Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Earnings before income taxes of $3.6 billion, $4.3 billion and $4.3 billion for fiscal years 2020, 2019 and 2018, respectively, represent earnings from domestic operations. The breakdown of income tax expense between current and deferred is as follows:

	Fiscal Years
(Dollars in Millions)	2020		2019		2018
Current:
Federal	$	559	$	608	$	572
State	123		104		144
Subtotal Current	682		712		716
Deferred:
Federal	149		235		275
State	31		38		4
Subtotal Deferred	180		273		279
Total Income Tax Expense	$	862	$	985	$	995

The Company recorded a 2020 income tax benefit of $30 million primarily as a result of the additional tax benefit associated with vesting of share-based awards and the resolution of certain tax matters. In 2019, the Company recorded an income tax benefit of $77 million primarily as a result of the additional tax benefit associated with vesting of share-based awards, the settlement of certain state tax matters, federal and state legislative changes, and a change in the valuation of deferred taxes as a result of filing the 2018 tax returns. The Company recorded a 2018 income tax benefit of $62 million primarily as a result of the additional tax benefit associated with vesting of share-based awards, state legislative changes, the settlement of certain state tax matters and a change in the valuation of deferred taxes as a result of filing the 2017 tax returns.

Income tax expense reconciled to the tax computed at statutory rates is presented in the following table. 

	Fiscal Years
(Dollars In Millions)	2020				2019				2018
Federal Income Taxes	$	762	21.0	%	$	906	21.0	%	$	904	21.0	%
State Income Taxes	117		3.2	%	108		2.5	%	112		2.6	%
Other	(17)		(0.4)	%	(29)		(0.7)	%	(21)		(0.5)	%
Income Tax Expense/ Rate	$	862	23.8	%	$	985	22.8	%	$	995	23.1	%

NOTE 12.  Income Taxes, continued

    The primary factors in the change in year-end net deferred income tax liability balances include the annual provision for deferred income tax expense and accumulated other comprehensive income/loss. The significant components of deferred income tax assets and liabilities include:

	2020				2019
(Dollars in Millions)	Assets		Liabilities		Assets		Liabilities
Pension Plans	$	62	$	—	$	71	$	—
Other Employee Benefit Plans	96		—		127		—
Accelerated Depreciation	—		7,195		—		7,020
Other	320		451		426		565
Total	$	478	$	7,646	$	624	$	7,585
Net Deferred Income Tax Liabilities			$	7,168			$	6,961

The Company files a consolidated federal income tax return, which includes its principal domestic subsidiaries. CSX and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. CSX participated in a contemporaneous IRS audit of tax years 2020 and 2019. Federal examinations of original federal income tax returns for all years through 2018 are resolved.

    As of December 2020, 2019 and 2018, the Company had approximately $16 million, $13 million and $12 million, respectively, of total unrecognized tax benefits as a result of uncertain tax positions. These tax benefits that were $13 million, $10 million and $9 million net of tax in 2020, 2019 and 2018, respectively, could favorably impact the effective income tax rate in each year. The Company does not expect that unrecognized tax benefits as of December 2020 for various state and federal income tax matters will significantly change over the next 12 months. The final outcome of these uncertain tax positions is not yet determinable. There were no material changes to the total gross unrecognized tax benefits and prior year audit resolutions of the Company during the fiscal year ended December 2020.

    CSX’s continuing practice is to recognize net interest and penalties related to income tax matters in income tax expense. Accrued interest and penalties were not material as of December 2020 or 2019. Additionally, expenses from changes to the reserves for interest and penalties were not material in 2020, 2019 or 2018