Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The Company's earnings are primarily domestic, and its effective income tax rates on earnings from operations for the three months ended June 30, 2020 and 2019, were 18.5% and 22.0%, respectively. For the six months ended June 30, 2020 and 2019, the Company's effective income tax rates on its earnings from operations were 19.9% and 21.4%, respectively. The lower effective tax rates for the three and six months ended June 30, 2020, were primarily attributable to research and development tax credits for prior periods.

For the three and six months ended June 30, 2020, the Company’s effective tax rates differed from the federal statutory rate primarily as a result of the research and development tax credits for prior periods. For the three months ended June 30, 2019, the Company’s effective tax rate differed from the federal statutory rate primarily as a result of an unfavorable adjustment to claims for research and development tax credits for prior periods. For the six months ended June 30, 2019, the Company’s effective tax rate did not differ materially from the federal statutory corporate income tax rate of 21%.

On March 27, 2020, the CARES Act was signed into law. The CARES Act includes certain changes to U.S. federal tax law that impact corporations. The Company’s initial analysis of the tax law changes included in the CARES Act indicates that the Act will not have a material impact on the Company’s effective income tax rate.

The Company's unrecognized tax benefits increased by $2 million during the three months ended June 30, 2020. As of June 30, 2020, the estimated amounts of the Company's unrecognized tax benefits, excluding interest and penalties, were liabilities of $40 million. Assuming a sustainment of these tax positions, the reversal of $30 million of the accrued amounts would favorably affect the Company's effective federal income tax rate in future periods.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. For the three months ended June 30, 2020, interest resulting from the unrecognized tax benefits noted above increased income tax expense less than $1 million.

Non-current state income taxes include deferred state income taxes, which reflect the change in deferred state tax assets and liabilities, and the tax expense or benefit associated with changes in unrecognized tax benefits in the relevant period. These amounts are recorded within operating income. Current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income.