Entity information:
Income Taxes
The current income tax provision reflects the tax consequences of revenues and expenses currently taxable or deductible on various income tax returns for the year reported. The deferred income tax provision or benefit generally reflects the net change in deferred income tax assets and liabilities during the year, excluding any deferred income tax assets and liabilities of acquired businesses. The components of the provision for income taxes for the years ended December 31 are as follows:
(in millions)
 
2017
 
2016
 
2015
Current Provision:
 
 
 
 
 
 
Federal
 
$
3,597

 
$
4,302

 
$
4,109

State and local
 
314

 
312

 
281

Foreign
 
254

 
95

 
46

Total current provision
 
4,165

 
4,709

 
4,436

Deferred (benefit) provision
 
(965
)
 
81

 
(73
)
Total provision for income taxes
 
$
3,200

 
$
4,790

 
$
4,363


.
The reconciliation of the tax provision at the U.S. federal statutory rate to the provision for income taxes and the effective tax rate for the years ended December 31 is as follows:
(in millions, except percentages)
 
2017
 
2016
 
2015
Tax provision at the U.S. federal statutory rate
 
$
4,908

 
35.0
 %
 
$
4,152

 
35.0
 %
 
$
3,581

 
35.0
 %
Change in tax law
 
(1,199
)
 
(8.6
)
 
—

 
—

 
—

 
—

State income taxes, net of federal benefit
 
197

 
1.4

 
205

 
1.7

 
145

 
1.4

Share-based awards - excess tax benefit
 
(319
)
 
(2.3
)
 
(158
)
 
(1.3
)
 
—

 
—

Non-deductible compensation
 
175

 
1.3

 
128

 
1.1

 
103

 
1.0

Health insurance industry tax
 
—

 
—

 
645

 
5.4

 
627

 
6.1

Foreign rate differential
 
(282
)
 
(2.0
)
 
(105
)
 
(0.9
)
 
(34
)
 
(0.3
)
Other, net
 
(280
)
 
(2.0
)
 
(77
)
 
(0.6
)
 
(59
)
 
(0.6
)
Provision for income taxes
 
$
3,200

 
22.8
 %
 
$
4,790

 
40.4
 %
 
$
4,363

 
42.6
 %

Deferred income tax assets and liabilities are recognized for the differences between the financial and income tax reporting bases of assets and liabilities based on enacted tax rates and laws. The components of deferred income tax assets and liabilities as of December 31 are as follows:
(in millions)
 
2017
 
2016
Deferred income tax assets:
 
 
 
 
Accrued expenses and allowances
 
$
544

 
$
820

U.S. federal and state net operating loss carryforwards
 
216

 
147

Share-based compensation
 
97

 
126

Nondeductible liabilities
 
169

 
236

Non-U.S. tax loss carryforwards
 
445

 
434

Other-domestic
 
167

 
476

Other-non-U.S.
 
198

 
175

Subtotal
 
1,836

 
2,414

Less: valuation allowances
 
(64
)
 
(55
)
Total deferred income tax assets
 
1,772

 
2,359

Deferred income tax liabilities:
 
 
 
 
U.S. federal and state intangible assets
 
(1,998
)
 
(3,055
)
Non-U.S. goodwill and intangible assets
 
(602
)
 
(584
)
Capitalized software
 
(530
)
 
(707
)
Depreciation and amortization
 
(236
)
 
(332
)
Prepaid expenses
 
(223
)
 
(228
)
Outside basis in partnerships
 
(279
)
 
(132
)
Other-non-U.S.
 
(86
)
 
(82
)
Total deferred income tax liabilities
 
(3,954
)
 
(5,120
)
Net deferred income tax liabilities
 
$
(2,182
)
 
$
(2,761
)

On December 22, 2017, the U.S. federal government enacted a tax bill, H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (Tax Reform). Tax Reform changed existing United States tax law, including a reduction of the U.S. corporate income tax rate. The Company re-measured deferred taxes as of the date of enactment, which resulted in the $1.2 billion reduction of net deferred income tax liabilities. The Company’s measurement of the income tax effects of Tax Reform for the year ended December 31, 2017 is reasonably estimated and, therefore, included in these financial statements in accordance with SEC Staff Accounting Bulletin No. 118. 
Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized. The valuation allowances primarily relate to future tax benefits on certain federal, state and non-U.S. net operating loss carryforwards. Federal net operating loss carryforwards of $235 million expire beginning in 2022 through 2037; state net operating loss carryforwards expire beginning in 2018 through 2037. Substantially all of the non-U.S. tax loss carryforwards have indefinite carryforward periods.
As of December 31, 2017, the Company’s undistributed earnings from non-U.S. subsidiaries are intended to be indefinitely reinvested in non-U.S. operations, and therefore no U.S. deferred taxes have been recorded. Taxes payable on the remittance of such earnings would be minimal.
A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31 is as follows:
(in millions)
 
2017
 
2016
 
2015
Gross unrecognized tax benefits, beginning of period
 
$
263

 
$
224

 
$
92

Gross increases:
 
 

 
 

 
 

Current year tax positions
 
356

 
37

 
—

Prior year tax positions
 
40

 
24

 
55

Acquired reserves
 
—

 
—

 
89

Gross decreases:
 
 

 
 

 
 

Prior year tax positions
 
(33
)
 
(4
)
 
(2
)
Settlements
 
(24
)
 
(6
)
 
(1
)
Statute of limitations lapses
 
(4
)
 
(12
)
 
(9
)
Gross unrecognized tax benefits, end of period
 
$
598

 
$
263

 
$
224


The Company believes it is reasonably possible that its liability for unrecognized tax benefits will decrease in the next twelve months by $210 million as a result of audit settlements and the expiration of statutes of limitations.
The Company classifies interest and penalties associated with uncertain income tax positions as income taxes within its Consolidated Statements of Operations. During the years ended December 31, 2017, 2016 and 2015, the Company recognized $14 million, $11 million and $11 million of interest and penalties, respectively. The Company had $84 million and $70 million of accrued interest and penalties for uncertain tax positions as of December 31, 2017 and 2016, respectively. These amounts are not included in the reconciliation above. As of December 31, 2017, there were $472 million of unrecognized tax benefits that, if recognized, would affect the effective tax rate.
The Company currently files income tax returns in the United States, various states and localities and non-U.S. jurisdictions. The U.S. Internal Revenue Service (IRS) has completed exams on the consolidated income tax returns for fiscal years 2016 and prior. The Company’s 2017 tax year is under advance review by the IRS under its Compliance Assurance Program. With the exception of a few states, the Company is no longer subject to income tax examinations prior to the 2011 tax year. In general, the Company is subject to examination in non-U.S. jurisdictions for years 2012 and forward.