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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income tax provision consisted of the following for the years ended December 31, 2024, 2023 and 2022:
In millions202420232022
Current:
Federal$1,658 $2,819 $2,803 
State476 662 735 
2,134 3,481 3,538 
Deferred:
Federal(453)(537)(1,526)
State(119)(139)(503)
(572)(676)(2,029)
Total$1,562 $2,805 $1,509 

The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2024, 2023 and 2022:
202420232022
Statutory income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal tax benefit4.6 3.7 3.2 
Legal charges0.5 — 3.4 
Basis difference upon disposition of subsidiary— — 1.6 
Prior year refunds and unrecognized tax benefits— — (2.6)
Tax credits
(1.2)(0.3)(0.6)
Other0.5 0.7 (0.1)
Effective income tax rate25.4 %25.1 %25.9 %
The following table is a summary of the components of the Company’s deferred income tax assets and liabilities as of December 31, 2024 and 2023:
In millions20242023
Deferred income tax assets:
Lease and rents$4,763 $5,059 
Legal charges1,109 1,205 
Inventory68 94 
Employee benefits168 168 
Bad debts and other allowances593 606 
Net operating loss and capital loss carryforwards272 409 
Deferred income47 62 
Insurance reserves381 356 
Investments21 56 
Other486 372 
Valuation allowance(301)(385)
Total deferred income tax assets
7,607 8,002 
Deferred income tax liabilities:
Retirement benefits172 112 
Lease and rents4,125 4,469 
Depreciation and amortization7,116 7,732 
Total deferred income tax liabilities11,413 12,313 
Net deferred income tax liabilities$3,806 $4,311 

When evaluating the realizability of deferred tax assets, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and the Company’s recent operating results. The Company established a valuation allowance of $301 million and $385 million as of December 31, 2024 and 2023, respectively, because it does not consider it more likely than not that certain deferred tax assets will be recovered.

As of December 31, 2024, the Company had net operating and capital loss carryovers of $272 million, a portion of which has an indefinite carryforward period, while the remainder expires between 2025 and 2044.

A reconciliation of the beginning and ending balance of unrecognized tax benefits in 2024, 2023 and 2022 is as follows:
In millions202420232022
Beginning balance$436 $446 $782 
Additions based on tax positions related to the current year— 2 5 
Additions based on tax positions related to prior years67 46 42 
Reductions for tax positions of prior years(49)(24)(166)
Expiration of statutes of limitation(29)(34)(4)
Settlements(1)— (213)
Ending balance$424 $436 $446 

CVS Health Corporation and most of its subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and local jurisdictions. The IRS has completed its examinations of the Company’s consolidated U.S. federal income tax returns for tax years through 2016, 2018 and 2019. The IRS has substantially completed its examination of the Company’s consolidated U.S. federal income tax return for tax year 2017.

CVS Health Corporation and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2024, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s operating results, financial condition or liquidity.
Substantially all material state and local income tax matters have been concluded for fiscal years through 2015. Certain state exams are likely to be concluded and certain state statutes of limitations will lapse in 2025, but the change in the balance of the Company’s uncertain tax positions is projected to be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for certain previous years. An estimate of the range of the possible change cannot be made at this time.

The Company records interest expense related to unrecognized tax benefits and penalties in the income tax provision. The Company accrued interest expense of approximately $45 million, $31 million and $29 million in 2024, 2023 and 2022, respectively. The Company had approximately $165 million and $134 million accrued for interest and penalties as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate is approximately $324 million, after considering the federal benefit of state income taxes.