

	Years Ended December 31,
	2018		2017			2016
	(in millions)
Current income tax
Federal	$	275	$	468		$	245
State and local	45		58			44
Foreign	41		52			23
Total current income tax	361		578			312

Deferred income tax
Federal	20		169			(36		)
State and local	2		(5		)	3
Foreign	3		(8		)	(1		)
Total deferred income tax	25		156			(34		)
Total income tax provision	$	386	$	734		$	278

On December 22, 2017, the Tax Act was signed into law. The provision for income taxes for the year ended December 31, 2017 included an expense of $286 million due to the enactment of the Tax Act. The $286 million expense included: 1) a $221 million expense for the remeasurement of deferred tax assets and liabilities to the Tax Act’s statutory rate of 21%; 2) a $57 million expense for the foreign provisions of the Tax Act, including a deemed repatriation tax of the Company’s total post-1986 earnings and profits (“E&P”); and 3) an $8 million expense for the remeasurement of tax contingencies, specifically state tax contingencies and interest accrued for tax contingencies. In 2018, the Company finalized its accounting related to the Tax Act and recorded a $3 million benefit related to foreign provisions.

The principal reasons that the aggregate income tax provision attributable to continuing operations is different from that computed by using the U.S. statutory rates of 21% for 2018 and 35% for 2017 and 2016 were as follows:



	Years Ended December 31,
	2018		2017		2016
Tax at U.S. statutory rate	21.0	%	35.0	%	35.0	%
Changes in taxes resulting from:
Low income housing tax credits	(3.2	)	(3.4	)	(4.2	)
Dividends received deduction	(1.6	)	(5.8	)	(7.6	)
State taxes, net of federal benefit	1.5		—		1.9
Foreign tax credits, net of addback	(1.1	)	—		(1.6	)
Impact of the Tax Act	—		13.0		—
Incentive compensation	—		(3.0	)	—
Foreign taxes	—		(2.0	)	(2.5	)
Taxes applicable to prior years	—		—		(3.1	)
Other, net	(1.1	)	(0.7	)	(0.5	)
Income tax provision	15.5	%	33.1	%	17.4	%

The decrease in the Company’s effective tax rate for the year ended December 31, 2018 compared to 2017 is primarily the result of the decrease in the federal statutory rate and a $286 million expense in 2017 due to provisions of the Tax Act, partially offset by lower levels of the dividends received deduction and a decrease in the benefit for net excess tax benefits related to employee share-based payments. The increase in the Company’s effective tax rate for the year ended December 31, 2017 compared to 2016 was primarily due to a $286 million expense in 2017 due to provisions of the Tax Act, including remeasurement of net deferred tax assets, a deemed repatriation of E&P and remeasurement of tax contingencies, partially offset by a $70 million benefit for net excess tax benefits related to the adoption of a new accounting standard for employee share-based payments.

Accumulated earnings of certain foreign subsidiaries, which totaled $13 million as of December 31, 2018, are intended to be permanently reinvested outside the United States. The expected incremental tax expense on these earnings relates to potential unrecoverable foreign withholding taxes if the earnings are distributed. As of December 31, 2018, this potential future cost is estimated to be immaterial.

Deferred income tax assets and liabilities result from temporary differences between the assets and liabilities measured for GAAP reporting versus income tax return purposes. Deferred income tax assets and liabilities are measured at the statutory rate of 21% as of both December 31, 2018 and 2017. The significant components of the Company’s deferred income tax assets and liabilities, which are included net within other assets or other liabilities on the Consolidated Balance Sheets, were as follows:



	December 31,
	2018		2017
	(in millions)
Deferred income tax assets
Liabilities for policyholder account balances, future policy benefits and claims	$	725	$	620
Deferred compensation	329		345
Investment related	145		245
Postretirement benefits	44		34
Other	57		66
Gross deferred income tax assets	1,300		1,310
Less: valuation allowance	20		17
Total deferred income tax assets	1,280		1,293

Deferred income tax liabilities
Deferred acquisition costs	437		446
Intangible assets	104		93
Depreciation expense	101		93
Goodwill	60		52
Deferred sales inducement costs	53		62
Net unrealized gains on Available-for-Sale securities	30		162
Other	6		7
Gross deferred income tax liabilities	791		915
Net deferred income tax assets	$	489	$	378

Included in the Company’s deferred income tax assets are tax benefits primarily related to state net operating losses of $20 million, net of federal benefit, which will expire beginning December 31, 2019. Based on analysis of the Company’s tax position, management believes it is more likely than not that the Company will not realize certain state net operating losses and state deferred tax assets; therefore, a valuation allowance of $20 million has been established.



	2018			2017			2016
	(in millions)
Balance at January 1	$	76		$	115		$	161
Additions based on tax positions related to the current year	22			16			15
Additions for tax positions of prior years	9			3			33
Reductions for tax positions of prior years	(3		)	(57		)	(87		)
Audit settlements	(12		)	(1		)	(7		)
Balance at December 31	$	92		$	76		$	115

It is reasonably possible that the total amounts of unrecognized tax benefits will change in the next 12 months. The Company estimates that the total amount of gross unrecognized tax benefits may decrease by $30 million to $40 million in the next 12 months primarily due to Internal Revenue Service (“IRS”) settlements and state exams.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. The Company recognized a net increase of $2 million, nil, and a net decrease of $43 million in interest and penalties for the years ended December 31, 2018, 2017, and 2016, respectively. As of December 31, 2018 and 2017, the Company had a payable of $10 million and $8 million, respectively, related to accrued interest and penalties.