The following table presents income tax expense (benefit) for 2019, 2018 and 2017:

	Federal			State		Foreign			Total
	($ in millions)
Year ended December 31, 2019
Current	$	87.9		$	12.0	$	70.8		$	170.7
Deferred		62.9			0.5		(0.7	)		62.7
	$	150.8		$	12.5	$	70.1		$	233.4

Year ended December 31, 2018
Current	$	(83.3	)	$	5.6	$	32.0		$	(45.7	)
Deferred		29.9			0.9		(0.1	)		30.7
	$	(53.4	)	$	6.5	$	31.9		$	(15.0	)

Year ended December 31, 2017
Current	$	(41.3	)	$	2.7	$	41.0		$	2.4
Deferred		(66.6	)		0.6		(0.2	)		(66.2	)
	$	(107.9	)	$	3.3	$	40.8		$	(63.8	)

Earnings (losses) before income taxes from domestic operations were $952.4 million, ($46.4) million and ($132.7) million in 2019, 2018 and 2017, respectively. Earnings before income taxes from foreign operations were $171.2 million, $86.0 million and $169.4 million in 2019, 2018 and 2017, respectively. Foreign tax expense was primarily attributable to the U.K., Canada, Switzerland and France.

The following table presents the difference between the federal income tax rate and the effective income tax rate:

	Year Ended December 31,
	2019			2018			2017
Federal income tax rate		21.0	%		21.0	%		35.0	%
Foreign tax credits		0.4			(0.3	)		(6.4	)
Income subject to dividends-received deduction		(0.3	)		(18.3	)		(25.5	)
Tax-exempt interest		(1.0	)		(36.0	)		(94.1	)
State taxes, net of federal tax benefit		0.9			13.8			6.5
Prior period adjustment		0.2			(0.1	)		(3.3	)
Tax benefit from sale of subsidiary		—			—			(54.1	)
Other, net		(0.4	)		(18.1	)		(32.0	)
Effective tax rate		20.8	%		(38.0	)%		(173.9	)%

The Tax Act was signed into law on December 22, 2017. Among other provisions, the Tax Act reduced the corporate federal income tax rate from 35.0 percent to 21.0 percent, effective January 1, 2018, for the 2018 and subsequent tax years. As a result, the value of Alleghany’s deferred tax assets and liabilities as of December 31, 2017 was reduced. Alleghany has reflected the impact of the Tax Act in its financial statements. The net impact of this reduction to Alleghany’s consolidated 2017 tax expense was not material.

The increase in effective tax rate in 2019 compared with 2018 primarily reflects the impact of higher earnings before income taxes and, to a lesser extent, lower tax-exempt interest income arising from municipal bond securities and lower dividends-received deductions, partially offset by higher state income taxes.

The decrease in the effective tax rate in 2018 from 2017 primarily reflects the decrease in the U.S. corporate federal income tax rate due to the Tax Act, as well as new limitations on certain deductions as a result of the Tax Act and a tax benefit associated with the sale of PacificComp.

The following table presents the tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities as of December 31, 2019 and 2018:

	As of December 31,
	2019			2018
	($ in millions)
Deferred tax assets:
Loss and LAE reserves	$	118.9		$	122.9
Minimum tax credit carry forward		—			68.8
Compensation accruals		94.1			88.1
Unearned premiums		97.4			85.9
OTTI losses		6.5			5.4
State net operating loss carry forward		22.8			23.5
Other		134.9			89.8
Gross deferred tax assets before valuation allowance		474.6			484.4
Valuation allowance		(22.8	)		(23.5	)
Gross deferred tax assets		451.8			460.9

Deferred tax liabilities:
Net unrealized gains on investments		274.8			127.2
Deferred acquisition costs		113.4			101.1
Purchase accounting adjustments		11.7			11.3
Other		46.0			56.4
Gross deferred tax liabilities		445.9			296.0

Net deferred tax assets	$	5.9		$	164.9

Other deferred tax assets include significant amounts of foreign tax credit carry forwards, which begin to expire in 2028. A valuation allowance is provided against deferred tax assets when, in the opinion of management, it is more likely than not that a portion of the deferred tax asset will not be realized. As of December 31, 2019 and 2018, Alleghany recognized $22.8 million and

$23.5 million, respectively, of deferred tax assets for certain state net operating and capital loss carryovers, and a valuation allowance of $22.8 million and $23.5 million, respectively, has been established against these deferred tax assets as Alleghany does not currently anticipate it will generate sufficient income in these states to absorb such loss carryovers.

Alleghany’s income tax return is currently under examination by the Internal Revenue Service for the 2015, 2016 and 2017 tax years. The following table presents the tax years of Alleghany and TransRe tax returns that remain subject to examination by major tax jurisdictions as of December 31, 2019.

Alleghany believes that, as of December 31, 2019, it had no material uncertain tax positions. Interest and penalties related to unrecognized tax expenses (benefits) are recognized in income tax expense, when applicable. There were no material liabilities for interest or penalties accrued as of December 31, 2019.