Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate and consisted of the following significant components (in millions):

	2023		2022		2021
Income tax provision (benefit) at statutory rate	$	711	$	208	$	(537)
State income tax provision (benefit), net of federal income tax benefit	46		13		(34)
Nondeductible employee meals	15		12		7
Nondeductible transportation fringe benefit	13		10		8
Valuation allowance	(21)		(10)		(38)
Other, net	5		20		1
Income tax expense (benefit)	$	769	$	253	$	(593)
Current	$	13	$	5	$	(10)
Deferred	756		248		(583)
Income tax expense (benefit)	$	769	$	253	$	(593)

Temporary differences and carryforwards that give rise to deferred tax assets and liabilities at December 31, 2023 and 2022 were as follows (in millions):

	UAL				United
	2023		2022		2023		2022
Deferred income tax asset (liability):
Federal and state net operating loss ("NOL") carryforwards	$	2,644	$	2,932	$	2,616	$	2,903
Deferred revenue	1,845		1,783		1,845		1,783
Employee benefits, including pension, postretirement and medical	695		606		695		606
Operating lease liabilities	1,134		1,118		1,134		1,118
Other financial liabilities	414		141		414		141
Interest expense carryforward	579		510		579		510
Other	575		576		575		576
Less: Valuation allowance	(179)		(199)		(179)		(199)
Total deferred tax assets	$	7,707	$	7,467	$	7,679	$	7,438
Depreciation	$	(6,782)	$	(5,844)	$	(6,782)	$	(5,844)
Operating lease right-of-use asset	(887)		(881)		(887)		(881)
Intangibles	(632)		(651)		(632)		(651)
Total deferred tax liabilities	$	(8,301)	$	(7,376)	$	(8,301)	$	(7,376)
Net deferred tax asset (liability)	$	(594)	$	91	$	(622)	$	62

United and its domestic consolidated subsidiaries file a consolidated federal income tax return with UAL. Under an intercompany tax allocation policy, United and its subsidiaries compute, record and pay UAL for their own tax liabilities as if they were separate companies filing separate returns. In determining their own tax liabilities, United and each of its subsidiaries take into account all tax credits or benefits generated and utilized as separate companies and they are each compensated for the aforementioned tax benefits on an annual basis.

The Company's federal and state NOL and tax credit carryforwards relate to current and prior years' NOLs and credits, which may be used to reduce tax liabilities in future years. These tax benefits are mostly attributable to federal pre-tax NOL carryforwards of $12.0 billion ($2.5 billion tax effected) for UAL. If not utilized these federal pre-tax NOLs will expire as follows (in billions): $0.2 in 2029 and $0.2 in 2033. The remaining $11.6 billion of NOLs has no expiration date. State pre-tax NOLs of $3.4 billion ($0.2 billion tax effected) expire over a 1 to 20-year period. Federal tax credits of $50 million will expire over a 1 to 20-year period and state tax credits of $56 million will expire over a 1 to 15-year period.

As of December 31, 2023, the Company has recorded $150 million of valuation allowance against its capital loss deferred tax assets. Capital losses have a limited carryforward period of five years, and they can be utilized only to the extent of capital gains. The Company does not anticipate generating sufficient capital gains to utilize the losses before they expire, therefore, a valuation allowance is necessary as of December 31, 2023. Additionally, the Company recorded a valuation allowance of $29 million on certain state deferred tax assets primarily due to state NOLs that have short expiration periods.

The Company's unrecognized tax benefits related to uncertain tax positions were $66 million, $58 million and $55 million at December 31, 2023, 2022 and 2021, respectively. All of the uncertain tax positions would affect the Company's effective tax rate if recognized. The changes in unrecognized tax benefits relating to settlements with taxing authorities, unrecognized tax benefits as a result of tax positions taken during a prior period and unrecognized tax benefits relating from a lapse of the statute of limitations were immaterial during 2023, 2022 and 2021. The Company does not expect significant increases or decreases in their unrecognized tax benefits within the next 12 months. There are no material amounts included in the balance at December 31, 2023 for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

The Company's federal income tax returns for tax years after 2002 remain subject to examination by the Internal Revenue Service (the "IRS") and state taxing jurisdictions.