Entity information:
Income Taxes
The income tax provision consists of the following amounts:
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in millions)
Current income taxes:
 
Federal
$
51

 
$
37

 
$
139

State
17

 
21

 
42

Foreign
68

 
106

 
36

Total current income taxes
136

 
164

 
217

Deferred income taxes:
 
 
 
 
 
Federal
(14
)
 
(97
)
 
(18
)
State
24

 
(35
)
 
(1
)
Foreign
—

 
(4
)
 
5

Total deferred income taxes
10

 
(136
)
 
(14
)
Total income tax provision
$
146

 
$
28

 
$
203


We have determined that undistributed earnings of certain non-U.S. subsidiaries will be reinvested for an indefinite period of time. We have both the intent and ability to indefinitely reinvest these earnings. As of December 31, 2017, the cumulative amount of undistributed earnings in these subsidiaries is approximately $131 million. Given our intent to reinvest these earnings for an indefinite period of time, we have not accrued a deferred tax liability on these earnings. A determination of an unrecognized deferred tax liability related to these earnings is not practicable.
A reconciliation of the income tax provision, based on the U.S. federal statutory rate, to our actual income tax provision for the years ended December 31, 2017, 2016 and 2015 is as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Federal income tax provision at the statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income tax provision, net of federal effect
2.6
 %
 
(6.7
)%
 
3.9
 %
Change in deferred taxes due to change in law
(9.9
)%
 
(1.2
)%
 
0.2
 %
Excess tax benefits related to employee share-based compensation
(4.0
)%
 
—
 %
 
—
 %
Non-U.S. subsidiary earnings
(6.0
)%
 
(7.3
)%
 
(6.4
)%
Tax credits and deductions
(1.0
)%
 
(5.1
)%
 
(0.8
)%
Change in unrecognized tax benefits
(0.8
)%
 
4.2
 %
 
0.3
 %
Other, net
0.7
 %
 
1.7
 %
 
—
 %
Actual income tax provision
16.6
 %
 
20.6
 %
 
32.2
 %
 
 
 
 
 
 


The lower effective tax rate in 2017 when compared to 2016 is primarily due to a decrease to tax expense associated with the remeasurement of our net U.S. deferred tax liability as a result of enactment of the Tax Cuts and Jobs Act. The decrease in the effective tax rate in 2017 is also due to the recognition of excess tax benefits associated with the vesting of employee share-based compensation arrangements. See “Recent Accounting Pronouncements” of Note 2, “Summary of Significant Accounting Policies” for further discussion. The lower effective tax rate in 2016 when compared to 2015 is primarily due to a shift in the geographic mix of earnings, largely driven by the write-off of the eSpeed trade name, partially offset by an unfavorable ruling from the Finnish Supreme Administrative Court.
The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of earnings and losses. These same and other factors, including the history of pre-tax earnings and losses, are taken into account in assessing the ability to realize deferred tax assets.

The temporary differences, which give rise to our deferred tax assets and (liabilities), consisted of the following:
 
December 31,
 
2017
 
2016
 
(in millions)
Deferred tax assets:
 
 
 
Deferred revenues
$
25

 
$
39

U.S. federal net operating loss
1

 
2

Foreign net operating loss
30

 
37

State net operating loss
4

 
1

Compensation and benefits
42

 
99

Foreign currency translation
292

 
528

Tax credits
7

 
7

Other
20

 
34

Gross deferred tax assets
$
421

 
$
747

 
 
 
 
Deferred tax liabilities:
 
 
 
Amortization of software development costs and depreciation
$
(47
)
 
$
(63
)
Amortization of acquired intangible assets
(510
)
 
(596
)
Investments
(26
)
 
(37
)
Other
(19
)
 
(24
)
Gross deferred tax liabilities
(602
)
 
(720
)
Net deferred tax assets before valuation allowance
(181
)
 
27

Less: valuation allowance
(30
)
 
(30
)
Net deferred tax assets (liabilities)
$
(211
)
 
$
(3
)

A valuation allowance has been established with regards to the tax benefits primarily associated with certain net operating losses, or NOLs, as it is more likely than not that these benefits will not be realized in the foreseeable future.
As of December 31, 2017, the expiration dates for the NOLs, and credits are as follows:
Jurisdiction
 
Amount
 
Expiration Date
 
 
(in millions)
 
