Financial Information

PART II

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Income Taxes

2018 Compared to 2017

Provision for income taxes decreased by $1,085 million, primarily due to the nonrecurring net tax expense in 2017 related to the 2017 Tax Act and the reduction of the U.S. federal tax rate in 2018 ($744 million), the prior year gain on the sale of our interest in Avendra ($257 million), increased earnings in jurisdictions with lower tax rates ($57 million), lower operating income ($46 million), reduction of our one-time net tax charge related to the 2017 Tax Act transition tax and the remeasurement of deferred income taxes ($41 million), the release of tax reserves due to the completion of certain examinations ($34 million), and the income tax consequences of an intercompany transaction ($18 million). The decrease was partially offset by the current period’s provisional estimate of tax for global intangible low-taxed income (“GILTI”) under the 2017 Tax Act ($34 million), tax expense incurred for uncertain tax positions relating to Legacy-Starwood operations ($30 million), an unfavorable comparison to a 2017 benefit due to tax law changes adopted in non-U.S. jurisdictions in 2017 ($18 million), the 2017 reversal of tax reserves related to interest accrued for previous periods ($15 million), net tax expense on dispositions ($13 million), and the 2017 release of a tax reserve due to the favorable settlement of a tax position ($12 million).

See Footnote 6. Income Taxes for further information on the 2017 Tax Act.

2017 Compared to 2016

Provision for income taxes increased by $1,092 million, primarily due to the 2017 Tax Act ($586 million), higher earnings due to the inclusion of Legacy-Starwood operations for the full year 2017 ($275 million), the gain on the sale of our interest in Avendra ($259 million), lower merger-related costs ($86 million), an unfavorable comparison to the 2016 release of a valuation allowance ($15 million), the gain on the disposition of a North American Full-Service property ($9 million), and a change in judgment regarding the realizability of certain deferred tax assets in certain states and foreign jurisdictions ($7 million). The increase was partially offset by tax benefits from the adoption of ASU 2016-09 ($72 million), change in the jurisdictional mix of earnings ($25 million), tax law changes in non-U.S. jurisdictions ($22 million), the reversal of tax reserves related to interest accrued for previous periods ($15 million), and adjustments resulting from finalizing prior years’ returns ($10 million).