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Income Taxes
 9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The differences between the 21% statutory federal income tax rate and our effective income tax rate were as follows:
(Dollars in millions)
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Tax at statutory rate:
 
$
62

 
21.0
 %
 
$
130

 
21.0
 %
 
$
355

 
21.0
 %
 
$
175

 
21.0
 %
Increase (decrease) resulting from:
 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Tax-exempt income from municipal bonds
 
(5
)
 
(1.7
)
 
(5
)
 
(0.8
)
 
(14
)
 
(0.8
)
 
(15
)
 
(1.8
)
Dividend received exclusion
 
(3
)
 
(1.0
)
 
(3
)
 
(0.5
)
 
(11
)
 
(0.7
)
 
(11
)
 
(1.3
)
Tax accounting method changes
 
—

 
—

 
(50
)
 
(8.1
)
 
—

 
—

 
(50
)
 
(6.0
)
Other
 
(8
)
 
(2.7
)
 
(7
)
 
(1.1
)
 
(10
)
 
(0.6
)
 
(6
)
 
(0.7
)
Provision for income taxes
 
$
46

 
15.6
 %
 
$
65

 
10.5
 %
 
$
320

 
18.9
 %
 
$
93

 
11.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
The provision for federal income taxes is based upon filing a consolidated income tax return for the company and its subsidiaries.

During the third quarter of 2018, we received approval from the IRS to change our method of tax accounting for certain items applicable for the 2017 tax year and tax return, primarily related to the valuation of our tax base unpaid losses. We recognized a benefit in the third quarter 2018 provision for income taxes for the difference between the current tax rate and the 2017 tax rate for the related items. This reduced our effective tax rate by
8.1% and 6.0% for the three months and nine months ended September 30, 2018, respectively.
During third quarter of 2019, the IRS notified us they would be examining the tax year ended December 31, 2017.

Unrecognized Tax Benefits
As of September 30, 2019 and December 31, 2018, we had a gross unrecognized tax benefit of $34 million. There were no changes to this amount during the first nine months ended 2019.

Acquisition of Cincinnati Global
As more fully discussed in Note 1, Accounting Policies and Note 14, Acquisition, we closed on the acquisition of Cincinnati Global during the first quarter of 2019. As a result of this acquisition, $59 million of net deferred tax assets were acquired or established at the acquisition date with an offsetting valuation allowance of $55 million.

As a result of operations for the nine months ended September 30, 2019, Cincinnati Global had $44 million of net deferred tax assets with an offsetting valuation allowance of $43 million.

Accounting guidance requires deferred tax assets to be reduced by a valuation allowance when management believes it is more likely than not that some, or all, of the deferred tax assets will not be realized. After considering all positive and negative evidence related to the Cincinnati Global operations, we believe it was appropriate to set up a valuation allowance for purposes of our opening Cincinnati Global balance sheet.

As of September 30, 2019, Cincinnati Global had operating loss carryforwards of $161 million which are subject to certain limitations. These Cincinnati Global losses can only be utilized within the Cincinnati Global group and cannot offset the income of our CFC group. Other than the Cincinnati Global loss carryforwards, we had no other operating or capital loss carryforwards as of September 30, 2019.