
	For the Year Ended December 31,
	2020		2019		2018
	(In millions)
Current income taxes:
Federal	$	(2)	$	1	$	(1)
State	—		—		—
Foreign	178		659		895
	176		660		894
Deferred income taxes:
Federal	—		67		(65)
State	—		—		2
Foreign	(112)		(53)		(159)
	(112)		14		(222)
Total	$	64	$	674	$	672

The total income tax provision differs from the amounts computed by applying the U.S. statutory income tax rate to income (loss) before income taxes. A reconciliation of the tax on the Company’s income (loss) before income taxes and total tax expense is shown below:


	For the Year Ended December 31,
	2020		2019		2018
	(In millions)
Income tax expense (benefit) at U.S. statutory rate	$	(1,016)	$	(631)	$	201
State income tax, less federal effect(1)	—		1		2
Taxes related to foreign operations	97		328		436
Tax credits	(13)		(6)		(13)

Tax on deemed repatriation of foreign earnings	—		—		103
Foreign tax credits	—		—		(336)


Change in U.S. tax rate	—		—		161
Net change in tax contingencies	1		1		(2)
Goodwill impairment	35		—		—
Sale of North Sea assets	—		—		(30)
Valuation allowances(1)	965		972		118
All other, net	(5)		9		32
	$	64	$	674	$	672

The net deferred income tax liability reflects the net tax impact of temporary differences between the asset and liability amounts carried on the balance sheet under GAAP and amounts utilized for income tax purposes. The net deferred income tax liability consists of the following as of December 31:


	2020		2019
	(In millions)
Deferred tax assets:

U.S. and state net operating losses	$	2,306	$	2,108
Capital losses	633		626

Tax credits and other tax incentives	33		32
Foreign tax credits	2,241		2,241
Accrued expenses and liabilities	93		97
Asset retirement obligation	654		618
Property & equipment	261		—
Investment in Altus Midstream LP	76		107
Net interest expense limitation	252		162
Lease liability	79		108
Other	1		88
Total deferred tax assets	6,629		6,187
Valuation allowance	(5,991)		(4,959)
Net deferred tax assets	638		1,228
Deferred tax liabilities:
Deferred income	—		1

Equity investments	4		—

Property and equipment	750		1,432
Right-of-use asset	74		106
Other	13		6
Total deferred tax liabilities	841		1,545
Net deferred income tax liability	$	203	$	317

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118) which provides guidance for the application of ASC Topic 740, Income Taxes, for the income tax effects of the Tax Cuts and Jobs Act (the TCJA). SAB 118 provides a measurement period which should not extend beyond 1 year of the enactment date of the TCJA. In 2018, the Company recorded an additional $103 million deferred tax expense attributable to the deemed repatriation of foreign earnings. This deferred tax expense combined with the provisional amount recorded in 2017 were fully offset by available foreign tax credits. The Company completed its analysis of the income tax effects of the TCJA in the fourth quarter of 2018.

The Company has recorded an increase in valuation allowance against certain deferred tax assets, primarily driven by asset impairments. The Company has assessed the future potential to realize these deferred tax assets and has concluded that it is more likely than not that these deferred tax assets will not be realized based on current economic conditions and expectations for the future.

The Company has a U.S. net operating loss carryforward of $8.9 billion, which includes $186 million of net operating loss subject to annual limitation under Section 382 of the Internal Revenue Code (Code). Net operating losses generated in tax years beginning after 2017 are subject to an 80 percent taxable income limitation with indefinite carryover under the TCJA. The Company also has a net interest expense carryover of $1.1 billion under Section 163(j) of the Code subject to indefinite carryover, a U.S. capital loss carryforward of $1.8 billion, which has a five year carryover period expiring in 2023 and a Canadian capital loss carryforward of $836 million which has an indefinite carryover. The Company has recorded a full valuation allowance against the U.S. net operating losses, the state net operating losses, the net interest expense carryover, the U.S. capital loss, and the Canadian capital loss carryforward because it is more likely than not that these attributes will not be realized.

The Company has a $2.2 billion U.S. foreign tax credit carryforward. The Company has recorded a full valuation allowance against the U.S. foreign tax credits listed above because it is more likely than not that these attributes will expire unutilized.

The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” which prescribes a minimum recognition threshold a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2020		2019		2018
	(In millions)
Balance at beginning of year	$	82	$	24	$	26
Additions based on tax positions related to prior year	—		49		—
Additions based on tax positions related to the current year	11		9		—
Reductions for tax positions of prior years	—		—		(2)
Balance at end of year	$	93	$	82	$	24

The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. Each quarter, the Company assesses the amounts provided for and, as a result, may increase or reduce the amount of interest and penalties. During each of the years ended December 31, 2020, 2019, and 2018, the Company recorded tax expense of $1 million for interest and penalties. At December 31, 2020, 2019, and 2018, the Company had an accrued liability for interest and penalties of $3 million, $2 million, and $1 million, respectively.

In 2020, 2019, and 2018, the Company recorded an $11 million net increase, $58 million net increase, and a $2 million net reduction, respectively, in its reserve for uncertain tax positions. The Company is currently under IRS audit for the 2014 through 2017 tax years.

Apache and its subsidiaries are subject to U.S. federal income tax as well as income tax in various states and foreign jurisdictions. The Company’s uncertain tax positions are related to tax years that may be subject to examination by the relevant taxing authority. Apache’s earliest open tax years in its key jurisdictions are as follows:

In 2020, the Company early adopted ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The Company’s early adoption of ASU 2019-12 using the prospective transition approach did not result in a material impact on the consolidated financial statements.