14. Income Taxes

Schlumberger operates in more than 100 tax jurisdictions, where statutory tax rates generally vary from 0% to 40%.

Income (loss) before taxes subject to United States and non-United States income taxes was as follows:

(Stated in millions)

	2017			2016			2015
United States	$	(841	)	$	(3,103	)	$	(691	)
Outside United States		(342	)		1,198			3,572
	$	(1,183	)	$	(1,905	)	$	2,881

Schlumberger recorded pretax charges of $3.764 billion in 2017 ($533 million in the US and $3.231 billion outside the US); $3.820 billion in 2016 ($1.848 billion in the US and $1.972 billion outside the US); and $2.575 billion in 2015 ($883 million in the US and $1.692 billion outside the US). These charges and credits are included in the table above and are more fully described in Note 3 – Charges and Credits.

The components of net deferred tax assets (liabilities) were as follows:

(Stated in millions)

	2017			2016
Postretirement benefits	$	135		$	253
Intangible assets		(2,186	)		(2,869	)
Investments in non-US subsidiaries		(224	)		(271	)
Fixed assets, net		(55	)		(79	)
Inventories		126			248
Other, net		554			838
	$	(1,650	)	$	(1,880	)

The above deferred tax balances at December 31, 2017 and 2016 were net of valuation allowances relating to net operating losses in certain countries of $119 million and $97 million, respectively.

As a direct result of Schlumberger’s 2016 acquisition of Cameron, certain non-US subsidiaries of Cameron are either wholly or partially owned by a US subsidiary of Schlumberger. As described in Note 3, Schlumberger recorded a $410 million charge relating to the one-time mandatory tax on previously deferred foreign earnings of Schlumberger’s US subsidiary. After considering the impact of foreign tax credits and tax losses, the resulting cash tax payable as a result of the one-time mandatory tax on previously deferred foreign earnings of Schlumberger’s US subsidiary will not be significant.

Other than as described above, Schlumberger generally does not provide for taxes related to its undistributed earnings because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. Taxes that would be incurred if the undistributed earnings of other Schlumberger subsidiaries were distributed to their ultimate parent company would not be material.

The components of Tax expense (benefit) were as follows:

(Stated in millions)

	2017			2016			2015
Current:
United States-Federal	$	(170	)	$	(511	)	$	90
United States-State		57			(36	)		12
Outside United States		703			648			1,085
		590			101			1,187
Deferred:
United States-Federal	$	(225	)	$	(352	)	$	(356	)
United States-State		4			(13	)		(19	)
Outside United States		(47	)		(51	)		(52	)
Valuation allowance		8			37			(14	)
		(260	)		(379	)		(441	)
	$	330		$	(278	)	$	746

A reconciliation of the United States statutory federal tax rate (35%) to the consolidated effective tax rate follows:

	2017			2016			2015
US federal statutory rate		35	%		35	%		35	%
State tax		-			2			-
Non-US income taxed at different rates		(24	)		(21	)		(13	)
Charges and credits (See Note 3)		(40	)		(1	)		6
Enactment of US tax reform		(6	)		-			-
Other		7			-			(2	)
		(28	)%		15	%		26	%

A number of the jurisdictions in which Schlumberger operates have tax laws that are not fully defined and are evolving. Schlumberger’s tax filings are subject to regular audit by the tax authorities. These audits may result in assessments for additional taxes that are resolved with the tax authorities, or potentially through the courts. Tax liabilities are recorded based on estimates of additional taxes that will be due upon the conclusion of these audits. Due to the uncertain and complex application of tax regulations, the ultimate resolution of audits may result in liabilities which could be materially different from these estimates.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions for the years ended December 31, 2017, 2016 and 2015 is as follows:

(Stated in millions)

	2017			2016			2015
Balance at beginning of year	$	1,419		$	1,285		$	1,402
Additions based on tax positions related to the current year		132			70			140
Additions for tax positions of prior years		58			119			136
Additions related to acquisitions		-			127			5
Impact of changes in exchange rates		23			(25	)		(78	)
Settlements with tax authorities		(41	)		(45	)		(99	)
Reductions for tax positions of prior years		(157	)		(85	)		(203	)
Reductions due to the lapse of the applicable statute of limitations		(41	)		(27	)		(18	)
Balance at end of year	$	1,393		$	1,419		$	1,285

The amounts above exclude accrued interest and penalties of $195 million, $178 million and $176 million at December 31, 2017, 2016 and 2015, respectively. Schlumberger classifies interest and penalties relating to uncertain tax positions within Tax expense (benefit) in the Consolidated Statement of Income (Loss).

The following table summarizes the tax years that are either currently under audit or remain open and subject to examination by the tax authorities in the most significant jurisdictions in which Schlumberger operates:

Brazil	2012 - 2017
Canada	2010 - 2017
Ecuador	2014 - 2017
Mexico	2011 - 2017
Norway	2013 - 2017
Russia	2014 - 2017
Saudi Arabia	2004 - 2017
United Kingdom	2015 - 2017
United States	2014 - 2017

In certain of the jurisdictions noted above, Schlumberger operates through more than one legal entity, each of which may have different open years subject to examination. The table above presents the open years subject to examination for the most material of the legal entities in each jurisdiction. Additionally, it is important to note that tax years are technically not closed until the statute of limitations in each jurisdiction expires. In the jurisdictions noted above, the statute of limitations can extend beyond the open years subject to examination.