
(In millions)	Foreign			U.S.			Total
2020:
Current		$	822		$	(28)		$	794
Deferred		(28)			(1,385)			(1,413)
Total income tax expense		$	794		$	(1,413)		$	(619)
2019:
Current		$	737		$	69		$	806
Deferred		183			152			335
Total income tax expense		$	920		$	221		$	1,141
2018:
Current		$	771		$	608		$	1,379
Deferred		93			(409)			(316)
Total income tax expense		$	864		$	199		$	1,063

For the U.S., the Tax Cuts and Jobs Act (Tax Act) was signed into law on December 22, 2017. Effective January 1, 2018, the Tax Act imposed a broad number of changes in tax law, including permanently reducing the U.S. federal statutory corporate income tax rate from 35% to 21%, eliminating or reducing certain deductions and credits and limiting the deductibility of interest expense and executive compensation.

In March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law and includes certain income tax provisions relevant to businesses. The Company was required to recognize the effect on the consolidated financial statements in the period the law was enacted, which was the period ended March 31, 2020. For the year ended December 31, 2020, the CARES Act did not have a material impact on the Company’s consolidated financial statements.

In September 2020, the U.S. Treasury and Internal Revenue Service issued Final and Proposed Regulations which address, among other items, the allocation of insurance expenses in the calculation of the foreign tax credit limitation. These regulations clarify how insurance related expenses are allocated and apportioned for this purpose. The Company had previously established valuation allowances on deferred foreign tax credits due to the uncertainty that previously existed. Under the guidance of these regulations, the Company recognized a one-time income tax benefit of $1.4 billion due to the release of these valuation allowances which were predominantly established on the Company’s deferred foreign tax credit benefits. The Company has determined that this will also reduce its effective tax rate in future periods, subject to any future changes in U.S. tax policy.

Income tax expense in the accompanying statements of earnings varies from the amount computed by applying the expected U.S. tax rate of 21% in 2020, 2019 and 2018 to pretax earnings. The principal reasons for the differences and the related tax effects for the years ended December 31 were as follows:


(In millions)	2020			2019			2018
Income taxes based on U.S. statutory rates		$	873		$	933		$	836
Foreign rate differential		0			229			220
Valuation allowance release		(1,411)			0			0


Other, net		(81)			(21)			7
Income tax expense		$	(619)		$	1,141		$	1,063


(In millions)	2020			2019			2018
Statements of earnings		$	(619)		$	1,141		$	1,063
Other comprehensive income (loss):
Unrealized foreign currency translation gains (losses) during period		(3)			27			10
Unrealized gains (losses) on fixed maturity securities:
Unrealized holding gains (losses) on fixed maturity securities during period		223			1,532			(787)
Reclassification adjustment for (gains) losses on fixed maturity securities included in net earnings		33			5			(12)
Unrealized gains (losses) on derivatives during period		0			(3)			0
Pension liability adjustment during period		(2)			(18)			(8)
Total income tax expense (benefit) related to items of other comprehensive income (loss)		251			1,543			(797)

Total income taxes		$	(368)		$	2,684		$	266


(In millions)	2020			2019
Deferred income tax liabilities:
Deferred policy acquisition costs		$	3,663		$	3,492
Unrealized gains and other basis differences on investments		5,227			4,485
Foreign currency gain on Aflac Japan		70			0
Premiums receivable		112			152
Policy benefit reserves		3,834			3,442
Total deferred income tax liabilities		12,906			11,571
Deferred income tax assets:
Unfunded retirement benefits		9			8
Other accrued expenses		37			36
Policy and contract claims		868			781
Foreign currency loss on Aflac Japan		0			16
Deferred compensation		137			162
Capital loss carryforwards		12			34
Depreciation		202			164
Anticipatory foreign tax credit		5,972			5,487
Deferred foreign tax credit		647			605
Other		326			204
Total deferred income tax assets before valuation allowance		8,210			7,497
Valuation allowance		0			(1,340)
Total deferred income tax assets after valuation allowance		8,210			6,157
Net deferred income tax liability		4,696			5,414
Current income tax (asset) liability		(35)			(44)
Total income tax liability		$	4,661		$	5,370

The application of U.S. GAAP requires the Company to evaluate the recoverability of deferred tax assets and establish a valuation allowance if necessary to reduce the deferred tax asset to an amount that is more likely than not expected to be realized. The Company has determined no valuation allowance against its anticipatory foreign tax credits is necessary. The anticipatory foreign tax credit represents the foreign tax credit the Company will generate from the reversal of Japan deferred tax liabilities in the future. The release of the valuation allowance on the anticipatory foreign tax credit is due to the regulations addressing the allocation of insurance expenses in the calculation of the foreign tax credit released September 29, 2020. The Company has also determined no valuation allowance against its deferred foreign tax credits is

necessary. Deferred foreign tax credits are foreign tax credits generated in the current tax year by the Japanese life company, but are unable to be utilized until 2021 due to Japan's current tax year not closing until March 31, 2021. The release of the valuation allowance on the deferred foreign tax credit is also due to the foreign tax credit regulations released September 29, 2020. Based upon a review of the Company's anticipated future taxable income, and including all other available evidence, both positive and negative, the Company's management has concluded that, notwithstanding the items noted above, it is more likely than not that all other deferred tax assets will be realized.

Under U.S. income tax rules, only 35% of non-life operating losses can be offset against life insurance taxable income each year. For current U.S. income tax purposes, as of December 31, 2020, there were non-life operating loss carryforwards of $298 million available to offset against future taxable income, all of which do not expire. The Company has capital loss carryforwards of $55 million available to offset capital gains, all of which expire in 2025. The Company has foreign tax credit carryforwards of $22 million available to offset against future excess foreign taxes paid, all of which expire in 2031.

The Company files federal income tax returns in the U.S. and Japan as well as state or prefecture income tax returns in various jurisdictions in the two countries. The Company is currently under audit by the IRS for the 2013-2018 amended federal income tax returns. There are currently no other open Federal, State, or local U.S. income tax audits. U.S. federal income tax returns for years before 2016 are no longer subject to examination. Japan corporate income tax returns for years before 2016 are no longer subject to examination. Management believes it has established adequate tax liabilities and final resolution of all open audits is not expected to have a material impact on the Company's consolidated financial statements.

Included in the balance of the liability for unrecognized tax benefits at December 31, 2020, are $15 million of tax positions for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility, compared with $15 million at December 31, 2019. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate, but would accelerate the payment of cash to the taxing authority to an earlier period. The Company has accrued approximately $4 million as of December 31, 2020, for permanent uncertainties, which if reversed would not have a material effect on the annual effective rate.

The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognized approximately $1 million in interest and penalties in 2020, compared with $1 million in 2019 and $1 million in 2018. The Company has accrued approximately $3 million for the payment of interest and penalties as of December 31, 2020, compared with $2 million at December 31, 2019.