Deferred income taxes reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and such amounts for tax purposes. The Company has a net deferred tax liability, primarily due to differences in depreciation rates for federal income tax purposes and for financial reporting purposes.

Deferred tax (assets) and liabilities comprise the following (in millions):


	2023		2022
Excess of tax over book depreciation	$	1,605	$	1,312
Intangibles - net	16		17
Operating lease assets	292		356
Other - net	3		49
Deferred tax liabilities	1,916		1,734

Mileage Plan	(455)		(436)
Inventory obsolescence	(23)		(21)

Employee benefits	(159)		(145)
Net operating losses	(166)		(28)
Operating lease liabilities	(329)		(392)
Leasehold maintenance	(28)		(67)
Other - net	(77)		(88)
Deferred tax assets	(1,237)		(1,177)
Valuation allowance	16		17
Net deferred tax liabilities	$	695	$	574

At December 31, 2023, the Company has paid taxes of $16 million and does not expect to pay any additional tax for 2023. The Company is also awaiting payment of a $4 million federal tax refund receivable as a result of carrying back capital losses and credits to previous tax years. The Company also has gross state and local NOLs of approximately $467 million that expire

Valuation allowances are provided to reduce the related deferred income tax assets to an amount which will, more likely than not, be realized. The Company has determined it is more likely than not that a portion of the federal capital loss carryforward and state NOL carryforward will not be realized and, therefore has provided a valuation allowance of $16 million for that portion as of December 31, 2023. The Company has likewise concluded it is more likely than not that all of its federal and the remaining state deferred income tax assets will be realized and thus no additional valuation allowance has been recorded. The Company reassesses the need for a valuation allowance each reporting period.


	2023		2022		2021
Current income tax (benefit) expense:
Federal	$	(3)	$	(11)	$	40
State	(4)		(3)		16
Total current income tax (benefit) expense	(7)		(14)		56

Deferred income tax expense:
Federal	82		32		80
State	13		3		15
Total deferred income tax expense	95		35		95
Income tax expense	$	88	$	21	$	151


	2023			2022			2021
Income before income tax	$	323		$	79		$	629

Expected tax expense	68			17			132
Nondeductible expenses	14			11			10
State income tax expense	17			5			20
Tax law changes	—			—			(14)
State income sourcing	(5)			(2)			—
Valuation allowance	(1)			(4)			1
Tax credits	(3)			(5)			(2)
Uncertain tax positions	(5)			(1)			3
Other - net	3			—			1
Actual tax expense	$	88		$	21		$	151

Effective tax rate(a)	27.1		%	26.2		%	24.0		%

The Company has identified its federal tax return and its state tax returns in Alaska, Oregon and California as “major” tax jurisdictions. A summary of the Company's jurisdictions and the periods that are subject to examination are as follows:


Jurisdiction			Period
Federal			2020 to 2022
Alaska			2018 to 2022
California			2007 to 2022
Oregon			2015 to 2022

Changes in the liability for gross unrecognized tax benefits during 2023, 2022 and 2021 are as follows (in millions):


	2023		2022		2021
Balance at January 1	$	21	$	41	$	35
Additions related to prior years	—		—		3
Releases related to prior years	—		(1)		—
Additions related to current year activity	9		1		3

Releases due to settlements	(3)		(20)		—
Releases due to lapse of statute of limitations	(2)		—		—
Balance at December 31	$	25	$	21	$	41

As of December 31, 2023, the Company had $25 million of accrued tax contingencies, of which $20 million, if fully recognized, would decrease the effective tax rate. As of December 31, 2023, 2022 and 2021, the Company has accrued interest and penalties, net of federal income tax benefit, of $2 million, $3 million, and $8 million. In 2023, 2022, and 2021, the Company recognized an immaterial benefit, a benefit of $5 million, and expense of $2 million for interest and penalties, net of federal income tax benefit. At December 31, 2023, the Company has unrecognized tax benefits recorded as a liability. These uncertain tax positions could change because of the Company's ongoing audits, settlement of issues, new audits, and status of other taxpayer court cases. The Company cannot predict the timing of these actions.