 
U.S. Federal NOL
 
$
1

 
2033-2035
Foreign NOL
 
4

 
2018-2026
Foreign NOL
 
26

 
No expiration date
State NOL
 
4

 
2025-2036
U.S. Federal Tax credits
 
7

 
2018-2027

The following represents the domestic and foreign components of income before income tax provision:
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(in millions)
Domestic
$
556

 
$
(155
)
 
$
393

Foreign
324

 
291

 
237

Income before income tax provision
$
880

 
$
136

 
$
630


We recorded income tax benefits of $40 million in 2017, $41 million in 2016 and $34 million in 2015, primarily related to share-based compensation. In 2017, the benefit was included in income tax expense. In 2016 and 2015, the amounts were recorded as additional paid-in-capital in the Consolidated Balance Sheets. See “Recent Accounting Pronouncements,” of Note 2, “Summary of Significant Accounting Policies,” for further discussion.
We are subject to examination by federal, state and local, and foreign tax authorities. We regularly assess the likelihood of additional assessments by each jurisdiction and have established tax reserves that we believe are adequate in relation to the potential for additional assessments. We believe that the resolution of tax matters will not have a material effect on our financial condition but may be material to our operating results for a particular period and the effective tax rate for that period.
There are $45 million as of December 31, 2017 and $48 million as of December 31, 2016 of unrecognized tax benefits that if recognized would affect our effective tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
Year Ended December 31,
 
2017
 
2016
 
(in millions)
Beginning balance
$
48

 
$
40

Additions as a result of tax positions taken in prior periods
2

 
9

Additions as a result of tax positions taken in the current period
5

 
3

Reductions related to settlements with taxing authorities
—

 
(4
)
Reductions as a result of lapses of the applicable statute of limitations
(10
)
 
—

Ending balance
$
45

 
$
48


Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense. We have accrued $9 million as of December 31, 2017 and $8 million as of December 31, 2016 for interest and penalties, net of tax effect.
Nasdaq and its eligible subsidiaries file a consolidated U.S. federal income tax return and applicable state and local income tax returns and non-U.S. income tax returns. Federal income tax returns for the years 2012 through 2015 are currently under examination by the Internal Revenue Services and we are subject to examination by the Internal Revenue Service for 2016. Several state tax returns are currently under examination by the respective tax authorities for the years 2005 through 2015 and we are subject to examination for 2016. Non-U.S. tax returns are subject to examination by the respective tax authorities for the years 2009 through 2016. Although the results of such examinations may have an impact on our unrecognized tax benefits, we do not anticipate that such impact will be material to our consolidated financial position or results of operations. Based on the expiration of the statute of limitations in the third quarter of 2017, we recognized $8 million in previously unrecognized tax benefits associated with positions taken in prior years. In addition, we anticipate that the amount of unrecognized tax benefits as of December 31, 2017 will decrease in the next twelve months as we expect to settle certain tax audits.
The Swedish Tax Agency has disallowed certain interest expense deductions for the years 2013 - 2015. We have appealed to the Lower Administrative Court. Despite a prior negative decision from the Council for Advance Rulings and the Supreme Administrative Court's refusal to hear our appeal at that time, we continue to expect a favorable decision from the Swedish Courts. Since January 1, 2013, we have recorded tax benefits of $56 million associated with this matter. We continue to pay all assessments from the Swedish Tax Agency while this matter is pending. If the Swedish Courts agree with our position we will receive a refund of all paid assessments; if the Swedish Courts disagree with our position, we will record tax expense of $48 million or $0.28 per diluted share, which is gross of any related U.S. tax benefits and reflects the impact of foreign currency translation. We record quarterly tax benefits of $1 million to $2 million related to this matter.
The Tax Cuts and Jobs Act was enacted on December 22, 2017 and is effective January 1, 2018. The new legislation contains several key provisions, including a reduction of the U.S. corporate income tax rate from 35% to 21%. We are required to remeasure all our U.S. deferred tax assets and liabilities as of December 22, 2017 and record the impact of such remeasurement in our 2017 financial statements. For the year ended December 31, 2017, we recorded a decrease to tax expense of $87 million, substantially all of which reflects the estimated impact associated with the remeasurement of our net U.S. deferred tax liability at the lower U.S. federal corporate income tax rate. The Tax Cuts and Jobs Act also imposes a transition tax on unremitted aggregate accumulated earnings of non-U.S. subsidiaries, which did not impact us.
SAB 118 has provided guidance which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. As of December 31, 2017, we have recorded a provisional estimate of the effects of the new legislation. We will continue to analyze the Tax Cuts and Jobs Act and related accounting guidance and interpretations in order to finalize any impacts within the measurement period.