Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Line Items]

Income Taxes

Income Taxes

The significant components of the income tax provision (benefit) were (in millions):

	Year Ended December 31,
	2020		2019		2018
Current income tax provision (benefit):
State and Local	$	—	$	2	$	3
Foreign	—		8		29
Current income tax provision (benefit)	—		10		32
Deferred income tax provision (benefit):
Federal	(2,335)		498		390
State and Local	(233)		62		50
Deferred income tax provision (benefit)	(2,568)		560		440
Total income tax provision (benefit)	$	(2,568)	$	570	$	472

 The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate as follows (in millions):

	Year Ended December 31,
	2020		2019		2018
Statutory income tax provision (benefit)	$	(2,405)	$	474	$	396
State income tax provision (benefit), net of federal tax effect	(183)		47		44
Book expenses not deductible for tax purposes	22		31		12
Foreign income taxes, net of federal tax effect	—		8		23
Change in valuation allowance	—		4		(6)
Other, net	(2)		6		3
Income tax provision (benefit)	$	(2,568)	$	570	$	472

The components of our deferred tax assets and liabilities were (in millions):

	December 31,
	2020		2019
Deferred tax assets:
Operating loss carryforwards and other credits	$	4,027	$	2,103
Loyalty program liability	1,977		1,755
Leases	1,913		2,077
Pensions	1,405		1,229
Postretirement benefits other than pensions	203		145
Rent expense	96		126
Reorganization items	28		30
Alternative minimum tax (AMT) credit carryforwards	—		90
Other	847		613
Total deferred tax assets	10,496		8,168
Valuation allowance	(34)		(34)
Net deferred tax assets	10,462		8,134
Deferred tax liabilities:
Accelerated depreciation and amortization	(5,028)		(5,196)
Leases	(1,818)		(1,979)
Other	(386)		(343)
Total deferred tax liabilities	(7,232)		(7,518)
Net deferred tax asset	$	3,230	$	616

At December 31, 2020, we had approximately $16.5 billion of federal net operating losses (NOLs) available to reduce future federal taxable income, of which $8.5 billion will expire beginning in 2023 if unused and $8.0 billion can be carried forward indefinitely (NOL Carryforwards). We also had approximately $5.0 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2020, which will expire in taxable years 2020 through 2040 if unused.

Our ability to use our NOL Carryforwards depends on the amount of taxable income generated in future periods. We provide a valuation allowance for our deferred tax assets, which include our NOLs, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand. We presently have a $34 million valuation allowance on certain net deferred tax assets related to state NOL Carryforwards. There can be no assurance that an additional valuation allowance on our net deferred tax assets will not be required. Such valuation allowance could be material.

Our ability to deduct our NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred. Substantially all of our remaining federal NOL Carryforwards attributable to US Airways Group are subject to limitation under Section 382; however, our ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation. Similar limitations may apply for state income tax purposes. Our ability to utilize any new NOL Carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another ownership change occurs. Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three-year period can potentially limit our future use of NOLs and tax credits.

At December 31, 2019, we had an AMT credit carryforward of approximately $170 million available for federal income tax purposes, which was fully refunded in 2020 as a result of the CARES Act.

In 2020, we recorded an income tax benefit of $2.6 billion, with an effective rate of approximately 22%, which was substantially non-cash. Substantially all of our income before income taxes is attributable to the United States.

We file our tax returns as prescribed by the tax laws of the jurisdictions in which we operate. Our 2017 through 2019 tax years are still subject to examination by the Internal Revenue Service. Various state and foreign jurisdiction tax years remain open to examination and we are under examination, in administrative appeals, or engaged in tax litigation in certain jurisdictions. We believe that the effect of any assessments will not be material to our consolidated financial statements.

The amount of, and changes to, our uncertain tax positions were not material in any of the years presented. We accrue interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively.

American Airlines, Inc.

