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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Taxes [Abstract]  
Income Taxes Income Taxes
The components of income before income taxes were (in millions):
Year Ended December 31,
202120202019
Domestic$845.9 $711.1 $913.1 
International1,142.9 698.2 1,025.2 
 $1,988.8 $1,409.3 $1,938.3 
Income tax expense (benefit) was (in millions):
Year Ended December 31,
202120202019
Current:   
U.S. federal$144.0 $172.2 $180.2 
U.S. state and local16.5 39.5 33.9 
International303.9 189.1 306.9 
 464.4 400.8 521.0 
Deferred:   
U.S. federal40.0 (17.4)19.1 
U.S. state and local(11.6)(6.1)(22.5)
International(4.1)4.4 (13.2)
 24.3 (19.1)(16.6)
 $488.7 $381.7 $504.4 
The reconciliation from the statutory U.S. federal income tax rate to our effective tax rate is:
Year Ended December 31,
202120202019
Statutory U.S. federal income tax rate21.0 %21.0 %21.0 %
U.S. state and local income taxes, net of U.S. federal income tax benefit0.2 2.2 0.5 
Impact of foreign operations3.6 3.4 4.5 
Other(0.2)0.5 — 
Effective tax rate24.6 %27.1 %26.0 %
Our effective tax rate for 2021 decreased year-over-year to 24.6% from 27.1%. In connection with the sale of ICON in the second quarter of 2021, we recorded a pre-tax gain of $50.5 million. The lower effective tax rate for 2021 was predominantly the result of $32.8 million of favorable settlements of uncertain tax positions in certain domestic jurisdictions, as well as a nominal tax applied against the book gain on the sale of ICON resulting from excess tax over book basis. The effective tax rate for 2020 reflects an increase due to the non-deductibility in certain jurisdictions of a portion of the COVID-19 repositioning charges recorded in the second quarter of 2020.
The Tax Cuts and Jobs Act of 2017, or the Tax Act, imposed a one-time tax, the transition tax, on the accumulated earnings of foreign subsidiaries. At December 31, 2021 and 2020, the remaining transition tax liability was $100.4 million and $112.0 million, respectively. The transition tax is expected to be fully paid by 2026. The Tax Act also implemented a territorial tax system that allows us to repatriate earnings of our foreign subsidiaries without incurring additional U.S. tax by providing a 100% dividend exemption. While a territorial tax system limits U.S. federal income tax to domestic source income, foreign source income is subject to tax in the appropriate foreign jurisdiction at the local rate, which in certain jurisdictions may be higher than the U.S. federal statutory income tax rate of 21%. Therefore, the foreign tax rate differential will cause our effective tax rate to be higher than the U.S. federal statutory income tax rate. The international tax rate differentials in 2021 and 2020 are primarily attributed to our earnings in Germany, Australia, France, Japan and Brazil being taxed at higher rates than the U.S. statutory tax rate.
We have elected to account for any tax on the global intangible low-taxed income, or GILTI, in the period in which it is incurred. In 2021 and 2020, we provided $8.8 million and $3.0 million, respectively, for tax impacts of GILTI.
Income tax expense in 2021, 2020 and 2019 includes $2.1 million, $3.8 million and $2.2 million, respectively, of interest, net of tax benefit, and penalties related to tax positions taken on our tax returns that have not been settled as of December 31, 2021. At December 31, 2021 and 2020, accrued interest and penalties were $10.7 million and $23.5 million, respectively.
The components of deferred tax assets and liabilities and balance sheet classification were (in millions):
December 31,
20212020
Deferred tax assets:  
Compensation$223.8 $236.5 
Tax loss and credit carryforwards81.4 67.0 
Basis differences from acquisitions29.9 20.8 
Basis differences from short-term assets and liabilities15.5 34.4 
Other(14.2)(5.8)
Deferred tax assets336.4 352.9 
Valuation allowance(18.0)(15.9)
Net deferred tax assets$318.4 $337.0 
Deferred tax liabilities:  
Goodwill and intangible assets$640.1 $611.1 
Unremitted foreign earnings76.6 91.9 
Basis differences from investments6.5 (1.1)
Financial instruments0.8 0.8 
Deferred tax liabilities$724.0 $702.7 
Long-term deferred tax assets$71.7 $77.8 
Long-term deferred tax liabilities$477.3 $443.5 
We have concluded that it is more likely than not that we will be able to realize our net deferred tax assets in future periods because results of future operations are expected to generate sufficient taxable income. The valuation allowance of $18.0 million and $15.9 million at December 31, 2021 and 2020, respectively, relates to tax losses and tax credit carryforwards in the U.S. and in international jurisdictions. Tax loss and credit carryforwards for which there is no valuation allowance are available for periods ranging from 2022 to 2041, which is longer than the forecasted utilization of such carryforwards.
A reconciliation of our unrecognized tax benefits is (in millions):
December 31,
20212020
January 1$182.9 $206.8 
Additions:  
Current year tax positions4.4 3.9 
Prior year tax positions1.7 2.8 
Reduction of prior year tax positions(12.1)(26.1)
Settlements(13.6)(2.5)
Foreign currency translation(0.5)(2.0)
December 31$162.8 $182.9 
The majority of the liability for uncertain tax positions is recorded in long-term liabilities. At December 31, 2021 and 2020, approximately $157.3 million and $174.0 million, respectively, of the liability for uncertain tax positions would affect our effective tax rate upon resolution of the uncertain tax positions.
We file a consolidated U.S. federal income tax return and income tax returns in various state and local jurisdictions. Our subsidiaries file tax returns in various foreign jurisdictions. Our principal foreign jurisdictions include the United Kingdom, France and Germany. The Internal Revenue Service has completed its examination of our U.S. federal tax returns through 2017. Tax returns in the United Kingdom, France and Germany have been examined through 2018, 2017 and 2009, respectively.