U.S. income before taxes included $3.0 billion, $2.7 billion and $2.9 billion of the Company’s U.S. entities’ income from operations outside of the U.S. for fiscal 2019, 2018 and 2017, respectively.



	For the Years Ended September 30,
	2019		2018			2017
	(in millions)
Current:
U.S. federal	$	1,504	$	2,819		$	2,377
State and local	243		219			291
Non-U.S.	843		754			629
Total current taxes	2,590		3,792			3,297
Deferred:
U.S. federal	184		(1,214		)	1,607
State and local	28		(96		)	66
Non-U.S.	2		23			25
Total deferred taxes	214		(1,287		)	1,698
Total income tax provision	$	2,804	$	2,505		$	4,995



	September 30,
	2019			2018
	(in millions)
Deferred Tax Assets:
Accrued compensation and benefits	$	117		$	135
Accrued litigation obligation	273			329
Client incentives	125			213
Net operating loss carryforwards	65			34
Comprehensive loss	33			17
Federal benefit of state taxes	148			120
Other	6			127
Valuation allowance	(69		)	(34		)
Deferred tax assets	698			941
Deferred Tax Liabilities:
Property, equipment and technology, net	(314		)	(286		)
Intangible assets	(4,983		)	(5,153		)
Foreign taxes	(184		)	(106		)
Deferred tax liabilities	(5,481		)	(5,545		)
Net deferred tax liabilities	$	(4,783	)	$	(4,604	)

The Tax Act, enacted on December 22, 2017, transitioned the U.S. tax system to a territorial system and lowered the statutory federal corporate income tax rate from 35% to 21%. The reduction of the statutory federal corporate tax rate to 21% became effective on January 1, 2018. In fiscal 2018, the Company’s statutory federal corporate rate was a blended rate of 24.5%, which was reduced to 21% in fiscal 2019.

In transitioning to the territorial tax system, the Tax Act required the Company to include certain untaxed foreign earnings of non-U.S. subsidiaries in its fiscal 2018 taxable income. Such foreign earnings were subject to a one-time tax at 15.5% on the amount held in cash or cash equivalents, and at 8% on the remaining non-cash amount. The 15.5% and 8% tax, collectively referred to as the “transition tax”, was estimated to be $1.1 billion, and was recorded as a provisional amount in fiscal 2018. The Company also recorded provisional amounts for the tax effects of various other new provisions in fiscal 2018. As permitted by ASU 2018-05, the Company completed the determination of the accounting impacts of the transition tax and various provisions in the first quarter of fiscal 2019. The adjustments to the provisional amounts were not material. The transition tax will be paid over a period of eight years as permitted by the Tax Act.

In addition, the Tax Act enacted a new deduction for foreign-derived intangible income (“FDII”) and a tax on global intangible low-tax income (“GILTI”), effective for the Company on October 1, 2018. In fiscal 2019, the Company adopted the accounting policy of accounting for taxes on GILTI in the period that it is subject to such tax.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. The fiscal 2019 and 2018 valuation allowances relate primarily to foreign net operating losses from subsidiaries acquired in recent years.

As of September 30, 2019, the Company had $17 million federal, $19 million state and $311 million foreign net operating loss carryforwards from acquired subsidiaries. Federal and state net operating loss carryforwards generated in years prior to fiscal 2018 will expire in fiscal 2028 through 2037. Federal net operating losses generated after fiscal 2017 and the foreign net operating losses may be carried forward indefinitely. The Company expects to fully utilize the state net operating loss carryforwards in future years.



	For the Years Ended September 30,
	2019					2018					2017
	Dollars			Percent		Dollars			Percent		Dollars			Percent
	(in millions, except percentages)
U.S. federal income tax at statutory rate	$	3,126		21	%	$	3,141		25	%	$	4,093		35	%
State income taxes, net of federal benefit	223			2	%	201			2	%	200			2	%
Non-U.S. tax effect, net of federal benefit	(527		)	(4	)%	(465		)	(4	)%	(641		)	(5	)%
Transition tax on foreign earnings	—			—	%	1,147			9	%	—			—	%
Remeasurement of deferred tax balances	—			—	%	(1,133		)	(9	)%	—			—	%
Reorganization of Visa Europe and other legal entities	—			—	%	—			—	%	1,515			13	%
Other, net	(18		)	—	%	(386		)	(3	)%	(172		)	(2	)%
Income tax provision	$	2,804		19	%	$	2,505		20	%	$	4,995		43	%

Current income taxes receivable were $130 million and $82 million at September 30, 2019 and 2018, respectively. Non-current income taxes receivable of $771 million and $689 million at September 30, 2019 and 2018, respectively, were included in other assets. Income taxes payable of $327 million and $257 million at September 30, 2019 and 2018, respectively, were included in accrued liabilities. Accrued income taxes of $2.5 billion and $2.4 billion at September 30, 2019 and 2018, respectively, were included in other liabilities.

