

($ in millions)	2019			2018			2017
Current
U.S. federal		$86			$7			$179
U.S. state and local	15			4			49
Foreign	296			297			349
Total current income tax expense		$397			$308			$577
Deferred
U.S. federal		($1	)		$44			$107
U.S. state and local	13			7			(16		)
Foreign	(17		)	(6		)	(53		)
Total deferred income tax expense		($5	)		$45			$38
Total income tax expense		$392			$353			$615



	2019		2018		2017
U.S. federal income tax rate	21.0	%	21.0	%	35.0	%
Changes in rate due to:
U.S. tax cost/(benefit) - Tax Cuts & Jobs Act	0.3		(2.5	)	11.0
U.S./foreign tax differential	2.9		3.3		(9.3	)
U.S. current tax benefit on foreign exchange realization	—		—		(4.9	)
U.S. tax incentives	(0.7	)	(1.0	)	(2.3	)
U.S. tax benefit on foreign dividends	(0.9	)	(0.4	)	(1.9	)
U.S. state and local taxes	1.3		0.5		1.1
U.S. deferred tax benefit on foreign income	—		—		(0.6	)
Other	(0.3	)	—		2.6
Effective income tax rate	23.6	%	20.9	%	30.7	%

The effective income tax rate for 2019 and 2018 was 23.6% and 20.9%, respectively. The lower effective income tax rate in 2018 reflected a net benefit for provisional adjustments related to the Tax Cuts and Jobs Act. The company continues to realize tax credit incentives mostly comprised of U.S. benefits for research and development activities. Provisions for income taxes in 2019 also included a net benefit of global intangible low taxed income expense, foreign derived intangible income deductions and foreign tax credits. The total benefit for these U.S. provision items in 2019 was $22 million.

In 2018, PPG implemented updated regulations for certain aspects of the Tax Cuts and Jobs Act and PPG completed its accounting for the provisional amounts recognized in its consolidated financial statements in 2017. The finalization of the provisional accounting during 2018 resulted in a net tax benefit of $42 million, which consisted of a benefit of $20 million related to unrepatriated foreign earnings, a benefit of $22 million for adjustments to certain deferred taxes, a benefit of $14 million for foreign derived intangible income, partially offset by an expense of $14 million for global intangible low taxed income.

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act which, among other things lowered the U.S. corporate statutory income tax rate from 35% to 21%, eliminated certain deductible items and added other deductible items for corporations, imposed a tax on unrepatriated foreign earnings and eliminated U.S. taxes on most future foreign earnings.

In December 2017, as a result of the Tax Cuts and Jobs Act, the Company recorded a provisional net tax charge of $134 million, which included a tax on unrepatriated earnings of $250 million, a charge of approximately $125 million related to the remeasurement of U.S. deferred taxes at the new enacted statutory rate, partially offset by a benefit from the reversal of an existing deferred tax liability on repatriated foreign earnings of approximately $150 million and a benefit resulting from PPG’s decision to accelerate recognition of certain U.S. tax attributes during the fourth quarter. The total tax expense for 2017 includes a deferred tax benefit of $22 million related to the $60 million of pretax pension settlement charges discussed in Note 13, “Employee Benefit Plans.”

Income before income taxes of the Company’s U.S. operations for 2019, 2018 and 2017 was $596 million, $571 million and $713 million, respectively. Income before income taxes of the Company’s foreign operations for 2019, 2018 and 2017 was $1,065 million, $1,122 million and $1,292 million, respectively.

Deferred income taxes are provided for the effect of temporary differences that arise because there are certain items treated differently for financial accounting than for income tax reporting purposes. The deferred tax assets and liabilities are determined by applying the enacted tax rate in the year in which the temporary difference is expected to reverse.



($ in millions)	2019			2018
Deferred income tax assets related to
Employee benefits		$382			$366
Contingent and accrued liabilities	148			149
Operating loss and other carry-forwards	225			251
Inventories	4			7
Other	87			82
Valuation allowance	(158		)	(164		)
Total		$688			$691
Deferred income tax liabilities related to
Property		$277			$262
Intangibles	594			545
Employee benefits	65			46
Other	2			15
Total		$938			$868
Deferred income tax liabilities – net		($250	)		($177	)



($ in millions)	2019		2018		Expiration
Available net operating loss carryforwards, Tax Effected:
Indefinite expiration		$157		$124	NA
Definite expiration	25		68		2020 - 2039
Total		$182		$192	NA
Income tax credit carryforwards		$59		$61	2020 - 2039

A valuation allowance of $158 million and $164 million has been established for carry-forwards and certain other items at December 31, 2019 and 2018, respectively, when the ability to utilize them is not likely.

The Company had $3.6 billion and $3.0 billion of undistributed earnings of non-U.S. subsidiaries as of December 31, 2019 and 2018, respectively. These amounts relate to approximately 290 subsidiaries in approximately 75 taxable jurisdictions. The Company estimates repatriation of undistributed earnings of non-U.S. subsidiaries as of December 31, 2019 and 2018 would have resulted in a tax cost of $32 million and $19 million, respectively.

PPG has established deferred tax liabilities on certain undistributed earnings, namely in connection with divestitures and the funding of the Pittsburgh Corning Asbestos Trust (refer to Note 14, “Commitments and Contingent Liabilities”).

As of December 31, 2019, with exception of the aforementioned deferred liability established for the asbestos trust, the Company has not changed its intention to reinvest foreign earnings indefinitely or repatriate when it is tax effective to do so, and as such, has not established a liability for foreign withholding taxes or other costs that would be incurred if the earnings were repatriated.

The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is no longer subject to examinations by tax authorities in any major tax jurisdiction for years before 2008. Additionally, the Company is no longer subject to examination by the Internal Revenue Service for U.S. federal income tax returns filed for years through 2014. The examinations of the Company’s U.S. federal income tax returns for 2015 through 2016 are currently underway.



($ in millions)	2019			2018			2017
January 1		$166			$148			$94
Current year tax positions - additions	25			36			37
Prior year tax positions - additions	4			17			26
Prior year tax positions - reductions	(9		)	(6		)	—
Statute of limitations expirations	(6		)	(9		)	(8		)
Settlements	(12		)	(15		)	(10		)
Foreign currency translation	(1		)	(5		)	9
December 31		$167			$166			$148

Interest and penalties



($ in millions)	2019		2018		2017
Accrued interest and penalties related to unrecognized tax benefits		$17		$16		$15
Loss recognized in income tax expense related to interest and penalties		$1		$2		$4