Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

For the years ended December 31, income (loss) before income taxes consisted of the following:



In millions	2018			2017			2016
Income (loss) before income taxes
United States	$	(79	)	$	(26	)	$	93
Foreign	106			84			128
Total income before income taxes	$	27		$	58		$	221

Income Tax Expense

For the years ended December 31, income tax (benefit) expense consisted of the following:



In millions	2018			2017			2016
Income tax (benefit) expense
Current
Federal	$	(10	)	$	132		$	67
State and local	6			2			7
Foreign	19			25			25
Deferred
Federal	(20		)	(22		)	7
State and local	(4		)	(4		)	1
Foreign	6			(8		)	(11		)
Total income tax (benefit) expense	$	(3	)	$	125		$	96
Effective income tax rate	(11.1		%)	215.5		%	43.4		%

The Difference Between the Effective Tax Rate and the U.S. Federal Statutory Income Tax Rate

The following table presents the principal components of the difference between the effective tax rate and the United States federal statutory income tax rate for the years ended December 31:



In millions	2018		2017		2016
Income tax expense at the U.S. federal tax rate	21.0	%	35.0	%	35.0	%
Foreign income tax differential	2.1	%	(22.6	)%	(14.0	)%
U.S. tax on foreign earnings	2.0	%	4.3	%	0.9	%
State and local income taxes	(25.0	)%	(11.0	)%	0.2	%
U.S. permanent book/tax differences	(2.7	)%	(1.5	)%	1.3	%
U.S. research and development tax credits	(29.5	)%	(11.2	)%	(1.6	)%
Change in valuation allowance	27.7	%	10.0	%	0.8	%
U.S. manufacturing deduction permanent difference	—	%	(8.0	)%	(3.5	)%
Goodwill impairment	—	%	—	%	8.9	%
Tax impact of sale of marketing applications business	—	%	—	%	9.9	%
Tax impact of equity compensation	(1.4	)%	0.7	%	2.4	%
Tax impact of U.S. tax law change - IRC Section 987	—	%	—	%	3.5	%
Deferred tax impact from U.S. rate change from Tax Reform	—	%	(27.0	)%	—	%
Tax impact of U.S. Tax Reform/ Transition Tax	(23.9	)%	250.0	%	—	%
Tax Impact of uncertain tax positions	20.2	%	(3.6	)%	(0.6	)%
Other, net	(1.6	)%	0.4	%	0.2	%
Effective income tax rate	(11.1	)%	215.5	%	43.4	%

Deferred Income Tax Assets and Liabilities

Deferred income tax assets and liabilities included in the balance sheets at December 31 were as follows:



In millions	2018			2017
Deferred income tax assets
Employee pensions and other liabilities	$	49		$	50
Other balance sheet reserves and allowances	18			13
Tax loss and credit carryforwards	63			59
Deferred revenue	20			3
Other	—			2
Total deferred income tax assets	150			127
Valuation allowance	(39		)	(32		)
Net deferred income tax assets	111			95
Deferred income tax liabilities
Intangibles and capitalized software	17			30
Property and equipment	11			12
Other	19			—
Total deferred income tax liabilities	47			42
Total net deferred income tax assets	$	64		$	53

Below is a roll-forward of the Company’s liability related to uncertain tax positions at December 31:



In millions	2018			2017
Balance at January 1	$	28		$	30
Gross decreases for prior period tax positions	—			(1		)
Gross increases for prior period tax positions	3			—
Gross increases for current period tax positions	8			3
Decreases due to the lapse of applicable statute of limitations	(1		)	(4		)
Decreases relating to settlements with taxing authorities	(4		)	—
Balance at December 31	$	34		$	28