INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Geographic Allocation of Income and Provision for Income Taxes
In millions	2020		2019		2018
Income (loss) before income taxes
Domestic	$	558	$	696	$	1,305
Foreign	(1)		(5)		(3)
Income before income taxes	$	557	$	691	$	1,302
Current tax expense
Federal	$	82	$	70	$	166
State and local	2		4		6
Foreign	—		—		40
Total current tax expense	$	84	$	74	$	212
Deferred tax expense (benefit)
Federal	$	42	$	(9)	$	27
State and local	4		(1)		8
Total deferred tax expense (benefit)	$	46	$	(10)	$	35
Provision for income taxes	$	130	$	64	$	247
Net income	$	427	$	627	$	1,055

Reconciliation to U.S. Statutory Rate	2020		2019		2018
Statutory U.S. federal income tax rate	21.0	%	21.0	%	21.0	%
Unrecognized tax benefits	(0.9)		(1.0)		(0.3)
Federal tax accrual adjustments	3.0		1.7		(0.3)
Restoration of tax basis	—		(12.2)		—
State and local tax impact	0.2		0.9		1.0
Other - net	—		(1.1)		(2.4)
Effective Tax Rate 1	23.3	%	9.3	%	19.0	%

1.The tax rate for 2020 was unfavorably impacted by an accrual to return adjustment. The tax rate for 2019 was favorably impacted by the restoration of tax basis in assets, driven by a court judgment that did not involve the Corporation. The tax rate for 2018 was favorably impacted by the Foreign Derived Intangible Income deduction and the Tax Cuts and Jobs Act of 2017.

Deferred Tax Balances at Dec 31	2020				2019
In millions	Assets		Liabilities		Assets		Liabilities
Property	$	22	$	194	$	14	$	145
Tax loss and credit carryforwards	34		—		39		—
Postretirement benefit obligations	318		—		275		—
Other accruals and reserves	313		4		320		—
Inventory	4		—		5		—
Other - net	19		—		20		—
Subtotal	$	710	$	198	$	673	$	145
Valuation allowances 1	(18)		—		(21)		—
Total	$	692	$	198	$	652	$	145

1.    Primarily related to the realization of recorded tax benefits on state tax loss carryforwards from operations in the United States.

Operating Loss and Tax Credit Carryforwards at Dec 31	2020		2019
In millions	Assets		Assets
Operating loss carryforwards
Expire within 5 years	$	21	$	26
Expire after 5 years or indefinite expiration	7		7
Total operating loss carryforwards	$	28	$	33
Tax credit carryforwards
Expire after 5 years or indefinite expiration	$	6	$	6
Total tax credit carryforwards	$	6	$	6

Undistributed earnings of foreign subsidiaries and related companies that are deemed to be permanently invested amounted to $7 million at December 31, 2020 and $8 million at December 31, 2019. The unrecognized deferred tax liability on those earnings is not material.

The following table provides a reconciliation of the Corporation's unrecognized tax benefits:

Total Gross Unrecognized Tax Benefits
In millions	2020		2019		2018
Total unrecognized tax benefits at Jan 1	$	1	$	1	$	1
Total unrecognized tax benefits at Dec 31	$	1	$	1	$	1
Total unrecognized tax benefits that, if recognized, would impact the effective tax rate	$	1	$	1	$	1
Total amount of interest and penalties (benefit) recognized in "Provision for income taxes"	$	(5)	$	(7)	$	(5)

In the first quarter of 2018, a settlement was reached for a tax matter regarding fees paid to the Corporation by a foreign nonconsolidated affiliate. As a result, the Corporation recorded an increase of $40 million to "Income taxes receivable" and "Income taxes payable" in the consolidated balance sheets. There was no impact to the consolidated statements of income. In the second quarter of 2018, a payment of $40 million was made for the settlement of the tax matter.

The Corporation is included in TDCC's consolidated federal income tax group and DowDuPont's consolidated tax return through March 31, 2019. Current and deferred tax expenses are calculated for the Corporation as a stand-alone group and are allocated to the group from the consolidated totals, consistent with the TDCC-UCC Tax Sharing Agreement. The Corporation is currently under examination in a number of tax jurisdictions, including the U.S. federal and various state jurisdictions. It is reasonably possible that these examinations may be resolved in the next twelve months. The impact on the Corporation’s results of operations is not expected to be material.

Tax years that remain subject to examination for the Corporation's major tax jurisdictions are shown below:

Tax Years Subject to Examination by Major Tax Jurisdiction at Dec 31, 2020	Earliest Open Year
Jurisdiction
United States:
Federal income tax	2004
State and local income tax	2004

Inherent uncertainties exist in estimates of tax contingencies due to changes in tax law, both legislated and concluded through the various jurisdictions' tax court systems. It is the opinion of the Corporation's management that the possibility is remote that costs in excess of those accrued will have a material impact on the Corporation's consolidated financial statements.