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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

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


(Millions)	2021		2020		2019
Current income tax expense:
U.S. federal	$	1,656	$	1,122	$	1,108
U.S. state and local	351		339		276
Non-U.S.	328		639		437
Total current income tax expense	2,335		2,100		1,821
Deferred income tax (benefit) expense:
U.S. federal	231		(931)		(58)
U.S. state and local	22		(119)		(31)
Non-U.S.	41		111		(62)
Total deferred income tax (benefit) expense	294		(939)		(151)
Total income tax expense	$	2,629	$	1,161	$	1,670

Effective income tax rate

A reconciliation of the U.S. federal statutory rate of 21 percent as of December 31, 2021, 2020 and 2019, to our actual income tax rate was as follows:


	2021		2020		2019
U.S. statutory federal income tax rate	21.0	%	21.0	%	21.0	%
(Decrease) increase in taxes resulting from:
Tax credits and tax-exempt income (a)	(0.1)		(4.1)		(1.9)
State and local income taxes, net of federal benefit	3.0		3.7		2.8
Non-U.S. subsidiaries' earnings	1.1		2.4		(0.5)
Tax settlements	(0.1)		(0.3)		(0.3)


Valuation allowances	—		4.0		(0.2)
Other	(0.3)		0.3		(1.1)
Actual tax rates	24.6	%	27.0	%	19.8	%

(a)Includes the implementation of PAM related to investments in QAH projects for the year ended December 31, 2021. Refer to Note 1 for further information.

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)	2021		2020
Deferred tax assets:
Reserves not yet deducted for tax purposes	$	3,637	$	3,905
Employee compensation and benefits	359		383
Net operating loss and tax credit carryforwards	398		399
Other	809		765
Gross deferred tax assets	5,203		5,452
Valuation allowance	(472)		(418)
Deferred tax assets after valuation allowance	4,731		5,034
Deferred tax liabilities:
Intangibles and fixed assets	1,320		1,433
Deferred revenue	189		252
Deferred interest	133		148
Investment in joint ventures	183		135
Other	521		366
Gross deferred tax liabilities	2,346		2,334
Net deferred tax assets	$	2,385	$	2,700

Changes in unrecognized tax benefits

The following table presents changes in unrecognized tax benefits:


(Millions)	2021		2020		2019
Balance, January 1	$	790	$	726	$	701
Increases:
Current year tax positions	64		57		66
Tax positions related to prior years	225		105		78
Effects of foreign currency translations	—		—		10
Decreases:
Tax positions related to prior years	(14)		(24)		(14)
Settlements with tax authorities	(15)		(15)		(40)
Lapse of statute of limitations	(17)		(58)		(75)
Effects of foreign currency translations	(9)		(1)		—
Balance, December 31	$	1,024	$	790	$	726