
(in millions of Canadian dollars)	2020		2019		2018
Current income tax expense	$	537	$	525	$	381
Deferred income tax expense
Origination and reversal of temporary differences	277		316		214
Effect of tax rate decrease	(32)		(95)		(21)
Effect of hedge of net investment in foreign subsidiaries	(18)		(38)		64
Other	(6)		(2)		(1)
Total deferred income tax expense	221		181		256
Total income taxes	$	758	$	706	$	637
Income before income tax expense
Canada	$	2,518	$	2,392	$	1,788
Foreign	684		754		800
Total income before income tax expense	$	3,202	$	3,146	$	2,588
Income tax expense
Current
Canada	$	412	$	410	$	336
Foreign	125		115		45
Total current income tax expense	537		525		381
Deferred
Canada	231		141		174
Foreign	(10)		40		82
Total deferred income tax expense	221		181		256
Total income taxes	$	758	$	706	$	637

The provision for deferred income taxes arises from temporary differences in the carrying values of assets and liabilities for financial statement and income tax purposes and the effect of loss carry forwards. The items comprising the deferred income tax assets and liabilities are as follows:


(in millions of Canadian dollars)	2020		2019
Deferred income tax assets
Amount related to tax losses carried forward	$	17	$	6
Liabilities carrying value in excess of tax basis	131		139
Unrealized foreign exchange losses	4		26
Environmental remediation costs	22		22
Other	4		4


Total net deferred income tax assets	178		197
Deferred income tax liabilities
Properties carrying value in excess of tax basis	3,708		3,524
Pensions carrying value in excess of tax basis	43		83
Other	93		91
Total deferred income tax liabilities	3,844		3,698
Total net deferred income tax liabilities	$	3,666	$	3,501

The Company’s consolidated effective income tax rate differs from the expected Canadian statutory tax rates. Expected income tax expense at statutory rates is reconciled to income tax expense as follows:


(in millions of Canadian dollars, except percentage)	2020			2019			2018
Statutory federal and provincial income tax rate (Canada)	26.31		%	26.77		%	26.86		%
Expected income tax expense at Canadian enacted statutory tax rates	$	842		$	842		$	695
(Decrease) increase in taxes resulting from:
(Gains) losses not subject to tax	(23)			(19)			8
Canadian tax rate differentials	(3)			—			—
Foreign tax rate differentials	(32)			(33)			(55)
Effect of tax rate decrease	(32)			(95)			(21)
Valuation allowance	—			(5)			5
Unrecognized tax benefits	(7)			33			—
Other	13			(17)			5
Income tax expense	$	758		$	706		$	637

In 2020, the Company revalued its deferred income tax balances as a result of a tax filing election for the state of North Dakota resulting in a lower corporate income tax rate and a net recovery of $29 million.

In 2019, the Company revalued its deferred income tax balances as a result of a corporate income tax rate decrease in the province of Alberta, resulting in a net recovery of $88 million.

In 2018, the Company revalued its deferred income tax balances as a result of corporate income tax rate decreases in the states of Iowa and Missouri, resulting in a net recovery of $21 million.

The Company has not provided a deferred liability for the income taxes, if any, which might become payable on any temporary difference associated with its foreign investments because the Company intends to indefinitely reinvest in its foreign investments and has no intention to realize this difference by a sale of its interest in foreign investments. It is not practical to calculate the amount of the deferred tax liability.

It is more likely than not that the Company will realize the majority of its deferred income tax assets from the generation of future taxable income, as the payments for provisions, reserves and accruals are made and losses and tax credits carried forward are utilized.

At December 31, 2020, the Company had tax effected operating losses carried forward of $15 million (2019 – $4 million), which have been recognized as a deferred tax asset. The losses carried forward will begin to expire in 2031. The Company expects to fully utilize these tax effected operating losses before their expiry. The Company did not have any minimum tax credits or investment tax credits carried forward.

At December 31, 2020, the Company had $2 million (2019 – $2 million) in tax effected capital losses carried forward recognized as a deferred tax asset. The Company has no unrecognized tax benefits from capital losses at December 31, 2020 and 2019.

The following table provides a reconciliation of uncertain tax positions in relation to unrecognized tax benefits for Canada and the U.S. for the year ended December 31:


(in millions of Canadian dollars)	2020		2019		2018
Unrecognized tax benefits at January 1	$	52	$	13	$	13
Increase in unrecognized:
Tax benefits related to the current year	—		9		1
Tax benefits related to prior years	10		34		—
Dispositions:
Gross uncertain tax benefits related to prior years	(9)		—		(1)
Settlements with taxing authorities	2		(4)		—
Unrecognized tax benefits at December 31	$	55	$	52	$	13

If these uncertain tax positions were recognized, all of the amount of unrecognized tax positions as at December 31, 2020 would impact the Company’s effective tax rate.

During the fourth quarter of 2019, a tax authority proposed an adjustment for a prior tax year without assessing taxes. Although the Company had commenced action to have the proposal removed, an increase in uncertain tax position was recorded on deferred income tax liability and expense in the amount of $24 million. While the proposed adjustment was withdrawn during 2020, the ultimate resolution of this matter may give rise to further favourable or unfavourable adjustments to deferred tax, the timing and amount of which are not determinable at this time.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of "Income tax expense" in the Company’s Consolidated Statements of Income. The net amount of accrued interest and penalties in 2020 was a $1 million recovery (2019 – $1 million recovery; 2018 – $nil). The total amount of accrued interest and penalties associated with unrecognized tax benefits at December 31, 2020 was $9 million (2019 – $10 million; 2018 – $11 million).

The Company and its subsidiaries are subject to either Canadian federal and provincial income tax, U.S. federal, state and local income tax, or the relevant income tax in other international jurisdictions. The Company has substantially concluded all Canadian federal and provincial income tax matters for the years through 2014. The federal and provincial income tax returns filed for 2015 and subsequent years remain subject to examination by the Canadian taxation authorities. The Internal Revenue Service ("IRS") audit for 2012 and 2013 has been settled. The income tax returns for 2016 and subsequent years continue to remain subject to examination by the IRS and U.S. state tax jurisdictions. The Company believes that it has recorded sufficient income tax reserves at December 31, 2020 with respect to these income tax examinations.