
	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
Income tax expense:
Federal
Current	$	5	7	(576)
Deferred	338		376	734
State
Current	50		15	(22)
Deferred	55		81	52
Foreign
Current	29		35	36
Deferred	(27)		(11)	(54)
Total income tax expense	$	450	503	170


	Years Ended December 31,
	2020		2019	2018
	(Dollars in millions)
Income tax expense was allocated as follows:
Income tax expense in the consolidated statements of operations:
Attributable to income	$	450	503	170
Stockholders' equity:
Tax effect of the change in accumulated other comprehensive loss	$	17	(62)	(2)


	Years Ended December 31,
	2020		2019		2018
	(Percentage of pre-tax income)
Statutory federal income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal income tax benefit	(10.8)	%	(1.6)	%	(1.5)	%
Goodwill impairment	(71.0)	%	(28.6)	%	(36.6)	%
Change in liability for unrecognized tax position	(0.6)	%	(0.2)	%	1.3	%
Legislative changes to GILTI	1.8	%	—	%	—	%
Nondeductible executive stock compensation	(1.6)	%	(0.1)	%	—	%
Change in valuation allowance	2.6	%	—	%	—	%
Tax reform	—	%	—	%	(5.9)	%
Net foreign income taxes	(0.6)	%	(0.5)	%	1.8	%
Research and development credits	1.6	%	0.1	%	0.9	%
Tax benefit of net operating loss carryback	—	%	—	%	9.1	%
Other, net	0.1	%	(0.7)	%	(1.0)	%
Effective income tax rate	(57.5)	%	(10.6)	%	(10.9)	%

The effective tax rate for the year ended December 31, 2020 reflects a $555 million unfavorable impact of non-deductible goodwill impairment, a $14 million favorable impact in tax regulations passed in 2020 allowing a high tax exception related to our tax exposure of Global Intangible Low-Taxed Income ("GILTI"), as well as a $20 million benefit related to the release of previously established valuation allowances against capital losses. The effective tax rates for the years ended December 31, 2019 and December 31, 2018 include a $1.4 billion and a $572 million unfavorable impact of non-deductible goodwill impairments, respectively. Additionally, the effective tax rate for the year ended December 31, 2018 reflects a $92 million unfavorable impact due to finalizing the impacts of tax reform. Partially offsetting these amounts is a $142 million benefit generated by a loss carryback to 2016.


	As of December 31,
	2020		2019
	(Dollars in millions)
Deferred tax assets
Post-retirement and pension benefit costs	$	1,164	1,169
Net operating loss carryforwards	3,138		3,167
Other employee benefits	119		134
Other	604		577
Gross deferred tax assets	5,025		5,047
Less valuation allowance	(1,538)		(1,319)
Net deferred tax assets	3,487		3,728
Deferred tax liabilities
Property, plant and equipment, primarily due to depreciation differences	(3,882)		(3,489)
Goodwill and other intangible assets	(2,755)		(3,019)
Gross deferred tax liabilities	(6,637)		(6,508)
Net deferred tax liability	$	(3,150)	(2,780)

Of the $3.2 billion and $2.8 billion net deferred tax liability at December 31, 2020 and 2019, respectively, $3.3 billion and $2.9 billion is reflected as a long-term liability and $191 million and $118 million is reflected as a net noncurrent deferred tax asset, in other, net on our consolidated balance sheets at December 31, 2020 and 2019, respectively.

At December 31, 2020, we had federal NOLs of $5.1 billion, net of limitations of Section 382 of the Internal Revenue Code ("Section 382") and uncertain tax positions, for U.S. federal income tax purposes. If unused, the NOLs will expire between 2023 and 2037. The U.S. federal net operating loss carryforwards expire as follows:


Expiring	Amount
December 31,	(Dollars in millions)
2024	$	745
2025	1,042
2026	1,525
2027	375
2028	637
2029	645
2030	668
2031	733
2032	348
2033	238
2037	2,976
NOLs per return	9,932
Uncertain tax positions	(4,855)
Financial NOLs	$	5,077

We expect to use substantially all of these tax attributes to reduce our future federal tax liabilities, although the timing of that use will depend upon our future earnings and future tax circumstances.

At December 31, 2020 we had state net operating loss carryforwards of $17 billion (net of uncertain tax positions). We also had foreign NOL carryforwards of $7 billion. Our acquisitions of Level 3, Qwest and SAVVIS, Inc. caused "ownership changes" within the meaning of Section 382 for the acquired companies. As a result, our ability to use these NOLs and tax credits are subject to annual limits imposed by Section 382.

We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize. As of December 31, 2020, a valuation allowance of $1.5 billion was established as it is more likely than not that this amount of net operating loss, capital loss and tax credit carryforwards will not be utilized prior to expiration. Our valuation allowance at December 31, 2020 and 2019 is primarily related to foreign and state NOL carryforwards. This valuation allowance increased by $219 million during 2020, primarily due to the impact of foreign exchange rate adjustments and state law changes.

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2020 and 2019 is as follows:


	2020		2019
	(Dollars in millions)
Unrecognized tax benefits at beginning of year	$	1,538	1,587
Increase in tax positions of the current year netted against deferred tax assets	18		11
Increase in tax positions of prior periods netted against deferred tax assets	5		6
Decrease in tax positions of the current year netted against deferred tax assets	(86)		(49)
Decrease in tax positions of prior periods netted against deferred tax assets	(5)		(19)
Increase in tax positions taken in the current year	4		5
Increase in tax positions taken in the prior year	1		10
Decrease due to payments/settlements	(1)		(8)
Decrease due to the reversal of tax positions taken in a prior year	—		(5)
Unrecognized tax benefits at end of year	$	1,474	1,538

The total amount (including both interest and any related federal benefit) of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $267 million and $259 million at December 31, 2020 and 2019, respectively.

Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense. We had accrued interest (presented before related tax benefits) of approximately $23 million and $15 million at December 31, 2020 and 2019, respectively.

We, or at least one of our subsidiaries, file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2002. The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where net operating loss carryforwards are available.

Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may decrease by up to $3 million within the next 12 months. The actual amount of such decrease, if any, will depend on several future developments and events, many of which are outside our control.