Notes to Consolidated Financial Statements continued The effective income tax rate for 2017 was (48.3)% compared to 35.2% for 2016. The decrease in the effective income tax rate and the provision for income taxes was due to a one-time, non-cash income tax benefit recorded in the current period as a result of the enactment of the TCJA on December 22, 2017. The TCJA significantly revised the U.S. federal corporate income tax by, among other things, lowering the corporate income tax rate to 21% beginning in 2018 and imposing a mandatory repatriation tax on accumulated foreign earnings. U.S. GAAP accounting for income taxes requires that Verizon record the impacts of any tax law change on our deferred income taxes in the quarter that the tax law change is enacted. Due to the complexities involved in accounting for the enactment of the TCJA, SEC Staff Accounting Bulletin (SAB) 118 allows us to provide a provisional estimate of the impacts of the legislation. Verizon has provisionally estimated, based on currently available information, that the enactment of the TCJA results in a one-time reduction in net deferred income tax liabilities of approximately $16.8 billion, primarily due to the re-measurement of U.S. deferred tax liabilities at the lower 21% U.S. federal corporate income tax rate, and no impact from the repatriation tax. This provisional estimate does not reflect the effects of any state tax law changes that may arise as a result of federal tax reform. Verizon will continue to analyze the effects of the TCJA on its financial statements and operations and include any adjustments to tax expense or benefit from continuing operations in the reporting periods that such adjustments are determined, consistent with the one-year measurement period set forth in SAB 118. The effective income tax rate for 2016 was 35.2% compared to 34.9% for 2015. The increase in the effective income tax rate was primarily due to the impact of $527 million included in the provision for income taxes from goodwill not deductible for tax purposes in connection with the Access Line Sale on April 1, 2016. This increase was partially offset by the impact that lower income before income taxes in the current period has on each of the reconciling items specified in the table above. The decrease in the provision for income taxes was primarily due to lower income before income taxes due to severance, pension and benefit charges recorded 2016 in compared to severance, pension and benefit credits recorded in 2015. The amounts of cash taxes paid by Verizon are as follows: (dollars in millions) Years Ended December 31, 2017 2016 2015 Income taxes, net of amounts refunded $ 4,432 $ 9,577 $ 5,293 Employment taxes 1,207 1,196 1,284 Property and other taxes 1,737 1,796 1,868 Total $ 7,376 $ 12,569 $ 8,445 The increase in cash taxes paid during 2016 compared to 2015 was due to a $3.2 billion increase in income taxes paid primarily as a result of the Access Line Sale. Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. Significant components of deferred tax assets and liabilities are as follows: (dollars in millions) At December 31, 2017 2016 Employee benefits $ 6,174 $ 10,453 Tax loss and credit carry forwards 4,176 3,318 Other—assets 1,938 2,632 12,288 16,403 Valuation allowances (3,293) (2,473) Deferred tax assets 8,995 13,930 Spectrum and other intangible amortization 21,148 31,404 Depreciation 14,767 22,848 Other—liabilities 4,281 5,642 Deferred tax liabilities 40,196 59,894 Net deferred tax liability $ 31,201 $ 45,964 The decrease in the net deferred tax liability during 2017 was primarily due to the $16.8 billion re-measurement of U.S. deferred taxes at the lower 21% U.S. federal corporate income tax rate. At December 31, 2017, undistributed earnings of our foreign subsidiaries indefinitely invested outside the United States amounted to approximately $1.8 billion. Due to foreign legal restrictions that require minimum reserves be maintained in certain countries, not all of the foreign undistributed earnings are available for repatriation. No U.S. federal deferred income taxes on these undistributed earnings are required because, under the TCJA, such earnings have been subject to U.S. federal tax as a result of the mandatory repatriation provision. In addition, such earnings will not be subject to U.S. federal tax when actually distributed under the new 100% participation exemption as enacted under the TCJA. At December 31, 2017, we had net after-tax loss and credit carry forwards for income tax purposes of approximately $4.2 billion that primarily relate to state and foreign taxes. Of these net after-tax loss and credit carry forwards, approximately $2.6 billion will expire between 2018 and 2037 and approximately $1.6 billion may be carried forward indefinitely. 90 verizon.com/2017AnnualReport
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