Income Taxes (Tables)

Income before income taxes is as follows:



	YEAR ENDED MAY 31,
(Dollars in millions)	2019		2018		2017
Income before income taxes:
United States	$	593	$	744	$	1,240
Foreign	4,208		3,581		3,646
TOTAL INCOME BEFORE INCOME TAXES	$	4,801	$	4,325	$	4,886

The provision for income taxes is as follows:



	YEAR ENDED MAY 31,
(Dollars in millions)	2019			2018		2017
Current:
United States
Federal	$	74		$	1,167	$	398
State	56			45		82
Foreign	608			533		439
Total Current	738			1,745		919
Deferred:
United States
Federal	(33		)	595		(279		)
State	(9		)	25		(9		)
Foreign	76			27		15
Total Deferred	34			647		(273		)
TOTAL INCOME TAX EXPENSE	$	772		$	2,392	$	646

A reconciliation from the U.S. statutory federal income tax rate to the effective income tax rate is as follows:



	YEAR ENDED MAY 31,
	2019		2018		2017
Federal income tax rate	21.0	%	29.2	%	35.0	%
State taxes, net of federal benefit	1.2	%	1.2	%	1.1	%
Foreign earnings	-2.1	%	-17.5	%	-20.7	%
Transition tax related to the Tax Act	—	%	43.3	%	—	%
Remeasurement of deferred tax assets and liabilities related to the Tax Act	—	%	3.7	%	—	%
Excess tax benefits from share-based compensation	-3.6	%	-5.3	%	—	%
Resolution of a U.S. tax matter	—	%	—	%	-3.2	%
U.S. Research and Development tax credit	-1.1	%	-0.6	%	-0.6	%
Other, net	0.7	%	1.3	%	1.6	%
EFFECTIVE INCOME TAX RATE	16.1	%	55.3	%	13.2	%

Deferred tax assets and liabilities comprise the following:



	AS OF MAY 31,
(Dollars in millions)	2019			2018
Deferred tax assets:
Inventories	$	66		$	73
Sales return reserves	128			104
Deferred compensation	271			250
Stock-based compensation	156			135
Reserves and accrued liabilities	101			102
Net operating loss carry-forwards	81			88
Other	125			106
Total deferred tax assets	928			858
Valuation allowance	(88		)	(95		)
Total deferred tax assets after valuation allowance	840			763
Deferred tax liabilities:
Foreign withholding tax on undistributed earnings of foreign subsidiaries	(235		)	(155		)
Property, plant and equipment	(188		)	(167		)
Intangibles	(23		)	(77		)
Other	(18		)	(26		)
Total deferred tax liabilities	(464		)	(425		)
NET DEFERRED TAX ASSET	$	376		$	338

The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:



	AS OF MAY 31,
(Dollars in millions)	2019			2018			2017
Unrecognized tax benefits, beginning of the period	$	698		$	461		$	506
Gross increases related to prior period tax positions	85			19			31
Gross decreases related to prior period tax positions	(32		)	(12		)	(163		)
Gross increases related to current period tax positions	81			249			115
Settlements	—			—			(12		)
Lapse of statute of limitations	(35		)	(20		)	(21		)
Changes due to currency translation	11			1			5
UNRECOGNIZED TAX BENEFITS, END OF THE PERIOD	$	808		$	698		$	461

The Company has available domestic and foreign loss carry-forwards of $257 million at May 31, 2019. If not utilized, such losses will expire as follows:



	YEAR ENDING MAY 31,
(Dollars in millions)	2020		2021		2022		2023		2024-2039		INDEFINITE		TOTAL
Net operating losses	$	5	$	2	$	1	$	26	$	34	$	189	$	257