Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Taxes

Provision for Income Taxes

Our income tax expense consisted of the following for the years ended December 31 (in millions):

	2019		2018		2017
Current:
Federal	$	204	$	256	$	400
State		94		132		56
Foreign		36		40		37
		334		428		493
Deferred:
Federal		94		59		(316)
State		8		(32)		62
Foreign		(2)		(2)		3
		100		25		(251)
Income tax expense	$	434	$	453	$	242

U.S. Federal Statutory Income Tax Rate Reconciled to Effective Rate

The U.S. federal statutory income tax rate is reconciled to the effective income tax rate for the years ended December 31 as follows:

	2019		2018		2017
Income tax expense at U.S. federal statutory rate	21.00	%	21.00	%	35.00	%
State and local income taxes, net of federal income tax benefit	4.39		4.41		3.25
Impacts of enactment of tax reform	—		(0.51)		(24.14)
Federal tax credits	(4.38)		(2.44)		(2.31)
Taxing authority audit settlements and other tax adjustments	(0.74)		(3.85)		0.03
Tax impact of equity-based compensation transactions	(0.91)		(0.54)		(1.45)
Tax impact of impairments	0.72		0.03		0.66
Tax rate differential on foreign income	0.40		0.43		(0.55)
Other	0.13		0.51		0.55
Effective income tax rate	20.61	%	19.04	%	11.04	%

Summary of income source

For financial reporting purposes, income before income taxes by source for the years ended December 31 was as follows (in millions):

	2019		2018		2017
Domestic	$	2,025	$	2,235	$	2,040
Foreign (a)		80		141		151
Income before income taxes	$	2,105	$	2,376	$	2,191

(a) Foreign income before income taxes for the year ended December 31, 2019 includes a $52 million impairment charge related to our minority-owned investment in a waste conversion technology business. See Note 12 for further discussion.

Components of Net Deferred Tax Assets (Liabilities)

The components of net deferred tax liabilities as of December 31 are as follows (in millions):

	2019		2018
Deferred tax assets:
Net operating loss, capital loss and tax credit carry-forwards	$	150	$	258
Landfill and environmental remediation liabilities		156		143
Operating lease liabilities		114		—
Miscellaneous and other reserves, net		150		175
Subtotal		570		576
Valuation allowance		(162)		(261)
Deferred tax liabilities:
Property and equipment		(842)		(752)
Goodwill and other intangibles		(865)		(854)
Operating lease right-of-use assets		(108)		—
Net deferred tax liabilities	$	(1,407)	$	(1,291)

Summary of unrecognized tax benefits

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, including accrued interest, is as follows (in millions):

	2019		2018		2017
Balance as of January 1	$	36	$	109	$	82
Additions based on tax positions related to the current year		5		6		19
Additions based on tax positions of prior years		—		12		11
Accrued interest		2		2		4
Settlements		—		(88)		(1)
Lapse of statute of limitations		(3)		(5)		(6)
Balance as of December 31	$	40	$	36	$	109