Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Components of income tax expense

The components of income tax expense for the years ended December 31 included in the Consolidated Statements of Income were as follows:

(Millions)	2020		2019		2018
Current income tax expense:
U.S. federal	$	1,122	$	1,108	$	70
U.S. state and local	339		276		150
Non-U.S.	639		437		681
Total current income tax expense	2,100		1,821		901
Deferred income tax (benefit) expense:
U.S. federal	(931)		(58)		276
U.S. state and local	(119)		(31)		78
Non-U.S.	111		(62)		(54)
Total deferred income tax (benefit) expense	(939)		(151)		300
Total income tax expense	$	1,161	$	1,670	$	1,201

Effective income tax rate

A reconciliation of the U.S. federal statutory rate of 21 percent as of December 31, 2020, 2019 and 2018, to our actual income tax rate was as follows:

	2020		2019		2018
U.S. statutory federal income tax rate	21.0	%	21.0	%	21.0	%
(Decrease) increase in taxes resulting from:
Tax-exempt income	(4.1)		(1.9)		(1.7)
State and local income taxes, net of federal benefit	3.7		2.8		2.8
Non-U.S. subsidiaries' earnings	2.4		(0.5)		(1.0)
Tax settlements(a)	(0.3)		(0.3)		(1.9)
U.S. Tax Act and related adjustments(b)	—		—		(4.3)
Valuation allowances	4.0		(0.2)		0.5
Other	0.3		(1.1)		(0.6)
Actual tax rates	27.0	%	19.8	%	14.8	%

(a)2018 primarily included a settlement of the IRS examination for tax years 2008-2014, as well as the resolution of certain tax matters in various jurisdictions.

(b)2018 included changes to the tax method of accounting for certain expenses and adjustments to the 2017 provisional Tax Act charge.

Components of deferred tax assets and liabilities

The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:

(Millions)	2020		2019
Deferred tax assets:
Reserves not yet deducted for tax purposes	$	3,905	$	2,633
Employee compensation and benefits	383		365
Net operating loss and tax credit carryforwards	399		119
Other	765		417
Gross deferred tax assets	5,452		3,534
Valuation allowance	(418)		(66)
Deferred tax assets after valuation allowance	5,034		3,468
Deferred tax liabilities:
Intangibles and fixed assets	1,433		1,279
Deferred revenue	252		315
Deferred interest	148		162
Investment in joint ventures	135		122
Other	366		129
Gross deferred tax liabilities	2,334		2,007
Net deferred tax assets	$	2,700	$	1,461

Changes in unrecognized tax benefits

The following table presents changes in unrecognized tax benefits:

(Millions)	2020		2019		2018
Balance, January 1	$	726	$	701	$	821
Increases:
Current year tax positions	57		66		152
Tax positions related to prior years	105		78		47
Effects of foreign currency translations	—		10		—
Decreases:
Tax positions related to prior years	(24)		(14)		(74)
Settlements with tax authorities(a)	(15)		(40)		(192)
Lapse of statute of limitations	(58)		(75)		(44)
Effects of foreign currency translations	(1)		—		(9)
Balance, December 31	$	790	$	726	$	701

(a)2018 included a settlement of the IRS examination for tax years 2008-2014 and the resolution of certain tax matters in various jurisdictions.