Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Components of income tax expense

The components of income tax expense for the years ended December 31 included in Credco’s Consolidated Statements of Income were as follows:

(Millions)	2019		2018		2017
Current income tax expense (benefit):
U.S. federal	$	45	$	(14)	$	785
U.S. state and local	13		(6)		15
Non-U.S.	23		84		24
Total current income tax expense	81		64		824
Deferred income tax expense (benefit):
U.S. federal	11		(28)		58
U.S. state and local	—		1		1
Non-U.S.	2		(8)		(5)
Total deferred income tax expense (benefit)	13		(35)		54
Total income tax expense	$	94	$	29	$	878

Effective income tax rate

A reconciliation of the U.S. federal statutory rate of 21 percent as of both December 31, 2019, and 2018, and 35 percent as of December 31, 2017, to Credco’s actual income tax rate on continuing operations was as follows:

	2019		2018		2017
U.S. statutory federal income tax rate	21.0	%	21.0	%	35.0	%
Increase (decrease) in taxes resulting from:
State and local income taxes, net of federal benefit	0.8		(0.4)		(0.3)
Non-U.S. subsidiaries earnings(a)	(3.7)		(8.7)		(25.7)
Tax settlements(b)	—		—		(1.1)
U.S. Tax Act(c)	—		(5.6)		311.6
Other(d)	0.3		0.7		(0.2)
Actual tax rate	18.4	%	7.0	%	319.3	%

(a)2017 primarily included tax benefits associated with the undistributed earnings of certain non-U.S. subsidiaries that were deemed to be reinvested indefinitely.

(b)Related to the resolution of tax matters in various jurisdictions.

(c)2017 included the $858 million provisional charge for the impacts of the Tax Act and the adjustments thereto are included in 2018.

(d)Results for all years include the impact of prior year tax returns filed in the current year.

Components of deferred tax assets and liabilities

The significant components of deferred tax assets and liabilities as of December 31 are reflected in the following table:

(Millions)	2019		2018
Deferred tax assets:
Reserves not yet deducted for tax purposes	$	29	$	36
State income taxes	9		7
Foreign exchange loss	32		42
Other	25		29
Gross deferred tax assets	95		114
Deferred tax liabilities:
Investment in foreign subsidiaries(a)	74		77
Gross deferred tax liabilities	74		77
Net deferred tax assets	$	21	$	37

(a)Deferred state income and foreign withholding tax consequences of future cash distributions from non-U.S. subsidiaries.

Changes in unrecognized tax benefits

The following table presents changes in unrecognized tax benefits:

(Millions)	2019		2018		2017
Balance, January 1	$	73	$	24	$	308
Increases:
Current year tax positions	5		4		8
Tax positions related to prior years	4		46		—
Decreases:
Tax positions related to prior years(a)	—		—		(289)
Lapse of statute of limitations	(2)		(1)		(3)
Balance, December 31	$	80	$	73	$	24

(a)Decrease due to the resolution with the IRS of an uncertain tax position in January 2017, which resulted in the recognition of $289 million in shareholder’s equity, specifically within AOCI.

Deemed repatriation tax payments due by year

	Payments due by year
(Millions)	2020		2021 - 2022		2023 – 2024		2025 and thereafter		Total
Deemed repatriation tax(a)	$	—	$	—	$	115	$	326	$	441

(a)In 2019, the IRS applied the prior year U.S. federal income tax return overpayment against a portion of the remaining obligation.