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Taxes
 12 Months Ended
Dec. 31, 2022
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 31,202220212020
Domestic$26,822 $27,607 $22,844 
Foreign1,449 1,813 1,123 
Total$28,271 $29,420 $23,967 

The components of the provision for income taxes are as follows:
(dollars in millions)
Years Ended December 31,202220212020
Current
Federal$2,411 $1,876 $2,826 
Foreign201 248 159 
State and Local938 414 1,081 
Total3,550 2,538 4,066 
Deferred
Federal2,529 3,354 1,432 
Foreign(22)(97)1 
State and Local466 1,007 120 
Total2,973 4,264 1,553 
Total income tax provision$6,523 $6,802 $5,619 

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 31,202220212020
Statutory federal income tax rate21.0 %21.0 %21.0 %
State and local income tax rate, net of federal tax benefits3.9 3.8 3.9 
Noncontrolling interest(0.4)(0.4)(0.5)
Divestitures— (0.6)0.1 
Tax credits(0.5)(0.5)(0.8)
Other, net(0.9)(0.2)(0.3)
Effective income tax rate23.1 %23.1 %23.4 %

The effective income tax rate for 2022 and 2021 was 23.1%. The effective income tax rate for the twelve months ended December 31, 2022 was comparable to the similar period in 2021. The decrease in the provision for income taxes was primarily due to the decrease in income before income taxes in the current period.

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 2021, 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 2021.

The amounts of cash taxes paid by Verizon are as follows:
(dollars in millions)
Years Ended December 31,202220212020
Income taxes, net of amounts refunded$2,736 $3,040 $2,725 
Employment taxes1,245 1,225 618 
Property and other taxes1,959 1,756 2,093 
Total$5,940 $6,021 $5,436 
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 31,20222021
Deferred Tax Assets
Employee benefits$3,888 $4,388 
Tax loss, credit, and other carry forwards1,940 2,224 
Other - assets6,986 7,314 
12,814 13,926 
Valuation allowances(1,347)(1,574)
Deferred tax assets11,467 12,352 
Deferred Tax Liabilities
Spectrum and other intangible amortization25,851 24,935 
Depreciation21,388 19,893 
Other - liabilities7,496 8,041 
Deferred tax liabilities54,735 52,869 
Net deferred tax liability$43,268 $40,517 

At December 31, 2022, undistributed earnings of our foreign subsidiaries indefinitely invested outside the U.S. amounted to approximately $2.5 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, 2022, we had net after-tax loss, credit, and other carry forwards for income tax purposes of approximately $1.9 billion that relate to federal, state and foreign taxes. Of these net after-tax loss, credit, and other carry forwards, approximately $1.2 billion will expire between 2023 and 2042 and approximately $732 million may be carried forward indefinitely.

During 2022, the valuation allowance decreased approximately $227 million. The $1.3 billion valuation allowance at December 31, 2022, as well as the 2022 activity is primarily related to state and foreign taxes.

Unrecognized Tax Benefits
A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows:
(dollars in millions)
202220212020
Balance at January 1,$3,134 $2,944 $2,870 
Additions based on tax positions related to the current year123 150 160 
Additions for tax positions of prior years122 621 258 
Reductions for tax positions of prior years(419)(330)(166)
Settlements(92)(163)(46)
Lapses of statutes of limitations(56)(88)(132)
Balance at December 31,$2,812 $3,134 $2,944 

Included in the total unrecognized tax benefits at December 31, 2022, 2021 and 2020 is $2.5 billion, $2.8 billion and $2.5 billion, respectively, that if recognized, would favorably affect the effective income tax rate.

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

Years Ended December 31,(dollars in millions)
2022$35 
2021(21)
20205 
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)
2022$544 
2021551 

The decrease in unrecognized tax benefits was primarily related to the resolution of issues with the Internal Revenue Service (IRS) involving tax years 2015-2016 as well as final purchase accounting adjustments made in connection with the 2021 acquisition of TracFone. The uncertain tax benefits related to the acquisition of TracFone are the subject of an indemnity from América Móvil for which there is a corresponding indemnity asset.
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 2017-2018 and Cellco's U.S. income tax return for tax years 2017-2019. Tax controversies are ongoing for tax years as early as 2009 in certain states and as early as 2000 outside the U.S. 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.