess of the historical investment in those subsidiaries. The Company will continue to monitor its global cash requirements and the need to recognize a deferred tax liability.

The Company’s liability for unrecognized tax benefits before interest and penalties totaled $145 million at September 30, 2019 and $49 million at December 31, 2018. The increase as of September 30, 2019 is attributable to $18 million related to subsidiary restructuring and other items that occurred during the first nine months of 2019, along with $78 million from pre-acquisition uncertain tax positions of First Data assumed by the Company. The Company believes it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $29 million over the next twelve months as a result of possible closure of federal tax audits, potential settlements with certain states and foreign countries, and the lapse of the statute of limitations in various state and foreign jurisdictions.

As of September 30, 2019, in connection with the acquisition of First Data, the Company is subject to income tax examination by the U.S. federal jurisdiction from 2010 forward. State and local examinations are substantially complete through 2010. Foreign jurisdictions generally remain subject to examination by their respective authorities from 2006 forward, none of which are considered significant jurisdictions.