Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 21 – Income Taxes

Accounting policy. Deferred income taxes are reflected in the Consolidated Balance Sheets for differences between the financial and income tax reporting bases of the Company's underlying assets and liabilities, and are established based upon enacted tax rates and laws. Deferred income tax assets are recognized when available evidence indicates that realization is more likely than not and a valuation allowance is established to the extent this standard is not met. The deferred income tax provision generally represents the net change in deferred income tax assets and liabilities during the reporting period excluding adjustments to accumulated other comprehensive income or amounts recorded in connection with a business combination. The current income tax provision generally represents estimated amounts due on income tax returns for the year reported to various jurisdictions plus the effect of any uncertain tax positions. The Company recognizes a liability for uncertain tax positions if management believes the probability that the positions will be sustained is 50% or less. For uncertain positions that management believes are more likely than not to be sustained, the Company recognizes a liability based upon management's estimate of the most likely settlement outcome with the taxing authority. The liabilities for uncertain tax positions are classified as current when the position is expected to be settled within 12 months or the statute of limitation expires within 12 months.

Income taxes attributable to the Company's foreign operations are generally provided using the respective foreign jurisdictions' tax rate.

A.Income Tax Expense

The components of income taxes for the years ended December 31 were as follows:

(In millions)	2021		2020		2019
Current taxes
U.S. income taxes	$	1,268	$	2,128	$	1,476
Foreign income taxes	207		334		173
State income taxes	112		303		114
Total current taxes	1,587		2,765		1,763
Deferred taxes (benefits)
U.S. income taxes (benefits)	(167)		(217)		(236)
Foreign income taxes	69		11		16
State income tax (benefits)	(122)		(180)		(93)
Total deferred taxes (benefits)	(220)		(386)		(313)
Total income taxes	$	1,367	$	2,379	$	1,450

Total income taxes for the years ended December 31 were different from the amount computed using the nominal federal income tax rate for the following reasons:

	2021				2020				2019
(In millions)	$		%		$		%		$		%
Tax expense at nominal rate	$	1,424	21.0	%	$	2,282	21.0	%	$	1,380	21.0	%
Impact of sale of business	—		—		104		1.0		—		—
Effect of foreign earnings	(33)		(0.5)		(61)		(0.6)		24		0.4
Health insurance industry tax	—		—		93		0.9		—		—
State income tax (net of federal income tax benefit)	(9)		(0.1)		24		0.2		32		0.5
Other	(15)		(0.2)		(63)		(0.6)		14		0.2
Total income taxes	$	1,367	20.2	%	$	2,379	21.9	%	$	1,450	22.1	%

Consolidated pre-tax income from the Company's foreign operations was approximately 26% of the Company's pre-tax income in 2021, 14% in 2020 and 12% in 2019.

B.Deferred Income Taxes

Deferred income tax assets and liabilities as of December 31, were as follows:

(In millions)	2021		2020
Deferred tax assets
Employee and retiree benefit plans	$	304	$	477
Other insurance and contractholder liabilities	263		278
Loss carryforwards	278		177
Other accrued liabilities	412		358
Other	245		209
Deferred tax assets before valuation allowance	1,503		1,499
Valuation allowance for deferred tax assets	(246)		(207)
Deferred tax assets, net of valuation allowance	1,257		1,292
Deferred tax liabilities
Depreciation and amortization	698		660
Acquisition-related basis differences	8,726		8,989
Policy acquisition expenses	312		289
Unrealized appreciation on investments and foreign currency translation	104		171
Other	212		122
Total deferred tax liabilities	10,052		10,231
Net deferred income tax (liabilities)	(8,795)
Net deferred income tax (liabilities) assets classified as Liabilities of businesses held for sale	(449)
Net deferred income tax (liabilities) assets per Consolidated Balance Sheets	$	(8,346)	$	(8,939)

Management believes that future results will be sufficient to realize a majority of the Company's gross deferred tax assets. Valuation allowances are established against deferred tax assets when it is determined that it is more likely than not that the asset will not be recognized. Valuation allowances have been established against certain federal, state and foreign tax attributes. There are multiple expiration dates associated with these tax attributes.

C.Uncertain Tax Positions

Reconciliations of unrecognized tax benefits for the years ended December 31 were as follows:

(In millions)	2021		2020		2019
Balance at January 1,	$	1,210	$	1,018	$	928
Increase due to prior year positions	21		128		68
Increase due to current year positions	31		88		29
Reduction related to settlements with taxing authorities	(15)		—		—
Reduction related to lapse of applicable statute of limitations	(17)		(24)		(7)
Balance at December 31,	$	1,230	$	1,210	$	1,018

Substantially all unrecognized tax benefits would impact shareholders' net income if recognized.

The Company classifies net interest expense on uncertain tax positions as a component of income tax expense and in Accrued expenses and other liabilities on the balance sheet. In addition to the amounts in the table above, the liability for net interest expense on uncertain tax positions was approximately $148 million as of December 31, 2021, $127 million as of December 31, 2020 and $100 million as of December 31, 2019.

D.Other Tax Matters

The statute of limitations for Cigna's consolidated federal income tax returns through 2016 have closed. However, Cigna filed amended returns for both the 2015 and 2016 tax years, which are under review by the Internal Revenue Service ("IRS"). Additionally, the IRS is examining Cigna's returns for 2017 and 2018. The statute of limitations for Express Scripts' consolidated federal income tax returns through 2012 has closed. However, for 2010 through 2012 tax years, there remains a significant disputed matter. The IRS is also examining Express Scripts' consolidated federal income tax returns for 2013 through 2018. The Company has established adequate reserves for these matters.

The Company conducts business in a number of state and foreign jurisdictions and may be engaged in multiple audit proceedings at any given time. Generally, no further state or foreign audit activity is expected for tax years prior to 2013 for Cigna's entities and 2006 for Express Scripts' entities.