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Income Taxes
 3 Months Ended
Mar. 31, 2020
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 March 31,
 
 
2020
 
2019
Tax at statutory rate:
 
$
(331
)
 
21.0
%
 
$
182

 
21.0
 %
Increase (decrease) resulting from:
 
 

 
 

 
 

 
 

Tax-exempt income from municipal bonds
 
(5
)
 
0.3

 
(5
)
 
(0.6
)
Dividend received exclusion
 
(4
)
 
0.3

 
(4
)
 
(0.5
)
Other
 
(10
)
 
0.6

 
(1
)
 
(0.1
)
Provision (benefit) for income taxes
 
$
(350
)
 
22.2
%
 
$
172

 
19.8
 %
 
 
 
 
 
 
 
 
 

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

We continue to believe that after considering all positive and negative evidence of taxable income in the carryback and carryforward periods as permitted by law, we believe it is more likely than not that all of the deferred tax assets on our U.S. domestic operations will be realized. As a result, we have no valuation allowance for our U.S. domestic operations as of March 31, 2020 and December 31, 2019. As more fully discussed below, we do carry a valuation allowance on the deferred tax assets related to Cincinnati Global.

During the first quarter of 2020, the IRS notified us they would be expanding their audit of tax year 2017 to include the tax year ended December 31, 2018.

In response to the novel coronavirus (SARS-CoV-2 or COVID-19), as more fully discussed in Note 1, Accounting Policies, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law on March 27, 2020. We are currently evaluating the CARES Act, but at the present time, believe any impact to our financial statements will be immaterial.

Unrecognized Tax Benefits
As of March 31, 2020 and December 31, 2019, we had a gross unrecognized tax benefit of $34 million. There were no changes to this amount during the first quarter of 2020. It is reasonably possible that within the next 12 months, our unrecognized tax benefit could change when the IRS completes its examination of the tax year ended December 31, 2018.

Cincinnati Global
As a result of operations for the three months ended March 31, 2020, Cincinnati Global had a $6 million reduction to their net deferred tax assets with an offsetting $6 million reduction to their valuation allowance. As of March 31, 2020, Cincinnati Global had a net deferred tax asset of $35 million and an offsetting valuation allowance of $35 million.

Deferred tax assets are 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 continue to believe it is appropriate to carry a valuation allowance as of March 31, 2020.

As of March 31, 2020, Cincinnati Global had operating loss carryforwards of $118 million in the United Kingdom. These Cincinnati Global losses can only be utilized within the Cincinnati Global group in the United Kingdom and cannot offset the income of our CFC group domestic operations in the United States. Other than the Cincinnati Global loss carryforwards, we had no other operating or capital loss carryforwards as of March 31, 2020.