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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The provision for income taxes by taxing jurisdiction and by significant components consisted of the following:
($ in millions)202120202019
Current   
U.S. federal$25 $12 $86 
U.S. state and local13 6 15 
Foreign301 320 296 
Total current income tax expense$339 $338 $397 
Deferred   
U.S. federal$12 $1 ($1)
U.S. state and local3 (3)13 
Foreign20 (45)(17)
Total deferred income tax expense/(benefit)$35 ($47)($5)
Total income tax expense$374 $291 $392 
A reconciliation of the statutory U.S. corporate federal income tax rate to the Company’s effective tax rate follows:
202120202019
U.S. federal income tax rate21.0 %21.0 %21.0 %
Changes in rate due to:   
Taxes on non-U.S. earnings2.7 3.3 2.9 
U.S. state and local taxes0.8 0.3 1.3 
U.S. tax (benefit)/cost on foreign dividends(1.6)0.1 (0.9)
Tax benefits from equity awards(0.3)(0.4)— 
Change in valuation allowance reserves— (1.4)— 
U.S. tax incentives(0.6)(0.9)(0.7)
U.S. tax cost - Tax Cuts & Jobs Act— — 0.3 
Uncertain tax positions(1.4)0.9 0.3 
Other— (1.5)(0.6)
Effective income tax rate20.6 %21.4 %23.6 %
In 2021, the effective income tax rate included a net benefit of $66 million primarily driven by foreign tax credits, releases of reserves for uncertain tax positions and research and development credits. In 2020, the effective income tax rate included a net benefit of $30 million for changes in valuation allowance reserves and for U.S. research and development credits, as well as other credits. In 2019, the effective income tax rate included a net benefit of $22 million driven by
Global Intangible Low-Taxed Income, foreign derived intangible income deductions, foreign tax credits and research and development credits.
Income before income taxes of the Company’s U.S. operations for 2021, 2020 and 2019 was $469 million, $190 million and $596 million, respectively. Income before income taxes of the Company’s foreign operations for 2021, 2020 and 2019 was $1,346 million, $1,172 million and $1,065 million, respectively.
Deferred income taxes
Deferred income taxes are provided for the effect of temporary differences that arise because there are certain items treated differently for financial accounting than for income tax reporting purposes. The deferred tax assets and liabilities are determined by applying the enacted tax rate in the year in which the temporary difference is expected to reverse.
($ in millions)20212020
Deferred income tax assets related to
Employee benefits$386 $439 
Contingent and accrued liabilities74 118 
Operating loss and other carry-forwards278 293 
Operating lease liabilities215 209 
Research and development amortization68 — 
Other121 197 
Valuation allowance(172)(167)
Total$970 $1,089 
Deferred income tax liabilities related to  
Property$278 $240 
Intangibles814 663 
Employee benefits75 37 
Operating lease right-of-use assets216 206 
Other36 16 
Total$1,419 $1,162 
Deferred income tax liabilities – net($449)($73)
Net operating loss and credit carryforwards
($ in millions)20212020Expiration
Available net operating loss carryforwards, tax effected:
Indefinite expiration$106 $113 NA
Definite expiration77 80 2022-2041
Total$183 $193 
Income tax credit carryforwards$115 $119 2022-2041
A valuation allowance of $172 million and $167 million has been established for carry-forwards and certain other items at December 31, 2021 and 2020, respectively, when the ability to utilize them is not likely.
Undistributed foreign earnings
The Company had $4.3 billion and $4.1 billion of undistributed earnings of non-U.S. subsidiaries as of December 31, 2021 and 2020, respectively. These amounts relate to approximately 280 subsidiaries in approximately 80 taxable jurisdictions. The Company estimates repatriation of undistributed earnings of non-U.S. subsidiaries as of December 31, 2021 and 2020 would have resulted in a tax cost of $39 million and $40 million, respectively.
As of December 31, 2021, the Company has not changed its intention to reinvest foreign earnings indefinitely or repatriate when it is tax effective to do so, and as such, has not established a liability for foreign withholding taxes or other costs that would be incurred if the earnings were repatriated.
Unrecognized tax benefits
The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. The Company is no longer subject to examinations by tax authorities in any major tax jurisdiction for years before 2008. Additionally, the Company is no longer subject to examination by the Internal Revenue Service for U.S. federal income tax returns filed for years through 2016. The examinations of the Company’s U.S. federal income tax returns for 2017 through 2018 are currently underway.
A reconciliation of the total amounts of unrecognized tax benefits (excluding interest and penalties) as of December 31 follows:
($ in millions)202120202019
January 1$175 $167 $166 
Current year tax positions - additions12 25 25 
Prior year tax positions - additions10 5 4 
Prior year tax positions - reductions(2)(2)(9)
Statute of limitations expirations(19)(8)(6)
Settlements(21)(11)(12)
Foreign currency translation3 (1)(1)
December 31$158 $175 $167 
The Company expects that any reasonably possible change in the amount of unrecognized tax benefits in the next 12 months would not be significant. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $132 million as of December 31, 2021.
Interest and penalties
($ in millions)202120202019
Accrued interest and penalties related to unrecognized tax benefits$17 $18 $17 
(Income)/loss recognized in income tax expense related to interest and penalties($2)$2 $1 
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.