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Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate and consisted of the following significant components (in millions):
UAL202020192018
Income tax provision (benefit) at statutory rate$(1,852)$822 $556 
State income taxes, net of federal income tax benefit(110)50 29 
Foreign tax rate differential— (90)(84)
Global intangible low-taxed income— 90 4 
Foreign income taxes1 1 2 
Nondeductible employee meals5 12 12 
State rate change(2)— 3 
Valuation allowance197 (4)(3)
Other, net8 24 7 
$(1,753)$905 $526 
Current$(12)$23 $14 
Deferred(1,741)882 512 
$(1,753)$905 $526 
United202020192018
Income tax provision (benefit) at statutory rate$(1,852)$822 $557 
State income taxes, net of federal income tax(110)50 29 
Foreign tax rate differential— (90)(84)
Global intangible low-taxed income— 90 4 
Foreign income taxes1 1 2 
Nondeductible employee meals5 12 12 
State rate change(2)— 3 
Valuation allowance197 (4)(3)
Other, net8 24 7 
$(1,753)$905 $527 
Current$(12)$23 $14 
Deferred(1,741)882 513 
$(1,753)$905 $527 
The Company's effective tax rate for the year ended December 31, 2020 differed from the federal statutory rate of 21% due to a blend of federal, state and foreign taxes as well as the impact of certain nondeductible items and a valuation allowance of $197 million related to capital losses and state attributes.
Temporary differences and carryforwards that give rise to deferred tax assets and liabilities at December 31, 2020 and 2019 were as follows (in millions):
 UALUnited
2020201920202019
Deferred income tax asset (liability):
Federal and state net operating loss ("NOL") carryforwards$2,476 $695 $2,448 $668 
Deferred revenue1,409 1,287 1,409 1,287 
Employee benefits, including pension, postretirement and medical 1,103 715 1,103 715 
Operating lease liabilities1,247 1,256 1,247 1,256 
Sale leaseback liabilities260 — 260 — 
Other362 165 362 165 
Less: Valuation allowance(247)(58)(247)(58)
Total deferred tax assets $6,610 $4,060 $6,582 $4,033 
Depreciation$(4,789)$(4,011)$(4,789)$(4,011)
Operating lease right-of-use asset(1,028)(1,061)(1,028)(1,061)
Intangibles(662)(724)(662)(724)
Total deferred tax liabilities$(6,479)$(5,796)$(6,479)$(5,796)
Net deferred tax asset (liability)$131 $(1,736)$103 $(1,763)
United and its domestic consolidated subsidiaries file a consolidated federal income tax return with UAL. Under an intercompany tax allocation policy, United and its subsidiaries compute, record and pay UAL for their own tax liability as if they were separate companies filing separate returns. In determining their own tax liabilities, United and each of its subsidiaries take into account all tax credits or benefits generated and utilized as separate companies and they are each compensated for the aforementioned tax benefits only if they would be able to use those benefits on a separate company basis.
The Company's federal and state NOL and tax credit carryforwards relate to current and prior years' NOLs and credits, which may be used to reduce tax liabilities in future years. These tax benefits are mostly attributable to federal pre-tax NOL carryforwards of $11.0 billion ($2.3 billion tax effected) for UAL. If not utilized these federal pre-tax NOLs will expire as follows (in billions): $0.1 in 2026, $0.5 in 2028, and $0.4 in 2029, $0.2 in 2032 and $0.4 in 2033. The remaining $9.4 billion of NOLs has no expiration date. State pre-tax NOLs of $3.7 billion ($0.2 billion tax effected) expire over a five to twenty year period. Federal tax credits of $42 million will expire over a one-to-eighteen-year period and state tax credits of $33 million will expire over a one-to-eleven-year period.
A tax valuation allowance is recognized if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company's management assesses available positive and negative evidence regarding the Company's ability to realize its deferred tax assets and records a valuation allowance when it is more likely than not that deferred tax assets will not be realized. In order to form a conclusion, management considers positive evidence in the form of taxable income in prior carryback years, reversing temporary differences, tax planning strategies and projections of future taxable income during the periods in which those temporary differences become deductible, as well as negative evidence such as historical losses. Although the Company was in a cumulative loss position at the end of 2020, management determined that the 2020 results were not indicative of future results due to the impact of the COVID-19 pandemic on its operations. The Company concluded that the positive evidence outweighs the negative evidence, primarily driven by approval and distribution of COVID-19 vaccines as well as increased confidence with the timing of the recovery. The Company's largest deferred tax assets are mostly attributable to federal pre-tax NOLs which were $11.0 billion ($2.3 billion tax effected) at December 31, 2020. The majority of the NOLs do not expire and the Company expects to recognize the NOLs through the reversal of existing deferred tax liabilities and projected future taxable income. Therefore, we have not recorded a valuation allowance on our deferred tax assets other than the capital loss carryforwards and state attributes that have short expiration periods. While the Company expects to generate sufficient future profits to fully utilize these NOLs, the Company may have to record a valuation allowance against our NOLs if it is unable to generate sufficient taxable income in future periods. Recording a valuation allowance against our NOLs would not impact our ability to use them. Assumptions about future taxable income are consistent with the plans and estimates used to manage our business. Management will continue to evaluate future financial performance to determine whether such performance is both sustained and significant enough to provide sufficient evidence to support not recording valuation allowance on these NOLs. Any reduction in estimated future taxable income may require additional valuation allowance against the deferred tax assets, which could be material. As of December 31, 2020, the Company has recorded $185 million of valuation allowance against its capital loss deferred tax assets. Capital losses have a limited carryforward period of five years and they can be utilized only to the extent of capital gains. The Company does not anticipate generating sufficient capital gains to utilize the losses before they expire, therefore, a valuation allowance is necessary as of December 31, 2020. Additionally, the
Company recorded a valuation allowance of $62 million on the state NOL and state tax credit deferred tax assets primarily due to utilization limitations resulting from a prior ownership change.
The Company's unrecognized tax benefits related to uncertain tax positions were $57 million, $53 million and $39 million at December 31, 2020, 2019 and 2018, respectively. Included in the ending balance at December 31, 2020 is $57 million that would affect the Company's effective tax rate if recognized. The changes in unrecognized tax benefits relating to settlements with taxing authorities, unrecognized tax benefits as a result of tax positions taken during a prior period and unrecognized tax benefits relating from a lapse of the statute of limitations were immaterial during 2020, 2019 and 2018. The Company does not expect significant increases or decreases in their unrecognized tax benefits within the next 12 months. There are no material amounts included in the balance at December 31, 2020 for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company's federal income tax returns for tax years after 2002 remain subject to examination by the Internal Revenue Service (the "IRS") and state taxing jurisdictions. We are currently under audit by the IRS for the 2016 and 2017 tax years.