
	2020		2019		2018
Income taxes:
Currently payable:
Federal	$	152	$	104	$	93
State	26		19		26
Non-U.S.	3		5		11
	181		128		130
Deferred:
Federal	(12)		19		(26)
State	4		7		14
Non-U.S.	1		(3)		(12)
	(7)		23		(24)
	$	174	$	151	$	106


	2020		2019		2018
Earnings from continuing operations before income taxes:
United States	$	737	$	624	$	832
Non-U.S.	29		1		(2)
	$	766	$	625	$	830

The following is a reconciliation of the effective income tax rate on continuing operations to the U.S. federal statutory income tax rate:


	2020		2019		2018
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State income taxes (net of federal tax benefit)	3.5		2.2		3.0
Tax effect of international items	(0.3)		—		(0.5)

Federal manufacturing deduction	—		—		(1.4)


Tax Reform - impact on U.S. deferred tax assets and liabilities⁽¹⁾	—		—		(21.7)
Tax Reform - transition tax⁽¹⁾	—		0.3		6.4
Effect of higher U.S. federal statutory tax rate⁽¹⁾	—		—		5.3

Divestiture impact on deferred taxes	—		1.2		—
Benefit on sale of the European chips business	(1.3)		—		—
Other	(0.2)		(0.5)		0.7
Effective income tax rate	22.7	%	24.2	%	12.8	%

⁽¹⁾The Tax Cuts and Jobs Act of 2017 (the Act) was enacted into law on December 22, 2017, and made significant changes to corporate taxation. Changes under the Act included:

•Reducing the federal corporate tax rate from 35% to 21% effective January 1, 2018. A blended rate applied for fiscal 2018 non-calendar year end companies for the fiscal periods that included the effective date of the rate change. The impact of this is shown as "Effect of higher U.S. federal statutory tax rate;"

•Repealing the exception for deductibility of performance-based compensation to covered employees, which impacted us beginning in 2019, along with expanding the number of covered employees;

•Transitioning to a territorial system for taxation on foreign earnings along with the imposition of a transition tax in 2018 on the deemed repatriation of unremitted foreign earnings;

•Changes to the taxation of multinational companies, including a new minimum tax on Global Intangible Low-Taxed Income, a new Base Erosion Anti-Abuse Tax, and a new U.S. corporate deduction for Foreign-Derived Intangible Income, all of which were effective for us beginning in 2019; and

As a result of the Act, we recognized a benefit of $179 in 2018 on the remeasurement of deferred tax assets and liabilities and expenses of $2 in 2019 and $53 in 2018 on the transition tax on unremitted foreign earnings.


	2020		2019
Depreciation	$	319	$	336
Amortization	856		877
Other	9		16
Deferred tax liabilities	1,184		1,229
Benefits and compensation	144		157
Pension benefits	58		46
Tax loss carryforwards	31		43
Capital loss carryforwards	95		287
Outside basis difference	—		116
Other	65		82
Gross deferred tax assets	393		731
Deferred tax asset valuation allowance	(122)		(427)
Deferred tax assets, net of valuation allowance	271		304
Net deferred tax liability	$	913	$	925

At August 2, 2020, our U.S. and non-U.S. subsidiaries had tax loss carryforwards of approximately $361. Of these carryforwards, $39 may be carried forward indefinitely, and $322 expire between 2021 and 2037, with the majority expiring after 2028. At August 2, 2020, deferred tax asset valuation allowances have been established to offset $134 of these tax loss carryforwards. Additionally, as of August 2, 2020, our U.S. and non-U.S. subsidiaries had capital loss carryforwards of approximately $382, all of which were offset by valuation allowances. The decrease in the total capital loss carryforwards for 2020 was primarily due to the sale of the Arnott's and other international operations.

The net change in the deferred tax asset valuation allowance in 2020 was a decrease of $305. The decrease was primarily due to the sale of the Arnott's and other international operations. The net change in the deferred tax asset valuation allowance in 2019 was an increase of $294. The increase was primarily due to the sale of Bolthouse Farms and the pending sale of the Arnott's and other international operations. The net change in the deferred tax asset valuation allowance in 2018 was an increase of $13. The increase was primarily due to the acquisition of Snyder's-Lance and the impact of currency.

As of August 2, 2020, and July 28, 2019, other deferred tax assets included $13 of state tax credit carryforwards related to various states that expire between 2021 and 2031. As of August 2, 2020, and July 28, 2019, deferred tax asset valuation allowances have been established to offset the $13 of state credit carryforwards.

As of August 2, 2020, we had approximately $18 of undistributed earnings of foreign subsidiaries. Consistent with prior years, these unremitted earnings and the investment in our foreign subsidiaries are deemed to be permanently reinvested and no additional tax has been provided. It is not practical to estimate the tax liability that might be incurred if such earnings were remitted to the U.S.


	2020		2019		2018
Balance at beginning of year	$	24	$	32	$	64
Increases related to prior-year tax positions	—		1		—
Decreases related to prior-year tax positions	(1)		(1)		(37)
Increases related to current-year tax positions	2		2		2
Settlements	(1)		(9)		(1)
Lapse of statute	(1)		(1)		—
Increase due to acquisitions	—		—		4
Balance at end of year	$	23	$	24	$	32

The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $18 as of August 2, 2020, $17 as of July 28, 2019, and $23 as of July 29, 2018. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes.

Our accounting policy with respect to interest and penalties attributable to income taxes is to reflect any expense or benefit as a component of our income tax provision. The total amount of interest and penalties recognized in the Consolidated

Statements of Earnings were earnings were not material in 2020, 2019, and 2018. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was $4 as of August 2, 2020, and as of July 28, 2019.

We do business internationally and, as a result, file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the U.S. and Canada. The 2019 and 2020 tax years are currently under audit by the Internal Revenue Service. In addition, several state income tax examinations are in progress for the years 2015 to 2018.