
	2020		2019		2018
Current:
U.S. Federal	$	715	$	652	$	437
Foreign	932		807		378
State	110		196		63
	1,757		1,655		878
Deferred:
U.S. Federal	273		325		140
Foreign	(167)		(31)		(4,379)
State	31		10		(9)
	137		304		(4,248)
	$	1,894	$	1,959	$	(3,370)


	2020		2019		2018
U.S. Federal statutory tax rate	21.0	%	21.0	%	21.0	%
State income tax, net of U.S. Federal tax benefit	1.2		1.6		0.5
Lower taxes on foreign results	(0.8)		(0.9)		(2.2)
One-time mandatory transition tax - TCJ Act	—		(0.1)		0.1
Remeasurement of deferred taxes - TCJ Act	—		—		(0.4)
International reorganizations	—		—		(47.3)
Tax settlements	—		—		(7.8)
Other, net	(0.5)		(0.6)		(0.6)
Annual tax rate	20.9	%	21.0	%	(36.7)	%

During the fourth quarter of 2017, the TCJ Act was enacted in the United States. Among its many provisions, the TCJ Act imposed a mandatory one-time transition tax on undistributed international earnings and reduced the U.S. corporate income tax rate from 35% to 21%, effective January 1, 2018.

In 2017, the SEC issued guidance related to the TCJ Act which allowed recording of provisional tax expense using a measurement period, not to exceed one year, when information necessary to complete the accounting for the effects of the TCJ Act is not available. We elected to apply the measurement period provisions of this guidance to certain income tax effects of the TCJ Act when it became effective in the fourth quarter of 2017.

The provisional measurement period allowed by the SEC ended in the fourth quarter of 2018. As a result, in 2018, we recognized a net tax benefit of $28 million ($0.02 per share) related to the TCJ Act. While our accounting for the recorded impact of the TCJ Act was deemed to be complete, additional guidance issued by the IRS impacted our recorded amounts after December 29, 2018. In 2019, we recognized a net tax benefit totaling $8 million ($0.01 per share) related to the TCJ Act. There were no tax amounts recognized in 2020 related to the TCJ Act.

As of December 26, 2020, our mandatory transition tax liability was $3.2 billion, which must be paid through 2026 under the provisions of the TCJ Act. We reduced our liability through cash payments and application of tax overpayments by $78 million in 2020, $663 million in 2019 and $150 million in 2018. We currently expect to pay approximately $309 million of this liability in 2021.

The TCJ Act also created a requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (GILTI), must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. During the first quarter of 2018, we elected to treat the tax effect of GILTI as a current-period expense when incurred.

The CARES Act was enacted on March 27, 2020 in the United States. The CARES Act and related notices include several significant provisions, such as delaying certain payroll tax payments, mandatory transition tax payments under the TCJ Act and estimated income tax payments. The CARES Act did not have a material impact on our financial results in 2020, including on our annual estimated effective tax rate or on our liquidity. We will continue to monitor and assess the impact similar legislation in other countries may have on our business and financial results.

On May 19, 2019, a public referendum held in Switzerland passed the TRAF, effective January 1, 2020. The enactment of certain provisions of the TRAF resulted in adjustments to our deferred taxes. During 2020, we recorded a net tax benefit of $72 million related to the adoption of the TRAF in the Swiss Canton of Bern. During 2019, we recorded net tax expense of $24 million related to the impact of the TRAF. While the accounting for the impacts of the TRAF are deemed to be complete, further adjustments to our financial statements and related disclosures could be made in future quarters, including in connection with final tax return filings.

In 2018, we reorganized certain of our international operations, including the intercompany transfer of certain intangible assets. As a result, we recognized other net tax benefits of $4.3 billion ($3.05 per share) in 2018. The related deferred tax asset of $4.4 billion is being amortized over a period of 15 years beginning in 2019. Additionally, the reorganization generated significant net operating loss carryforwards and related deferred tax assets that are not expected to be realized, resulting in the recording of a full valuation allowance.


