Income taxes (Tables)

12 Months Ended

Dec. 31, 2022

Summary of the Major Components of the Company's Income Tax Expense

The following is a summary of the major components of the Company’s income tax expense:


(in millions of Canadian dollars)	2022		2021		2020
Current income tax expense	$	492	$	526	$	537
Deferred income tax expense
Origination and reversal of temporary differences	101		259		277
Effect of tax rate decrease	(25)		(11)		(32)
Effect of hedge of net investment in foreign subsidiaries (Note 7)	59		(3)		(18)
Other	1		(3)		(6)
Total deferred income tax expense	136		242		221
Total income taxes	$	628	$	768	$	758
Income before income tax expense
Canada	$	2,236	$	2,899	$	2,518
Foreign	1,909		721		684
Total income before income tax expense	$	4,145	$	3,620	$	3,202
Income tax expense
Current
Canada	$	333	$	404	$	412
Foreign	159		122		125
Total current income tax expense	492		526		537
Deferred
Canada	177		(179)		231
Foreign	(41)		421		(10)
Total deferred income tax expense	136		242		221
Total income taxes	$	628	$	768	$	758

Deferred Income Tax Assets and Liabilities

The items comprising the deferred income tax assets and liabilities are as follows:


(in millions of Canadian dollars)	2022		2021
Deferred income tax assets
Tax losses and other attributes carried forward(1)	$	70	$	19
Liabilities carrying value in excess of tax basis	108		124
Unrealized foreign exchange losses	50		—
Environmental remediation costs	22		22
Other(1)	5		5


Total deferred income tax assets	255		170
Valuation allowance	(4)		—
Total net deferred income tax assets	$	251	$	170
Deferred income tax liabilities
Investment in Kansas City Southern (Note 10)	7,526		7,079
Properties carrying value in excess of tax basis	4,149		3,887
Pensions carrying value in excess of tax basis	691		441
Unrealized foreign exchange gains	—		13
Other	82		102
Total deferred income tax liabilities	12,448		11,522
Total net deferred income tax liabilities	$	12,197	$	11,352

(1) 2021 comparative figures have been reclassified to conform with current period presentation.

Expected Income Tax Expense Reconciled To Income Tax Expense

Expected income tax expense at statutory rates is reconciled to income tax expense as follows:


(in millions of Canadian dollars, except percentage)	2022			2021			2020
Statutory federal and provincial income tax rate (Canada)	26.12		%	26.12		%	26.31		%
Expected income tax expense at Canadian enacted statutory tax rates	$	1,083		$	946		$	842
(Decrease) increase in taxes resulting from:
Gains not subject to tax	(9)			(116)			(23)
Canadian tax rate differentials	(12)			(22)			(3)
Foreign tax rate differentials	(94)			(37)			(32)
Effect of tax rate decrease	(25)			(11)			(32)
Deduction for dividends taxed on outside basis	(270)			—			—
Unrecognized tax benefits	(24)			(2)			(7)
Other	(21)			10			13
Income tax expense	$	628		$	768		$	758

Reconciliation of Uncertain Tax Positions In Relation To Unrecognized Tax Benefits

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)	2022		2021		2020
Unrecognized tax benefits at January 1	$	49	$	55	$	52
Increase in unrecognized:
Tax benefits related to the current year	1		—		—
Tax benefits related to prior years	—		—		10
Dispositions:
Gross uncertain tax benefits related to prior years	(30)		(6)		(9)
Settlements with taxing authorities	—		—		2
Unrecognized tax benefits at December 31	$	20	$	49	$	55