Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

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



In millions	2019			2018			2017
(Loss) income before income taxes
United States	$	(85	)	$	(79	)	$	(26	)
Foreign	72			106			84
Total (loss) income before income taxes	$	(13	)	$	27		$	58

Income Tax Expense

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



In millions	2019			2018			2017
Income tax expense (benefit)
Current
Federal	$	(3	)	$	(10	)	$	132
State and local	—			6			2
Foreign	13			19			25
Deferred
Federal	(10		)	(20		)	(22		)
State and local	(1		)	(4		)	(4		)
Foreign	8			6			(8		)
Total income tax expense (benefit)	$	7		$	(3	)	$	125
Effective income tax rate	(53.8		%)	(11.1		%)	215.5		%

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:



	2019		2018		2017
Income tax expense at the U.S. federal tax rate	21.0	%	21.0	%	35.0	%
Foreign income tax differential	(49.2	)%	2.1	%	(22.6	)%
U.S. tax on foreign earnings	(8.4	)%	2.0	%	4.3	%
State and local income taxes	58.2	%	(25.0	)%	(11.0	)%
U.S. permanent book/tax differences	(17.0	)%	(2.7	)%	(1.5	)%
U.S. research and development tax credits	68.5	%	(29.5	)%	(11.2	)%
Change in valuation allowance	(49.1	)%	27.7	%	10.0	%
U.S. manufacturing deduction permanent difference	—	%	—	%	(8.0	)%
Tax impact of equity compensation	(49.3	)%	(1.4	)%	0.7	%
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	(24.6	)%	20.2	%	(3.6	)%
Other, net	(3.9	)%	(1.6	)%	0.4	%
Effective income tax rate	(53.8	)%	(11.1	)%	215.5	%

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	2019			2018
Deferred income tax assets
Employee pensions and other liabilities	$	63		$	49
Other balance sheet reserves and allowances	18			18
Operating lease liabilities	14			—
Tax loss and credit carryforwards	80			63
Deferred revenue	12			20
Total deferred income tax assets	187			150
Valuation allowance	(45		)	(39		)
Net deferred income tax assets	142			111
Deferred income tax liabilities
Intangibles and capitalized software	8			17
Right of use assets - operating lease	13			—
Property and equipment	12			11
Other	28			19
Total deferred income tax liabilities	61			47
Total net deferred income tax assets	$	81		$	64

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



In millions	2019			2018
Balance at January 1	$	34		$	28
Gross increases for prior period tax positions	4			3
Gross increases for current period tax positions	5			8
Decreases due to the lapse of applicable statute of limitations	(6		)	(1		)
Decreases relating to settlements with taxing authorities	—			(4		)
Balance at December 31	$	37		$	34