Income Taxes (Tables)

12 Months Ended

Dec. 31, 2020

Provision for Federal & Foreign Income Tax Expense

Our provision for federal and foreign income tax expense for continuing operations consisted of the following (in millions):


	2020		2019		2018
Federal income tax expense (benefit):
Current
Operations	$	1,292	$	698	$	975
One-time charge due to tax legislation	—		—		(6)
Deferred
Operations	21		235		(194)
One-time charge due to tax legislation	—		—		(37)
Total federal income tax expense	1,313		933		738
Foreign income tax expense (benefit):
Current	50		91		67
Deferred	(16)		(13)		(13)
Total foreign income tax expense	34		78		54
Total income tax expense	$	1,347	$	1,011	$	792

Reconciliation of Income Tax Expense Computed Using U.S. Statutory Federal Tax Rate to Actual Income Tax Expense

Our reconciliation of the U.S. federal statutory income tax rate of 21.0% to actual income tax expense for continuing operations is as follows (dollars in millions):


	2020				2019				2018
	Amount		Rate		Amount		Rate		Amount		Rate
Income tax expense at the U.S. federal statutory tax rate	$	1,729	21.0	%	$	1,521	21.0	%	$	1,226	21.0	%
Foreign derived intangible income deduction	(170)		(2.1)		(122)		(1.7)		(61)		(1.0)
Research and development tax credit	(97)		(1.2)		(148)		(2.0)		(138)		(2.4)
Tax deductible dividends	(64)		(0.8)		(62)		(0.9)		(59)		(1.0)
Excess tax benefits for share-based payment awards	(52)		(0.6)		(63)		(0.9)		(55)		(0.9)
Tax accounting method change (a)	—		—		(15)		(0.2)		(61)		(1.0)
Deferred tax write-down and transition tax (b)	—		—		—		—		(43)		(0.7)
Other, net (c)	1		0.1		(100)		(1.3)		(17)		(0.4)
Income tax expense	$	1,347	16.4	%	$	1,011	14.0	%	$	792	13.6	%

(a)Recognized tax benefit of $15 million and $61 million in 2019 and 2018, from our change in a tax accounting method related to restoration of tax basis.

(b)Includes a deferred tax re-measurement and transition tax true-up in 2018 primarily due to the re-measurement of certain net deferred tax assets using the lower U.S. corporate income tax rate and a deemed repatriation tax.

(c)Includes additional $21 million deduction for foreign derived intangible income related to 2019 recognized in 2020. Includes additional $98 million deduction for foreign derived intangible income related to 2018 recognized in 2019 reflecting proposed tax regulations released on March 4, 2019.

Components of Federal and Foreign Deferred Tax Assets and Liabilities

The primary components of our federal and foreign deferred income tax assets and liabilities at December 31 were as follows (in millions):


	2020		2019
Deferred tax assets related to:
Accrued compensation and benefits	$	926	$	659
Pensions	2,994		3,057
Contract accounting methods	392		349
Foreign company operating losses and credits	51		49
Other (a)	509		416
Valuation allowance (b)	(13)		(28)
Deferred tax assets, net	4,859		4,502
Deferred tax liabilities related to:
Goodwill and purchased intangibles	363		330
Property, plant and equipment	481		340
Exchanged debt securities and other (a)	547		525
Deferred tax liabilities	1,391		1,195
Net deferred tax assets	$	3,468	$	3,307

(a)Includes deferred tax assets and liabilities related to lease liability and ROU asset.

(b)A valuation allowance was provided against certain foreign company deferred tax assets arising from carryforwards of unused tax benefits.