
	2020		2019		2018
Federal:
Current	$	616	$	328	$	636
Deferred	77		222		(35)
Total federal	693		550		601
State:
Current	230		178		190
Deferred	8		26		22
Total state	238		204		212
Foreign:
Current	372		405		487
Deferred	5		(98)		(37)
Total foreign	377		307		450
Total provision for income taxes	$	1,308	$	1,061	$	1,263

Except for certain provisions, the Tax Cuts and Jobs Act (2017 Tax Act) is effective for tax years beginning on or after January 1, 2018. The Company is a fiscal-year taxpayer, so most provisions became effective for fiscal 2019, including limitations on the Company’s ability to claim foreign tax credits, repeal of the domestic manufacturing deduction, and limitations on certain business deductions. Provisions with significant impacts that were effective starting in the second quarter of fiscal 2018 and throughout fiscal 2019 included: a decrease in the U.S. federal income tax rate, remeasurement of certain net deferred tax liabilities, and a transition tax on deemed repatriation of certain foreign earnings. The decrease in the U.S. federal statutory income tax rate to 21.0% was effective for all of 2020 and 2019 and resulted in a blended rate for the Company of 25.6% for 2018.


	2020						2019						2018
Federal taxes at statutory rate	$	1,127	21.0	%	$	1,001	21.0	%	$	1,136	25.6	%
State taxes, net	190		3.6		171		3.6		154		3.4
Foreign taxes, net	92		1.7		(1)		—		32		0.7

Employee stock ownership plan (ESOP)	(24)		(0.5)		(18)		(0.4)		(14)		(0.3)
2017 Tax Act	—		—		(123)		(2.6)		19		0.4
Other	(77)		(1.4)		31		0.7		(64)		(1.4)
Total	$	1,308	24.4	%	$	1,061	22.3	%	$	1,263	28.4	%

During 2019, the Company recognized net tax benefits of $123 related to the 2017 Tax Act. This benefit primarily included $105 related to U.S. taxation of deemed foreign dividends, partially offset by losses of current year foreign tax credits. During 2018, the Company recognized a net tax expense of $19 related to the 2017 Tax Act. This expense included $142 for the estimated tax on deemed repatriation of foreign earnings, and $43 for the reduction in foreign tax credits and other immaterial items, largely offset by a tax benefit of $166 for the remeasurement of certain deferred tax liabilities.

The Company recognized total net tax benefits of $81, $221 and $57 in 2020, 2019 and 2018, respectively. These amounts include a benefit of $77, $59 and $33, respectively, related to the stock-based compensation accounting standard adopted in 2018 in addition to the impacts of the 2017 Tax Act noted above.


	2020		2019
Deferred tax assets:
Equity compensation	$	80	$	74
Deferred income/membership fees	144		180
Foreign tax credit carry forward	101		65
Operating lease liabilities	832		—
Accrued liabilities and reserves	639		566
Total deferred tax assets	1,796		885
Valuation allowance	(105)		(76)
Total net deferred tax assets	1,691		809
Deferred tax liabilities:
Property and equipment	(800)		(677)
Merchandise inventories	(228)		(187)
Operating lease right-of-use assets	(801)		—
Foreign branch deferreds	(81)		(69)
Other	(40)		(21)
Total deferred tax liabilities	$	(1,950)	$	(954)
Net deferred tax liabilities	$	(259)	$	(145)

The deferred tax accounts at the end of 2020 and 2019 include deferred income tax assets of $406 and $398, respectively, included in other long-term assets; and deferred income tax liabilities of $665 and $543, respectively, included in other long-term liabilities.

In 2020 and 2019, the Company recorded valuation allowances of $105 and $76, respectively, primarily related to foreign tax credits that the Company believes will not be realized due to limitations on the ability to claim the credits during the carry forward period. The foreign tax credit carry forwards are set to expire beginning in fiscal 2030.

The Company no longer considers fiscal year earnings of non-U.S. consolidated subsidiaries after 2017 to be indefinitely reinvested and has recorded the estimated incremental foreign withholding (net of available foreign tax credits) on fiscal year earnings and state income taxes payable assuming a hypothetical repatriation to the U.S. The Company continues to consider undistributed earnings of certain non-U.S. consolidated subsidiaries prior to 2018, which totaled $2,955, to be indefinitely reinvested and has not provided for withholding or state taxes.


	2020		2019
Gross unrecognized tax benefit at beginning of year	$	27	$	36
Gross increases—current year tax positions	1		5
Gross increases—tax positions in prior years	8		2
Gross decreases—tax positions in prior years	(3)		—
Settlements	—		(4)
Lapse of statute of limitations	(3)		(12)
Gross unrecognized tax benefit at end of year	$	30	$	27

The gross unrecognized tax benefit includes tax positions for which the ultimate deductibility is highly certain but there is uncertainty about the timing of such deductibility. At the end of 2020 and 2019, these amounts were immaterial. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of these tax positions would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority. The total amount of such unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods is $28 and $24 at the end of 2020 and 2019, respectively.

Accrued interest and penalties related to income tax matters are classified as a component of income tax expense. Accrued interest and penalties recognized during 2020 and 2019 and accrued at the end of each respective period were not material.

The Company is currently under audit by several jurisdictions in the United States and in several foreign countries. Some audits may conclude in the next 12 months and the unrecognized tax benefits recorded in relation to the audits may differ from actual settlement amounts. It is not practical to estimate the effect, if any, of any amount of such change during the next 12 months to previously recorded uncertain tax positions in connection with the audits. The Company does not anticipate that there will be a material increase or decrease in the total amount of unrecognized tax benefits in the next 12 months.

The Company files income tax returns in the United States, various state and local jurisdictions, in Canada, and in several other foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local examination for years before fiscal 2017. The Company is currently subject to examination in California for fiscal years 2013 to present.

The Company is subject to multiple examinations for value added, sales-based, payroll, product, import or other non-income taxes in various jurisdictions. In certain cases, the Company has received assessments from the authorities. Subsequent to the end of 2019, the Company received an assessment related to a product tax audit covering multiple years. The Company recorded a charge of $123 in 2019. In the fourth quarter of 2020, the Company reached an agreement with the tax authority on this matter, resulting in a benefit of $84. Other possible losses or range of possible losses associated with these matters are either immaterial or an estimate of the possible loss or range of loss cannot be made at this time. If certain matters or a group of matters were to be decided adversely to the Company, it could result in a charge that might be material to the results of an individual fiscal quarter or year.