	2020		2019
Deferred tax liabilities
Debt guarantee of wholly-owned subsidiary	$	578	$	578
Property, plant and equipment	1,851		1,583

Recapture of net operating losses	504		335
Right-of-use assets	371		345
Other	159		167
Gross deferred tax liabilities	3,463		3,008
Deferred tax assets
Net carryforwards	5,008		4,168
Intangible assets other than nondeductible goodwill	1,146		793
Share-based compensation	90		94
Retiree medical benefits	153		154
Other employee-related benefits	373		350
Pension benefits	80		104
Deductible state tax and interest benefits	150		126
Lease liabilities	371		345
Other	866		741
Gross deferred tax assets	8,237		6,875
Valuation allowances	(4,686)		(3,599)
Deferred tax assets, net	3,551		3,276
Net deferred tax assets	$	(88)	$	(268)

A number of years may elapse before a particular matter, for which we have established a reserve, is audited and finally resolved. The number of years with open tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions and the related open tax audits are as follows:


Jurisdiction	Years Open to Audit	Years Currently Under Audit
United States	2014-2019	2014-2016
Mexico	2014-2019	2014-2016
United Kingdom	2017-2019	None
Canada (Domestic)	2016-2019	2016-2017
Canada (International)	2010-2019	2010-2017
Russia	2017-2019	None

In 2018, we recognized a non-cash tax benefit of $364 million ($0.26 per share) resulting from the conclusion of certain international tax audits. Additionally, in 2018, we recognized non-cash tax benefits of $353 million ($0.24 per share) as a result of our agreement with the IRS resolving all open matters related to the audits of taxable years 2012 and 2013, including the associated state impact. The conclusion of certain international tax audits and the resolution with the IRS, collectively, resulted in non-cash tax benefits totaling $717 million ($0.50 per share) in 2018.

Our annual tax rate is based on our income, statutory tax rates and tax planning strategies and transactions, including transfer pricing arrangements, available to us in the various jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. We establish reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and that we likely will not succeed. We adjust these reserves, as well as the related interest, in light of changing facts and circumstances, such as the progress of a tax audit, new tax laws, relevant court cases or tax authority settlements. Settlement of any particular issue would usually require the use of cash. Favorable resolution would be recognized as a reduction to our annual tax rate in the year of resolution.

As of December 26, 2020, the total gross amount of reserves for income taxes, reported in other liabilities, was $1.6 billion. We accrue interest related to reserves for income taxes in our provision for income taxes and any associated penalties are recorded in selling, general and administrative expenses. The gross amount of interest accrued, reported in other liabilities, was $338 million as of December 26, 2020, of which $93 million of tax expense was recognized in 2020. The gross amount of interest accrued, reported in other liabilities, was $250 million as of December 28, 2019, of which $84 million of tax expense was recognized in 2019.


	2020		2019
Balance, beginning of year	$	1,395	$	1,440
Additions for tax positions related to the current year	128		179
Additions for tax positions from prior years	153		93
Reductions for tax positions from prior years	(22)		(201)
Settlement payments	(13)		(74)
Statutes of limitations expiration	(23)		(47)
Translation and other	3		5
Balance, end of year	$	1,621	$	1,395

Operating loss carryforwards totaling $28.3 billion as of December 26, 2020 are being carried forward in a number of foreign and state jurisdictions where we are permitted to use tax operating losses from prior periods to reduce future taxable income. These operating losses will expire as follows: $0.2 billion in 2021, $25.2 billion between 2022 and 2040 and $2.9 billion may be carried forward indefinitely. We establish valuation allowances for our deferred tax assets if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

In 2018, we repatriated $20.4 billion of cash, cash equivalents and short-term investments held in our foreign subsidiaries without such funds being subject to further U.S. federal income tax liability, related to the TCJ Act. As of December 26, 2020, we had approximately $6 billion of undistributed international earnings. We intend to continue to reinvest $6 billion of earnings outside the United States for the