TD Ameritrade 2018 Annual Report

TD AMERITRADE HOLDING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued) 76 There were no borrowings outstanding under any of the intercompany credit agreements as of September 30, 2018 and 2017. 11. Income Taxes The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Act reduces the U.S. federal corporate income tax rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. As of September 30, 2018, the Company has completed its accounting for the tax effects of the Act. The U.S. federal statutory income tax rate, for companies with a fiscal year end of September 30, 2018, was a blended rate of 24.5%. However, as the Company is on a calendar year for tax reporting purposes, the actual computed blended U.S. federal statutory income tax rate was somewhat lower due to the Company's income being earned unevenly during the fiscal year. Provision for income taxes is comprised of the following for the fiscal years indicated (dollars in millions): 2018 2017 2016 Current expense (benefit): Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 380 $ 484 $ 435 State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 49 (4) 438 533 431 Deferred expense (benefit): Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32) (11) (5) State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 — (3) (24) (11) (8) Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 414 $ 522 $ 423 A reconciliation of the U.S. federal statutory income tax rate to the effective tax rate applicable to pre-tax income follows for the fiscal years indicated: 2018 2017 2016 Federal statutory income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.5% 35.0% 35.0% Statutory versus actual blended federal income tax rate . . . . . . . . . . . . . . . . (1.3) — — State taxes, net of federal tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 2.8 2.8 Adjustments to estimated state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . — — (0.2) Federal incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4 (0.3) (1.4) Interest recorded (reversed) on unrecognized tax benefits, net . . . . . . . . . . . 0.2 0.2 (1.1) Remeasurement of U.S. deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . (3.8) — — Reversal of accruals for unrecognized tax benefits . . . . . . . . . . . . . . . . . . . . (0.4) (0.4) (1.8) Share-based payment compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.3) — — Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1 0.1 21.9% 37.4% 33.4% The Company's effective income tax rate for fiscal year 2018 was 21.9%, compared to 37.4% and 33.4% for fiscal years 2017 and 2016, respectively. The provision for income taxes for fiscal year 2018 included a net favorable adjustment of $71 million related to the remeasurement of the Company's deferred income tax balances as it pertains to the Act, a $5 million income tax benefit resulting from the change in accounting for income taxes related to