
	Years Ended December 31,
	2020		2019		2018
U.S. income	$	2,280	$	1,599	$	1,421
Non-U.S. income	275		339		289
Income before income taxes and equity income	$	2,555	$	1,938	$	1,710


Income Tax Expense	Years Ended December 31,
	2020		2019		2018
Current income tax expense
U.S. federal	$	129	$	—	$	—
U.S. state and local	143		16		1
Non-U.S.	67		81		83
Total current	339		97		84
Deferred income tax expense
U.S. federal	299		330		133
U.S. state and local	5		71		75
Non-U.S.	50		39		31
Total deferred	354		440		239
Total income tax provision	$	693	$	537	$	323

We have foreign subsidiaries with cumulative undistributed earnings that are indefinitely reinvested. Accordingly, no provision for U.S. income tax has been provided, and the unrecognized deferred tax liability is insignificant. An estimate of the undistributed earnings is $373 million and $409 million at December 31, 2020 and 2019.


	Years Ended December 31,
	2020		2019		2018
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
Non-U.S. income taxed at other than the U.S. federal statutory rate	1.5		2.1		2.8
State and local income taxes	4.1		4.0		4.2
U.S. tax on non-U.S. earnings	0.4		1.1		0.2
Valuation allowance	0.3		0.5		0.4
Tax credits and incentives	(0.2)		(0.7)		(6.2)
U.S. federal tax reform impact	—		—		(2.6)
Other	—		(0.3)		(0.9)
Effective tax rate	27.1	%	27.7	%	18.9	%

Deferred Income Tax Assets and Liabilities Deferred income tax assets and liabilities at December 31, 2020 and 2019 reflect the effect of temporary differences between amounts of assets, liabilities and equity for financial reporting purposes and the basis of such assets, liabilities and equity as measured by tax laws, as well as tax loss and tax credit carryforwards. The following table summarizes the components of temporary differences and carryforwards that give rise to deferred tax assets and liabilities:


	December 31, 2020		December 31, 2019
Deferred tax assets
Net operating loss carryforward - U.S.(a)	$	15	$	371
Net operating loss carryforward - non-U.S.(b)	150		178
Market value difference of loan portfolio	741		310
Accruals	86		115
Tax credits(c)	466		839
Other	282		185
Total deferred tax assets before valuation allowance	1,740		1,998
Less: valuation allowance	(291)		(279)
Total deferred tax assets	1,449		1,719
Deferred tax liabilities
Depreciable assets	2,038		2,177
Deferred acquisition costs	109		123
Other	160		152
Total deferred tax liabilities	2,307		2,452
Net deferred tax liability	$	(858)	$	(733)

(b)Includes tax-effected operating losses of $125 million expiring through 2040 and $25 million that may be carried forward indefinitely at December 31, 2020.

We are included in GM’s consolidated U.S. federal income tax return and certain states’ income tax returns. Net operating losses and certain tax credits generated by us have been utilized by GM; however, income tax expense and deferred tax balances are presented in these financial statements as if we filed our own tax returns in each jurisdiction. As of December 31, 2020, we have $291 million in valuation allowances against deferred tax assets in U.S. jurisdictions. The increase in valuation allowance of $12 million is primarily due to an increase in foreign tax credits.


Unrecognized Tax Benefits	Years Ended December 31,
	2020		2019		2018
Beginning balance	$	57	$	50	$	54
Additions to prior years' tax positions	—		1		—
Reductions to prior years' tax positions	(1)		—		—
Additions to current year tax positions	6		7		3
Changes in tax positions due to lapse of statutory limitations	3		(1)		(5)
Foreign currency translation	(3)		—		(2)
Ending balance	$	62	$	57	$	50

At December 31, 2020, 2019 and 2018, there were $40 million, $41 million and $37 million of net unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate.

We recognize accrued interest and penalties associated with uncertain tax positions as a component of the income tax provision. Accrued interest and penalties are included within other liabilities on the consolidated balance sheets.

At December 31, 2020 and 2019, we had liabilities of $57 million and $78 million for income tax-related interest and penalties.

At December 31, 2020, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax benefits in the next twelve months.

Other Matters We are included in GM's consolidated U.S. federal income tax returns and certain U.S. state returns, and we are obligated to pay GM for our share of these tax liabilities. Amounts owed to GM for income taxes are accrued and recorded as a related party payable. At December 31, 2020, we had $244 million in related party taxes payable for federal and state tax liabilities. At December 31, 2019, we had $4 million in related party taxes payable for state tax liabilities. The increase in federal tax liability is due to the full utilization of net operating loss carryforwards.

Income tax returns are filed in multiple jurisdictions and are subject to examination by taxing authorities throughout the world. We have open tax years from 2011 to 2020 with various tax jurisdictions. These open years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and/or recognition of expenses, or the sustainability of income tax credits. Certain of our state and foreign tax returns are currently under examination in various jurisdictions.