Bortles Corporation’s U.S. operations have been in “steady state” for several years, whereby its pre-tax income has been constant (at $400 million each year) and its originating temporary differences and reversing temporary differences exactly offset. At December 31, 2016, Bortles reported a net deferred tax liability of $700 million, related to its U.S. operations. Bortles has no state income taxes, so the $700 million deferred tax liability was based on the federal corporate tax rate of 35%.

Bortles has a foreign subsidiary that generates $100 million of pre-tax income per year (so that Bortles’s total pre-tax income is $500 million). The foreign subsidiary has no book tax differences and pays income tax to its home government at 18%. Bortles had deemed its unrepatriated foreign earnings to be indefinitely reinvested and therefore had not accrued a deferred tax liability related to it as of December 31, 2016.

In 2017, the Tax Cuts and Jobs Act was enacted, permanently lowering the U.S. corporate tax rate from 35% to 21%, effective in 2018. In addition, the new law imposed a one time tax on unrepatriated foreign earnings, with the rate varying depending on the extent to which the unrepatriated earnings were held in cash. In Bortles’s case, this one-time tax amounted to $540 million. Beginning in 2018, there is no longer any U.S. tax on the foreign income of U.S. corporations.

Note that the 18% tax rate Bortles’s foreign subsidiary pays to its home country has not changed.

Bortles has no permanent differences and no other comprehensive income in either its U.S. operations or its foreign subsidiary. Assume that pre-tax income remains constant at $500 million per year ($400 million from U.S. operations and $100 million from foreign operations).

Required:

1. Determine Bortles’s income tax provision in 2016.

2. Determine Bortles’s income tax provision in 2017.

3. Determine Bortles’s income tax provision in 2018.