The Company’s operating hub in the Asia Pacific region is located in Singapore. It is subject to a tax incentive which is effective through September 30, 2023, and is conditional upon meeting certain business operations and employment thresholds in Singapore. The tax incentive decreased Singapore tax by $324 million, $295 million and $252 million, and the benefit of the tax incentive on diluted earnings per share was $0.14, $0.13 and $0.11 in fiscal 2019, 2018 and 2017, respectively.

In accordance with Accounting Standards Codification 740—Income Taxes, the Company is required to inventory, evaluate and measure all uncertain tax positions taken or to be taken on tax returns, and to record liabilities for the amount of such positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities.

At September 30, 2019, 2018, and 2017, the Company’s total gross unrecognized tax benefits were $2.2 billion, $1.7 billion and $1.4 billion, respectively, exclusive of interest and penalties described below. Included in the $2.2 billion, $1.7 billion and $1.4 billion are $1.4 billion, $1.2 billion and $1.1 billion of unrecognized tax benefits, respectively, that if recognized, would reduce the effective tax rate in a future period.



	2019			2018			2017
	(in millions)
Balance at beginning of period	$	1,658		$	1,353		$	1,160
Increases of unrecognized tax benefits related to prior years	216			367			56
Decreases of unrecognized tax benefits related to prior years	(13		)	(233		)	(59		)
Increases of unrecognized tax benefits related to current year	384			172			197
Decreases related to settlements with taxing authorities	(9		)	—			—
Reductions related to lapsing statute of limitations	(2		)	(1		)	(1		)
Balance at end of period	$	2,234		$	1,658		$	1,353

It is the Company’s policy to account for interest expense and penalties related to uncertain tax positions in non-operating expense in its consolidated statements of operations. The Company recognized $66 million, $15 million and $23 million of interest expense in fiscal 2019, 2018 and 2017, respectively, related to uncertain tax positions. The Company accrued $5 million and $1 million of penalties in fiscal 2019 and fiscal 2017, respectively, and accrued no penalties in fiscal 2018, related to uncertain tax positions. At September 30, 2019 and 2018, the Company had accrued interest of $165 million and $99 million, respectively, and accrued penalties of $26 million and $34 million, respectively, related to uncertain tax positions included in other long-term liabilities in its consolidated balance sheets.

The Company’s fiscal 2012 through 2015 U.S. federal income tax return is currently under Internal Revenue Service (IRS) examination. The Company has filed federal refund claims for fiscal years 2008 through 2011, which are also currently under IRS examination. Except for the refund claims, the federal statutes of limitations have expired for fiscal years prior to 2012. The Company’s fiscal years 2006 through 2015 California tax returns are currently under examination. The California statutes of limitations have expired for fiscal years prior to 2006.

During fiscal 2013, the Canada Revenue Agency (CRA) completed its examination of the Company’s fiscal 2003 through 2009 Canadian tax returns and proposed certain assessments. Based on the findings of its examination, the CRA also proposed certain assessments to the Company’s fiscal 2010 through 2017 Canadian tax returns. The Company filed notices of objection against these assessments and, in fiscal 2015, completed the appeals process without reaching a settlement with the CRA. In April 2016, the Company petitioned the Tax Court of Canada to overturn the CRA’s assessments. Legal proceedings continue to be in progress. The Company continues to believe that its income tax provision adequately reflects its obligations to the CRA.

The India tax authorities completed the first level examination of the Company’s income tax returns for the taxable years falling within the period from fiscal 2010 to 2015, and proposed certain assessments. The Company objected to these proposed assessments and filed appeals to the appellate authorities. While the timing and outcome of the final resolution of these appeals are uncertain, the Company believes that its income tax provision adequately reflects its income tax obligations in India.

The Company is also subject to examinations by various state and foreign tax authorities. All material state and foreign tax matters have been concluded for years through fiscal 2002. The timing and outcome of the final resolutions of the federal, state and foreign tax examinations and refund claims are uncertain. As such, it is not reasonably possible to estimate the impact that the final outcomes could have on the Company’s unrecognized tax benefits in the next 12 months.