
(Dollars in millions)	Year Ended December 31
Provision for income taxes	2020		2019		2018
Current
Non-U.S.	$	31	$	7	$	22
Deferred
U.S. federal	—		(9)		(4)
State	—		2		—
Non-U.S.	1		1		24
Total income tax expense	$	32	$	1	$	42


(Dollars in millions)	Year Ended December 31
Effective income tax rate	2020		2019		2018
U.S. federal income tax rate	$	(108)	$	(109)	$	(53)
Foreign tax rate variances	(1)		(8)		1
State taxes, net of federal benefit	(7)		(6)		—
Tax credits	(6)		(7)		(9)
Change in Valuation Allowances	113		120		79
Non-Controlling Interest	—		2		3
Earnings of equity investments	14		15		13
Withholding taxes	3		4		5

Tax on divestiture	23		—		—
Convertible debt	—		(10)		—
Other, net	1		—		3
Provision for income taxes	$	32	$	1	$	42

The 2020 income tax expense of $32 million includes a $23 million income tax expense on the gain from the sale of VNBS. The 2019 income tax expense of $1 million includes a $10 million income tax benefit related to domestic losses incurred during the year ended December 31, 2019. The deferred tax liability is a result of the issuance of the Convertible Senior Notes and recorded as a component of APIC is treated as a source of income in fiscal 2019 and a resulting benefit recorded in continuing operations.


(Dollars in millions)	As of December 31
Deferred taxes	2020		2019
Assets
Provisions	$	43	$	42
Costs capitalized for tax	—		1
Intangibles assets	7		12
Tax receivables, principally net operating loss carryforward	262		130
Credits	14		8
Lease liabilities	29		29
Other	6		4
Deferred tax assets before allowances	$	361	$	226
Valuation allowances	(323)		(179)
Total	$	38	$	47
Liabilities
Property, plant and equipment	(5)		(9)
Distribution taxes	(2)		(4)
Convertible Senior Notes	(8)		(10)
Operating lease right-of-use assets	(29)		(30)

Total	$	(44)	$	(53)
Net deferred tax liability	$	(6)	$	(6)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. On December 31, 2020, the Company had net operating loss carryforwards (NOL’s) of $1,174 million, of which $1,085 million have no expiration date. The remaining losses expire on various dates through 2030. The Company also has $14 million of U.S. Research and Development Credit carry forwards, which expire on various dates through 2040.

The Company assesses all available evidence, both positive and negative, to determine the amount of any required valuation allowance. Valuation allowances have been established for the Company’s US, Sweden, China, France and Japan operations. Such allowances are provided against each entity’s net deferred tax assets, primarily NOL’s, due to a history of cumulative losses or changes to projected future earnings which would support the recognition of the net deferred tax assets.

The Company has recorded a deferred tax asset of $6 million and $7 million as of December 31, 2020 and 2019, respectively, and deferred tax liabilities of $12 million and $13 million as of December 31, 2020 and 2019, respectively in the Consolidated Balance Sheets.


(Dollars in millions)	As of December 31
Valuation Allowances Against Deferred Tax Assets	2020		2019
Allowances at beginning of year	$	179	$	125
Benefits reserved current year	133		102



Translation difference	11		(1)
Held for sale	—		(47)
Allowances at end of year	$	323	$	179

The Company has reserves for income taxes that represent the Company’s best estimate of the potential liability for tax exposures. Inherent uncertainties exist in estimates of tax exposures due to changes in tax law, both legislated and concluded through the various jurisdictions’ court systems. Any income tax liabilities resulting from operations prior to the legal date of separation, were settled with Former Parent on the last day Veoneer was part of the Autoliv group and were relieved through the Former Parent company investment.

The Company files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. Taxing jurisdictions significant to Veoneer include Canada, China, France, Germany, India, Japan, South Korea, Sweden and the U.S. Open tax years related to these taxing jurisdictions remain subject to examination and could result in additional tax liabilities. In general, the Company’s affiliates are no longer subject to income tax examinations by foreign tax authorities for years before 2014.

Since the Company’s operations were generally part of an existing Autoliv legal entity through April 1, 2018 or June 30, 2018 (depending on the jurisdiction), the existing Autoliv legal entity was the primary obligor and is responsible for handling any income tax audit and settling any audits with the taxing authority. For historic stand-alone Autoliv entities that were transferred to Veoneer, Autoliv had agreed to indemnify Veoneer for any taxes incurred for periods prior to April 1, 2018 subject to the terms of the Tax Matters Agreement. To the extent that the Company has accrued a liability for an uncertain tax position related to a period prior to the separation, such liabilities were settled with Former Parent on the last day the Company was part of the Former Parent’s group and were relieved through the Parent company investment.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in tax expense. As of December 31, 2020, the Company had recorded $7 million for unrecognized tax benefits. The total unrecognized tax benefits as of December 31, 2020 is classified as non-current tax payable included in Other Non-Current Liabilities in the Consolidated Balance Sheets.

Approximately $2 million of these reserves would impact income tax expense if released into income. The Company does not expect a change to its unrecognized tax benefits in the next twelve months.


(Dollars in millions)	As of December 31
Unrecognized Tax Benefits	2020		2019
Unrecognized tax benefits at beginning of year	$	4	$	2
Increases as a result of tax positions taken during the current period	3		2

Total unrecognized tax benefits at end of year	$	7	$	4

The Company's deferred tax liability for unremitted foreign earnings was $2 million as of December 31, 2020. The $2 million deferred tax liability represented our estimate of the foreign tax cost associated with our preliminary estimate of $32 million of