
($ in millions)		2020		2019		2018
Current	-U.S. Federal	$	9	$	(272)	$	(169)
	-U.S. State	(41)		(57)		(94)
	-Non-U.S.	(78)		(161)		(284)
		(110)		(490)		(547)

Deferred	-U.S. Federal	180		141		10
	-U.S. State	81		39		(6)
	-Non-U.S.	48		(16)		105
		309		164		109
		$	199	$	(326)	$	(438)


($ in millions)	Amount
Unrecognized tax benefit at beginning of 2018	$	491

Change attributable to tax positions taken in prior years	37
Change attributable to tax positions taken during the current period	148
Decrease attributable to settlements with taxing authorities	(53)

Unrecognized tax benefit at year-end 2018	623
Change attributable to tax positions taken in prior years	(13)
Change attributable to tax positions taken during the current period	13
Decrease attributable to settlements with taxing authorities	(54)

Unrecognized tax benefit at year-end 2019	569
Change attributable to tax positions taken in prior years	(66)
Change attributable to tax positions taken during the current period	4
Decrease attributable to settlements with taxing authorities	(43)

Unrecognized tax benefit at year-end 2020	$	464

Our unrecognized tax benefit balances included $410 million at year-end 2020, $498 million at year-end 2019, and $497 million at year-end 2018 of tax positions that, if recognized, would impact our effective tax rate. It is reasonably possible that within the next twelve months we will reach resolution of income tax examinations in one or more jurisdictions. The actual amount of any change to our unrecognized tax benefits could vary depending on the timing and nature of the settlement. Therefore, an estimate of the change cannot be provided. We recognize accrued interest and penalties for our unrecognized tax benefits as a component of tax expense. Related interest (benefit) expense totaled $(15) million in 2020, $28 million in 2019, and $3 million in 2018. We accrued interest and penalties related to our unrecognized tax benefits of approximately $85 million at year-end 2020 and $100 million at year-end 2019 on our Balance Sheets.

We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The U.S. Internal Revenue Service (“IRS”) has examined our federal income tax returns, and as of year-end 2020, we have settled all issues for tax years through 2013 for Marriott and through 2012 for Starwood. Our Marriott 2014 and 2015 tax year audits are substantially complete, and our Marriott 2016 through 2018 tax year audits are currently ongoing. Starwood is currently under audit by the IRS for years 2013 through 2016. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and tax credit carry-forwards. We state those balances at the enacted tax rates we expect will be in effect when we pay or recover the taxes. Deferred income tax assets represent amounts available to reduce income taxes we will pay on taxable income in future years. We evaluate our ability to realize these future tax deductions and credits by assessing whether we expect to have sufficient future taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies to utilize these future deductions and credits. We establish a valuation allowance when we no longer consider it more likely than not that a deferred tax asset will be realized.

The following table presents the tax effect of each type of temporary difference and carry-forward that gave rise to significant portions of our deferred tax assets and liabilities as of year-end 2020 and year-end 2019:


($ in millions)	At Year-End 2020		At Year-End 2019
Deferred Tax Assets
Employee benefits	$	262	$	267
Net operating loss carry-forwards	818		680
Accrued expenses and other reserves	214		162
Receivables, net	12		11
Tax credits	49		41
Loyalty Program	367		249
Deferred income	69		70
Lease liabilities	252		261
Other	82		15
Deferred tax assets	2,125		1,756
Valuation allowance	(1,009)		(616)
Deferred tax assets after valuation allowance	1,116		1,140
Deferred Tax Liabilities
Equity method investments	(29)		(55)
Property and equipment	(42)		(82)
Intangibles	(663)		(895)
Right-of-use assets	(197)		(229)
Self-insurance	(19)		(15)

Deferred tax liabilities	(950)		(1,276)
Net deferred taxes	$	166	$	(136)

Our valuation allowance is attributable to non-U.S. and U.S. state net operating loss carry-forwards. During 2020, our valuation allowance increased primarily due to legislative changes in Switzerland and net operating losses in Luxembourg.

At year-end 2020, we had approximately $31 million of tax credits that will expire through 2030 and $17 million of tax credits that do not expire. We recorded $44 million of net operating loss benefits in 2020 and $10 million in 2019. At year-end 2020, we had approximately $3,938 million of primarily state and foreign net operating losses, of which $2,315 million will expire through 2040.

We made no provision for U.S. income taxes or additional non-U.S. taxes on certain undistributed earnings of non-U.S. subsidiaries. These earnings could become subject to additional taxes if the non-U.S. subsidiaries dividend or loan those earnings to an affiliate or if we sell our interests in the non-U.S. subsidiaries. We cannot practically estimate the amount of additional taxes that might be payable on the undistributed earnings.


	2020		2019		2018
U.S. statutory tax rate	21.0	%	21.0	%	21.0	%
U.S. state income taxes, net of U.S. federal tax benefit	3.8		1.6		2.5
Non-U.S. income	12.5		(3.3)		(1.0)
Change in valuation allowance	(20.0)		3.4		2.6
Change in uncertain tax positions	12.2		1.9		1.0
Change in U.S. tax rate	0.0		0.0		(1.7)
Permanent items	9.4		1.3		0.0
Tax on asset dispositions	0.0		(0.7)		(2.9)

Excess tax benefits related to equity awards	6.4		(3.2)		(1.8)
U.S. tax on foreign earnings	(3.0)		0.1		0.0
Other, net	0.6		(1.7)		(1.0)
Effective rate	42.9	%	20.4	%	18.7	%

The non-U.S. income tax benefit presented in the table above includes tax-exempt income in Hong Kong and Singapore, and a deemed interest deduction in Switzerland, which collectively represented 12.9% in 2020, 8.8% in 2019, and 4.0% in 2018. We included the impact of these items in the non-U.S. income line above because we consider them to be equivalent to a reduction of the statutory tax rates in these jurisdictions. Pre-tax income in Switzerland, Singapore, and Hong Kong totaled $314 million in 2020, $709 million in 2019, and $513 million in 2018.

The non-U.S. income tax benefit also includes U.S. income tax expense on non-U.S. operations, which represents 0.8% in 2020, 2.0% in 2019, and 1.4% in 2018. We included the impact of this tax in the non-U.S. income line above because we consider this tax to be an integral part of the foreign taxes.