Income Taxes [Line Items]

Income Taxes

Income Taxes

The significant components of the income tax provision (benefit) were (in millions):

	Year Ended December 31,
	2020		2019		2018
Current income tax provision (benefit):
State and Local	$	—	$	2	$	3
Foreign	—		8		28
Current income tax provision (benefit)	—		10		31
Deferred income tax provision (benefit):
Federal	(2,224)		567		453
State and Local	(229)		56		50
Deferred income tax provision (benefit)	(2,453)		623		503
Total income tax provision (benefit)	$	(2,453)	$	633	$	534

The income tax provision (benefit) differed from amounts computed at the statutory federal income tax rate as follows (in millions):

	Year Ended December 31,
	2020		2019		2018
Statutory income tax provision (benefit)	$	(2,290)	$	547	$	460
State income tax provision (benefit), net of federal tax effect	(181)		41		46
Book expenses not deductible for tax purposes	20		29		10
Foreign income taxes, net of federal tax effect	—		8		22
Change in valuation allowance	—		5		(6)
Other, net	(2)		3		2
Income tax provision (benefit)	$	(2,453)	$	633	$	534

The components of American’s deferred tax assets and liabilities were (in millions):

	December 31,
	2020		2019
Deferred tax assets:
Operating loss carryforwards and other credits	$	3,944	$	2,115
Loyalty program liability	1,977		1,755
Leases	1,904		2,067
Pensions	1,397		1,219
Postretirement benefits other than pensions	203		145
Rent expense	96		126
Reorganization items	28		30
Alternative minimum tax (AMT) credit carryforwards	—		118
Other	796		569
Total deferred tax assets	10,345		8,144
Valuation allowance	(24)		(24)
Net deferred tax assets	10,321		8,120
Deferred tax liabilities:
Accelerated depreciation and amortization	(4,992)		(5,153)
Leases	(1,809)		(1,968)
Other	(294)		(340)
Total deferred tax liabilities	(7,095)		(7,461)
Net deferred tax asset	$	3,226	$	659

At December 31, 2020, American had approximately $16.5 billion of federal net operating losses (NOLs) available to reduce future federal taxable income, of which $8.9 billion will expire beginning in 2023 if unused and $7.6 billion can be carried forward indefinitely (NOL Carryforwards). American is a member of AAG’s consolidated federal and certain state income tax returns. American also had approximately $5.0 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2020, which will expire in taxable years 2020 through 2040 if unused.

American’s ability to use its NOL Carryforwards depends on the amount of taxable income generated in future periods. American provides a valuation allowance for its deferred tax assets, which include the NOLs, when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. American considers all available positive and negative evidence and makes certain assumptions in evaluating the realizability of its deferred tax assets. Many factors are considered that impact American’s assessment of future profitability, including conditions which are beyond its control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand. American presently has a $24 million valuation allowance on certain net deferred tax assets related to state NOL Carryforwards. There can be no assurance that an additional valuation allowance on American’s net deferred tax assets will not be required. Such valuation allowance could be material.

American’s ability to deduct its NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred. Substantially all of American’s remaining federal NOL Carryforwards attributable to US Airways Group are subject to limitation under Section 382; however, American’s ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation. Similar limitations may apply for state income tax purposes. American’s ability to utilize any new NOL Carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another ownership change occurs. Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three-year period can potentially limit American’s future use of NOLs and tax credits.

At December 31, 2019, American had an AMT credit carryforward of approximately $226 million available for federal income tax purposes, which was fully refunded in 2020 as a result of the CARES Act.

In 2020, American recorded an income tax benefit of $2.5 billion, with an effective rate of approximately 22%, which was substantially non-cash. Substantially all of American’s income before income taxes is attributable to the United States.

American files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. American’s 2017 through 2019 tax years are still subject to examination by the Internal Revenue Service. Various state and foreign jurisdiction tax years remain open to examination and American is under examination, in administrative appeals, or engaged in tax litigation in certain jurisdictions. American believes that the effect of any assessments will not be material to its consolidated financial statements.

The amount of, and changes to, American’s uncertain tax positions were not material in any of the years presented. American accrues interest and penalties related to unrecognized tax benefits in interest expense and operating expense, respectively.