Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 5: Income Taxes

Income Before Income Taxes
Year ended December 31 (in millions)	2021		2020		2019
Domestic	$	21,243	$	16,211	$	16,646
Foreign	(2,150)		(2,146)		350
	$	19,093	$	14,065	$	16,996

Components of Income Tax Expense
Year ended December 31 (in millions)	2021		2020		2019
Current (Expense) Benefit:
Federal	$	(2,355)	$	(2,824)	$	(2,085)
State	(669)		(836)		(425)
Foreign	(343)		(254)		(600)
	(3,367)		(3,914)		(3,110)
Deferred (Expense) Benefit:
Federal	(1,504)		111		(902)
State	(255)		71		15
Foreign	(133)		368		324
	(1,892)		550		(563)
Income tax (expense) benefit	$	(5,259)	$	(3,364)	$	(3,673)

Our income tax expense differs from the federal statutory amount because of the effect of the items detailed in the table below. 

Year ended December 31 (in millions)	2021		2020		2019
Federal tax at statutory rate	$	(4,009)	$	(2,954)	$	(3,569)
State income taxes, net of federal benefit	(464)		(265)		(306)
Foreign income taxed at different rates	(392)		(24)		(126)
Adjustments to uncertain and effectively settled tax positions, net	(238)		(344)		(3)
Federal research and development credits	85		164		124
Excess tax benefits recognized on share-based compensation	209		150		196
Tax legislation	(498)		(120)		31
Other	48		29		(20)
Income tax (expense) benefit	$	(5,259)	$	(3,364)	$	(3,673)

We base our provision for income taxes on our current period income, changes in our deferred income tax assets and liabilities, income tax rates, changes in estimates of our uncertain tax positions, tax planning opportunities available in the jurisdictions in which we operate and excess tax benefits or deficiencies that arise when the tax consequences of share-based compensation differ from amounts previously recognized in the statement of income. We recognize deferred tax assets and liabilities when there are temporary differences between the financial reporting basis and tax basis of our assets and liabilities and for the expected benefits of using net operating loss carryforwards. When a change in the tax rate or tax law has an impact on deferred taxes, we apply the change based on the years in which the temporary differences are expected to reverse. We record the change in our consolidated financial statements in the period of enactment.

The determination of the income tax consequences of a business combination includes identifying the tax basis of assets and liabilities acquired and any contingencies associated with uncertain tax positions assumed or resulting from the business combination. Deferred tax assets and liabilities related to temporary differences of an acquired entity are recorded as of the date of the business combination and are based on our estimate of the ultimate tax basis that will be accepted by the various tax authorities. We record liabilities for contingencies associated with prior tax returns filed by the acquired entity based on criteria set forth in the appropriate accounting guidance. We adjust the deferred tax accounts and the liabilities periodically to reflect any revised estimated tax basis and any estimated settlements with the various tax authorities. The effects of these adjustments are recorded to income tax expense.

From time to time, we engage in transactions in which the tax consequences may be subject to uncertainty. In these cases, we evaluate our tax position using the recognition threshold and the measurement attribute in accordance with the accounting guidance related to uncertain tax positions. Examples of these transactions include business acquisitions and dispositions, including consideration paid or received in connection with these transactions, certain financing transactions, and the allocation of income among state and local tax jurisdictions. Significant judgment is required in assessing and estimating the tax consequences of these transactions. We determine whether it is more likely than not that a tax position will be sustained on examination, including the resolution of any related appeals or litigation processes, based on the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to be recognized in our consolidated financial statements. We classify interest and penalties, if any, associated with our uncertain tax positions as a component of income tax (expense) benefit.

Components of Net Deferred Tax Liability
December 31 (in millions)	2021		2020
Deferred Tax Assets:
Net operating loss and other loss carryforwards	$	3,194	$	2,609
Nondeductible accruals and other	3,246		3,253
Less: Valuation allowance	2,907		2,312
	3,533		3,550
Deferred Tax Liabilities:
Differences between book and tax basis of property and equipment and intangible assets	30,584		29,829
Differences between book and tax basis of investments	526		405
Differences between book and tax basis of long-term debt	1,788		680
Differences between book and tax basis of foreign subsidiaries and undistributed foreign earnings	394		468
	33,292		31,382
Net deferred tax liability	$	29,759	$	27,832

The following table presents changes in our valuation allowance for deferred tax assets:

(in millions)	2021		2020		2019
Beginning balance	$	2,312	$	1,906	$	632
Additions charged to income tax expense and other accounts	635		430		1,403
Deductions from reserves	40		24		129
Ending balance	$	2,907	$	2,312	$	1,906

Changes in our net deferred tax liability in 2021 that were not recorded as deferred income tax benefit (expense) are primarily related to an increase of $73 million related to acquisitions and a decrease of $44 million associated with items included in other comprehensive income (loss).

As of December 31, 2021, we had federal net operating loss carryforwards of $196 million, and various state net operating loss carryforwards, the majority of which expire in periods through 2041. As of December 31, 2021, we also had foreign net operating loss carryforwards of $9.6 billion related to our foreign operations, primarily at Sky and NBCUniversal, the majority of which can be carried forward indefinitely. The determination of the realization of the state and foreign net operating loss carryforwards is dependent on our subsidiaries’ taxable income or loss, apportionment percentages, redetermination from taxing authorities, and state and foreign laws that can change from year to year and impact the amount of such carryforwards. We recognize a valuation allowance if we determine it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. As of December 31, 2021 and 2020, our valuation allowance was primarily related to foreign and state net operating loss carryforwards.

Uncertain Tax Positions

Reconciliation of Unrecognized Tax Benefits
(in millions)	2021		2020		2019
Gross unrecognized tax benefits, January 1	$	1,879	$	1,422	$	1,543
Additions based on tax positions related to the current year	352		436		230
Additions based on tax positions related to prior years	111		152		133
Reductions for tax positions of prior years	(181)		(31)		(344)
Reductions due to expiration of statutes of limitations	(107)		(76)		(117)
Settlements with tax authorities and other	(12)		(24)		(23)
Gross unrecognized tax benefits, December 31	$	2,042	$	1,879	$	1,422

Our gross unrecognized tax benefits include both amounts related to positions for which we have recorded liabilities for potential payment obligations and those for which tax has been assessed and paid. The amounts exclude the federal benefits on state tax positions that were recorded to deferred income taxes. If we were to recognize our gross unrecognized tax benefits in the future, $1.5 billion would impact our effective tax rate and the remaining amount would increase our deferred income tax liability. The amount and timing of the recognition of any such tax benefit is dependent on the completion of examinations of our tax filings by the various tax authorities and the expiration of statutes of limitations. It is reasonably possible that certain tax contests could be resolved within the next 12 months that may result in a decrease in our effective tax rate. As of December 31, 2021 and 2020, accrued interest and penalties associated with our liability for uncertain tax positions were not material.

The IRS has completed its examination of our income tax returns for all years through 2016. Various states are examining our state tax returns and the tax years of those tax returns currently under examination vary by state, with most of the periods relating to tax years 2011 and forward. Various foreign jurisdictions are examining our tax returns and the tax years of those tax returns currently under examination vary by country, with most of the periods relating to tax years 2010 and forward.