NOTE 4 — INCOME TAXES

The provision for income taxes consists of the following (dollars in millions):


	2018			2017		2016
Current:
Federal	$	759		$	1,067	$	1,129
State		149			120		125
Foreign		23			19		37
Deferred:
Federal		9			423		75
State		13			3		(5	)
Foreign		(7	)		6		17

	$	946		$	1,638	$	1,378

The 2017 Tax Cuts and Jobs Act (“Tax Act”) significantly revised U.S. corporate income taxes, including lowering the statutory corporate tax rate from 35% to 21% beginning in 2018, imposing a mandatory one-time transition tax on undistributed foreign earnings and creating a new U.S. minimum tax on earnings of foreign subsidiaries. Our provision for income taxes for the year ended December 31, 2018 included tax benefits of $613 million (including $67 million related to the remeasurement of certain deferred tax assets and liabilities) related to the reduction in our effective tax rate under the Tax Act. We completed our analysis of the impact of the Tax Act during the fourth quarter of 2018, reducing our provision for income taxes for the year ended December 31, 2018 by $67 million related to a remeasurement of certain deferred tax assets and liabilities for which we were unable to make reasonable estimates in 2017. For the year ended, December 31, 2017, a provisional amount of $301 million related to the remeasurement of our deferred tax assets and liabilities for which we were then able to make reasonable estimates was recorded as a component of our provision for income taxes. During 2017 we also reclassified a provisional amount of $127 million from our deferred tax liabilities for the one-time transition tax, based on our estimated undistributed post-1986 foreign earnings and profits. Because we had previously recorded U.S. taxes on these earnings, the transition tax liability, which is payable over an 8-year period, did not affect our 2017 provision for income taxes. Adjustments during 2018 to the provisional amounts recorded in 2017 were not significant.

Legislation or any additional guidance issued by federal and state taxing authorities or other standard-setting bodies related to the Tax Act may require us to make further adjustments to federal, state, and foreign tax assets and liabilities recorded as of December 31, 2018 and could materially impact our provision for income taxes and effective tax rate in the periods in which they are made.

During 2018, we recorded a reduction to our provision for income taxes of $28 million for tax credits related to certain 2017 hurricane-related expenses. Our provision for income taxes for the years ended December 31, 2018, 2017 and 2016 included tax benefits of $124 million, $82 million and $162 million, respectively, related to the settlement of employee equity awards. During 2016, the IRS completed its examination of our 2011 and 2012 tax years, resolving all outstanding federal tax issues. We reduced our provision for income taxes for the year ended December 31, 2016 by $51 million, including interest (net of tax), as a result of this resolution. Our foreign pretax income was $86 million, $91 million and $149 million for the years ended December 31, 2018, 2017 and 2016, respectively.

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


	2018			2017			2016
Federal statutory rate		21.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		2.9			2.2			2.1
Change in liability for uncertain tax positions		(0.1	)		—			(1.0	)
Tax benefit from settlements of employee equity awards		(2.4	)		(2.0	)		(3.6	)
Impact of Tax Act on deferred tax balances		(1.6	)		7.8			—
Other items, net		0.2			(0.5	)		(0.2	)

Effective income tax rate on income attributable to HCA Healthcare, Inc.		20.0			42.5			32.3
Income attributable to noncontrolling interests from consolidated partnerships		(2.3	)		(5.1	)		(3.6	)

Effective income tax rate on income before income taxes		17.7	%		37.4	%		28.7	%

A summary of the items comprising the deferred tax assets and liabilities at December 31 follows (dollars in millions):


	2018				2017
	Assets		Liabilities		Assets		Liabilities
Depreciation and fixed asset basis differences	$	—	$	340	$	—	$	260
Allowances for professional liability and other risks		355		—		345		—
Accounts receivable		274		—		243		—
Compensation		256		—		263		—
Other		424		491		420		501

	$	1,309	$	831	$	1,271	$	761

At December 31, 2018, federal and state net operating loss carryforwards (expiring in years 2021 through 2037) available to offset future taxable income approximated $71 million and $94 million, respectively. Utilization of net operating loss carryforwards in any one year may be limited.

The following table summarizes the activity related to our unrecognized tax benefits (dollars in millions):


	2018			2017
Balance at January 1	$	399		$	377
Additions based on tax positions related to the current year		22			40
Additions for tax positions of prior years		10			11
Reductions for tax positions of prior years		(14	)		(13	)
Settlements		(2	)		—
Lapse of applicable statutes of limitations		(25	)		(16	)

Balance at December 31	$	390		$	399

Our liability for unrecognized tax benefits was $435 million, including accrued interest of $48 million and excluding $3 million that was recorded as reductions of the related deferred tax assets, as of December 31, 2018 ($439 million, $44 million and $4 million, respectively, as of December 31, 2017). Unrecognized tax benefits of $137 million ($145 million as of December 31, 2017) would affect the effective rate, if recognized.

We are subject to examination by the IRS for tax years after 2014 as well as by state and foreign taxing authorities. Depending on the resolution of any federal, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.