
For the Years Ended December 31,
(In millions of dollars)	2020		2019		2018
Income before income taxes:
U.S.	$	1,075	$	657	$	460
Other	1,718		1,782		1,784
	$	2,793	$	2,439	$	2,244

The expense (benefit) for income taxes is comprised of:

Current –
U.S. Federal	$	172	$	70	$	82
Other national governments	456		455		449
U.S. state and local	79		57		82
	707		582		613
Deferred –
U.S. Federal	40		69		(30)
Other national governments	(14)		(16)		(1)
U.S. state and local	14		31		(8)
	40		84		(39)
Total income taxes	$	747	$	666	$	574


December 31,
(In millions of dollars)	2020		2019
Deferred tax assets:
Accrued expenses not currently deductible	$	547	$	492
Differences related to non-U.S. operations (a)	294		324

Accrued U.S. retirement benefits	494		438
Net operating losses (b)	60		70
Income currently recognized for tax	25		19

Other	43		27
	$	1,463	$	1,370


Deferred tax liabilities:

Differences related to non-U.S. operations	$	569	$	400
Depreciation and amortization	491		594
Accrued retirement & postretirement benefits - non-U.S. operations	143		151
Capitalized expenses currently recognized for tax	87		77
Other	32		37
	$	1,322	$	1,259

The amount of cumulative undistributed earnings that are indefinitely reinvested in non-U.S. subsidiaries is approximately $700 million as of December 31, 2020. While no additional U.S. federal income tax would be required if such earnings were repatriated, additional state and withholding taxes would apply. The amount of these additional taxes is estimated to be approximately $60 million.

Future U.S. federal tax costs related to basis differences in Non-U.S. subsidiaries would primarily be realized through the U.S. GILTI tax regime. The Company elected to recognize GILTI tax costs as a period cost and therefore, has not provided deferred tax liabilities on these basis differences.


For the Years Ended December 31,	2020		2019		2018
U.S. Federal statutory rate	21.0	%	21.0	%	21.0	%
U.S. state and local income taxes—net of U.S. Federal income tax benefit	2.5		3.0		2.3
Differences related to non-U.S. operations	2.3		3.0		3.3
U.S. Tax Reform	—		—		(0.3)
Equity compensation	(1.4)		(1.3)		(1.0)
Uncertain Tax Positions	1.1		—		—
Other	1.2		1.6		0.3
Effective tax rate	26.7	%	27.3	%	25.6	%

The Company’s consolidated effective tax rate was 26.7%, 27.3% and 25.6% in 2020, 2019 and 2018, respectively. The rates in all periods reflect the effects of tax planning and the ongoing impact of the Tax Cuts and Jobs Act ("TCJA"), including regulatory and other guidance as it became available. The tax rate in 2020 includes a valuation allowance for certain tax credits, the impact of uncertain tax positions, and certain tax planning benefits. The 2019 rate includes certain tax costs related to JLT integration and restructuring activity. The 2018 rate includes the effect of a charge related to the Company’s investment in Alexander Forbes.

A valuation allowance was recorded to adjust deferred tax assets to the amount that the Company believes is more likely than not to be realized. Valuation allowances had net increases of $72 million, $60 million and $36 million in 2020, 2019 and 2018, respectively. Adjustments of the beginning of the year balances of valuation allowances decreased income tax expense by $14 million during 2020. There was no change to income tax expense as a result of adjustments of the beginning of the year valuation allowances in 2019, while in 2018 changes to the beginning of year valuation allowance increased income tax expense by $1 million. Approximately 58% of the Company’s net operating loss carryforwards expire from 2021 through 2037, and others are unlimited. The potential tax benefit from net operating loss carryforwards at the end of 2020 comprised federal, state and local, and non-U.S. tax benefits of $24 million, $25 million, and $94 million, respectively, before reduction for valuation allowances.


(In millions of dollars)	2020		2019		2018
Balance at January 1,	$	86	$	78	$	71
Additions, based on tax positions related to current year	9		8		6
Additions for tax positions of prior years	25		15		6
Reductions for tax positions of prior years	(9)		(1)		—

Settlements	(4)		(1)		(2)
Lapses in statutes of limitation	(9)		(13)		(3)
Balance at December 31,	$	98	$	86	$	78

Of the total unrecognized tax benefits at December 31, 2020, 2019 and 2018, $90 million, $75 million and $64 million, respectively, represent the amount that, if recognized, would favorably affect the effective tax rate in any future periods. The total gross amount of accrued interest and penalties at December 31, 2020, 2019 and 2018, before any applicable federal benefit, was $40 million, $31 million and $15 million, respectively.

The Company is routinely examined by the jurisdictions in which it has significant operations. In the U.S. federal jurisdiction, the Company participates in the Internal Revenue Service’s (IRS) Compliance Assurance Process (CAP), which is structured to be, in effect, a real-time audit. The IRS is currently examining the Company’s 2017, 2018 and 2019 tax returns. The Company was accepted into the Bridge phase of the CAP process for tax year 2020.

New York is a significant tax jurisdiction for the Company. During 2019, New York State initiated an audit for the 2015 tax year; and during 2020 included the 2016 tax year. During 2020, New York City initiated an audit for tax years 2016 through 2018. During 2018, New York State and New York City closed the examination of tax years 2007 through 2009. In addition, New York State and New York City have continuing examinations underway for various entities covering the years 2010 through 2014.


Tax Audit (Years)
Jurisdiction:	Initiated in 2020	Ongoing	Concluded
Canada	2017, 2019-2020	2018	2013-2016 during 2019
France		2017-2018	2011, 2012 during 2018
Germany	2015-2018	2013-2016	2009-2012 during 2018
Italy	2017	2015-2016
Singapore	2018	2018	2016, 2017 during 2020
United Kingdom	2018	2016-2017	2014, 2015 during 2018

The Company has established liabilities for uncertain tax positions in relation to potential assessments in the jurisdictions in which it operates. The Company believes the resolution of tax matters will not have a material effect on the consolidated financial position of the Company, although a resolution of tax matters could have a material impact on the Company's net income or cash flows and on its effective tax rate in a particular future period. It is reasonably possible that the total amount of unrecognized tax benefits will decrease between zero and approximately $33 million within the next twelve months due to settlement of audits and expiration of statutes of limitation.