
	Year Ended December 31,
	2020		2019		2018
Federal Income Taxes
Current	$	3	$	(3)	$	37
Deferred	58		98		83
Foreign Income Taxes
Current	19		43		46
Deferred	(34)		5		57
State Income Taxes
Current	8		15		29
Deferred	10		21		(5)
Income Tax Expense	$	64	$	179	$	247


	Year Ended December 31,
	2020		2019		2018
U.S. federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Nondeductible expenses	4.1	%	1.3	%	3.7	%
Effect of tax law changes	(10.5)	%	(4.6)	%	14.5	%
Change in valuation allowance for deferred tax assets	9.9	%	2.0	%	0.6	%
State taxes, net of federal benefit	5.5	%	3.5	%	2.3	%
Audit and other tax return adjustments	1.4	%	0.6	%	(1.8)	%
Tax-exempt income, credits and incentives	(5.9)	%	(2.1)	%	(2.2)	%
Foreign rate differential adjusted for U.S. taxation of foreign profits(1)	(2.6)	%	0.1	%	4.8	%
Stock-based compensation	2.3	%	(0.3)	%	0.2	%
Other	0.2	%	0.3	%	1.9	%
Effective Income Tax Rate	25.4	%	21.8	%	45.0	%

On a consolidated basis, including discontinued operations, we paid a total of $32, $94 and $80 in income taxes to federal, foreign and state jurisdictions during the three years ended December 31, 2020, 2019 and 2018, respectively.


	Year Ended December 31,
	2020		2019		2018
Pre-tax income	$	64	$	179	$	247
Discontinued operations(1)	—		95		10


Common shareholders' equity:
Changes in defined benefit plans	43		(55)		131

Cash flow hedges	1		(1)		5
Translation adjustments	(3)		8		(9)
Retained Earnings	—		—		36
Total Income Tax Expense	$	105	$	226	$	420

We recognize tax liabilities when, despite our belief that our tax return positions are supportable, we believe that certain positions may not be fully sustained upon review by tax authorities. Each period, we assess uncertain tax positions for recognition, measurement and effective settlement. Benefits from uncertain tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement - the more-likely-than-not recognition threshold. Where we have determined that our tax return filing position does not satisfy the more likely than not recognition threshold, we have recorded no tax benefits. These assessments require the use of considerable estimates and judgments and can increase or decrease our effective tax rate, as well as impact our operating results. A difference in the ultimate resolution of uncertain tax positions from what is currently estimated could have a material impact on our results of operations and financial condition.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a variety of jurisdictions. We are also subject to ongoing tax examinations in numerous jurisdictions due to the extensive geographical scope of our operations. As a result, we have received, and may in the future receive, proposed tax adjustments and tax assessments in multiple jurisdictions. We regularly assess the likelihood of the outcomes resulting from these ongoing tax examinations as part of our continuing assessment of uncertain tax positions to determine our provision for income taxes. The specific timing of when the resolution of each tax position will be reached is uncertain. As of December 31, 2020, we do not believe that there are any positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.


	2020		2019		2018
Balance at January 1	$	127	$	108	$	125
Additions related to current year	3		42		2
Additions related to prior years positions	8		17		3
Reductions related to prior years positions	(10)		(36)		(13)
Settlements with taxing authorities(1)	(8)		(1)		(6)
Reductions related to lapse of statute of limitations	(7)		(3)		(3)
Currency	2		—		—

Balance at December 31	$	115	$	127	$	108

Included in the balances at December 31, 2020, 2019 and 2018 are $8, $3 and $8, respectively, of tax positions that are highly certain of realizability but for which there is uncertainty about the timing or that they may be reduced through an indirect benefit from other taxing jurisdictions. Because of the impact of deferred tax accounting, other than for the possible incurrence of interest and penalties, the disallowance of these positions would not affect the annual effective tax rate.

Within income tax expense, we recognize interest and penalties accrued on unrecognized tax benefits, as well as interest received from favorable settlements. We had $4, $2 and $2 accrued for the payment of interest and penalties associated with unrecognized tax benefits at December 31, 2020, 2019 and 2018, respectively.

In the U.S., we are no longer subject to U.S. federal income tax examinations for years before 2015. With respect to our major foreign jurisdictions, we are no longer subject to tax examinations by tax authorities for years before 2011.

At December 31, 2020 we have not provided deferred taxes on our undistributed pre-1987 E&P of approximately $360, as such undistributed earnings have been determined to be indefinitely reinvested and we currently do not plan to initiate any action that would precipitate a deferred tax impact. The increase from the amount at December 31, 2019 of $350 is due to foreign currency translation adjustments. Additionally, we have also not provided deferred taxes on the outside basis differences in our investments in foreign subsidiaries that are unrelated to undistributed earnings. These basis differences are also indefinitely reinvested. A determination of the unrecognized deferred taxes related to these components is not practicable.


	December 31,
	2020		2019(2)
Deferred Tax Assets
Research and development	$	150	$	143
Post-retirement medical benefits	94		98

Net operating losses	377		389
Operating reserves, accruals and deferrals	124		115
Tax credit carryforwards	249		231
Deferred and share-based compensation	13		26
Pension	211		298
Depreciation	35		16
Operating lease liabilities	82		84
Other	44		63
Subtotal	1,379		1,463
Valuation allowance	(396)		(399)
Total	$	983	$	1,064

Deferred Tax Liabilities
Finance lease and installment sales	$	247	$	240

Intangibles and goodwill	140		128
Unremitted earnings of foreign subsidiaries	31		39
Operating lease ROU assets	76		78
Other	16		18
Total	$	510	$	503

Total Deferred Taxes, Net	$	473	$	561

Reconciliation to the Consolidated Balance Sheets
Deferred tax assets	$	508	$	598
Deferred tax liabilities(1)	(35)		(37)
Total Deferred Taxes, Net	$	473	$	561

(2)The deferred tax assets and liabilities disclosure at December 31, 2019 has been adjusted to primarily reflect the tax effect of the gross deferred tax Operating Lease (ROU) Assets and the tax effect of the related gross deferred tax Operating lease liabilities recognized in accordance with ASC 842. There was no impact on Total Deferred Taxes, Net from this adjustment.

We record the estimated future tax effects of temporary differences between the tax bases of assets and liabilities and the amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. We apply judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, we considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The deferred tax assets requiring significant judgment are U.S. tax credit carryforwards with a limited life.

The net change in the total valuation allowance for the years ended December 31, 2020, 2019 and 2018 was a decrease of $3, an increase of $2 and a decrease of $38, respectively. The valuation allowance relates primarily to certain net operating loss carryforwards, tax credit carryforwards and deductible temporary differences for which we have concluded it is more-likely-than-not that these items will not be realized in the ordinary course of operations.

Although realization is not assured, we have concluded that it is more-likely-than-not that the deferred tax assets, for which a valuation allowance was determined to be unnecessary, will be realized in the ordinary course of operations based on the available positive and negative evidence, including scheduling of deferred tax liabilities and projected income from operating activities. The amount of the net deferred tax assets considered realizable, however, could change in the near term if future income or income tax rates are higher or lower than currently estimated, or if there are differences in the timing or amount of future reversals of existing taxable or deductible temporary differences.