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Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Taxes
Note 12. Taxes
The components of income before provision for income taxes are as follows:
(dollars in millions)
Years Ended December 31,202120202019
Domestic$27,607 $22,844 $21,655 
Foreign1,813 1,123 1,078 
Total$29,420 $23,967 $22,733 

The components of the provision for income taxes are as follows:
(dollars in millions)
Years Ended December 31,202120202019
Current
Federal$1,876 $2,826 $518 
Foreign248 159 221 
State and Local414 1,081 974 
Total2,538 4,066 1,713 
Deferred
Federal3,354 1,432 1,150 
Foreign(97)1 (13)
State and Local1,007 120 95 
Total4,264 1,553 1,232 
Total income tax provision$6,802 $5,619 $2,945 

The following table shows the principal reasons for the difference between the effective income tax rate and the statutory federal income tax rate:
Years Ended December 31,202120202019
Statutory federal income tax rate21.0 %21.0 %21.0 %
State and local income tax rate, net of federal tax benefits3.8 3.9 3.7 
Affiliate stock disposition— — (9.9)
Noncontrolling interest(0.4)(0.5)(0.5)
Divestitures(0.6)0.1 (0.1)
Tax credits(0.5)(0.8)(1.3)
Other, net(0.2)(0.3)0.1 
Effective income tax rate23.1 %23.4 %13.0 %

The effective income tax rate for 2021 was 23.1% compared to 23.4% for 2020. The decrease in the effective income tax rate was primarily due to the sale of Verizon Media in the current period, partially offset by the non-recurring tax benefit recognized in 2020 from a series of legal entity restructurings. The increase in the provision for income taxes was primarily due to the increase in income before income taxes in the current period.

The effective income tax rate for 2020 was 23.4% compared to 13.0% for 2019. The increase in the effective income tax rate and the provision for income taxes was primarily due to the recognition of a $2.2 billion tax benefit in connection with the disposition of preferred stock representing a minority interest in a foreign affiliate in 2019 that did not reoccur in 2020.

The amounts of cash taxes paid by Verizon are as follows:
(dollars in millions)
Years Ended December 31,202120202019
Income taxes, net of amounts refunded$3,040 $2,725 $3,583 
Employment taxes1,225 618 1,044 
Property and other taxes1,756 2,093 1,551 
Total$6,021 $5,436 $6,178 
Deferred Tax Assets and Liabilities
Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. Significant components of deferred tax assets and liabilities are as follows:
(dollars in millions)
At December 31,20212020
Deferred Tax Assets
Employee benefits$4,388 $5,218 
Tax loss and credit carry forwards2,224 2,848 
Other - assets7,314 6,096 
13,926 14,162 
Valuation allowances(1,574)(2,183)
Deferred tax assets12,352 11,979 
Deferred Tax Liabilities
Spectrum and other intangible amortization24,935 22,726 
Depreciation19,893 18,009 
Other - liabilities8,041 6,867 
Deferred tax liabilities52,869 47,602 
Net deferred tax liability$40,517 $35,623 

At December 31, 2021, undistributed earnings of our foreign subsidiaries indefinitely invested outside the U.S. amounted to approximately $5.5 billion. The majority of Verizon's cash flow is generated from domestic operations and we are not dependent on foreign cash or earnings to meet our funding requirements, nor do we intend to repatriate these undistributed foreign earnings to fund U.S. operations. Furthermore, a portion of these undistributed earnings represents amounts that legally must be kept in reserve in accordance with certain foreign jurisdictional requirements and are unavailable for distribution or repatriation. As a result, we have not provided U.S. deferred taxes on these undistributed earnings because we intend that they will remain indefinitely reinvested outside of the U.S. and therefore unavailable for use in funding U.S. operations. Determination of the amount of unrecognized deferred taxes related to these undistributed earnings is not practicable.

At December 31, 2021, we had net after-tax loss and credit carry forwards for income tax purposes of approximately $2.2 billion that primarily relate to state and foreign taxes. Of these net after-tax loss and credit carry forwards, approximately $1.7 billion will expire between 2022 and 2041 and approximately $554 million may be carried forward indefinitely.

During 2021, the valuation allowance decreased approximately $609 million primarily due to the sale of Verizon Media. The $1.6 billion valuation allowance at December 31, 2021, is primarily related to state and foreign net operating losses and credits.

Unrecognized Tax Benefits
A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:
(dollars in millions)
202120202019
Balance at January 1,$2,944 $2,870 $2,871 
Additions based on tax positions related to the current year150 160 149 
Additions for tax positions of prior years621 258 297 
Reductions for tax positions of prior years(330)(166)(300)
Settlements(163)(46)(58)
Lapses of statutes of limitations(88)(132)(89)
Balance at December 31,$3,134 $2,944 $2,870 

Included in the total unrecognized tax benefits at December 31, 2021, 2020 and 2019 is $2.8 billion, $2.5 billion and $2.4 billion, respectively, that if recognized, would favorably affect the effective income tax rate.

We recognized the following net after-tax (benefit) expenses related to interest and penalties in the provision for income taxes:

Years Ended December 31,(dollars in millions)
2021$(21)
20205 
201935 
The after-tax accruals for the payment of interest and penalties in the consolidated balance sheets are as follows:

At December 31,(dollars in millions)
2021$551 
2020388 

The increase in unrecognized tax benefits was primarily related to the acquisition of Tracfone, and was partially offset by the resolution of issues with the Internal Revenue Service (IRS) involving tax years 2013-2014 as well as lapses of statutes of limitations in various jurisdictions. The uncertain tax benefits related to the acquisition of Tracfone involve pre-acquisition tax matters and are the subject of an indemnity from América Móvil for which a corresponding indemnity asset has been established.
Verizon and/or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state, local and foreign jurisdictions. As a large taxpayer, we are under audit by the IRS and multiple state and foreign jurisdictions for various open tax years. The IRS is currently examining the Company’s U.S. income tax returns for tax years 2015-2018 and Cellco's U.S. income tax return for tax years 2017-2018. Tax controversies are ongoing for tax years as early as 2006. The amount of the liability for unrecognized tax benefits will change in the next twelve months due to the expiration of the statute of limitations in various jurisdictions and it is reasonably possible that various current tax examinations will conclude or require reevaluations of the Company’s tax positions during this period. An estimate of the range of the possible change cannot be made until these tax matters are further developed or resolved.