INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax assets and liabilities at December 31, 2021 and 2020, are as follows:

(in millions)	2021			2020
DEFERRED TAX LIABILITIES:
Accelerated depreciation	$	2,883		$	2,939
Prepaid insurance	189			190
Operating lease right-of-use assets	356			423
Other	188			67
Total deferred tax liabilities	3,616			3,619
DEFERRED TAX ASSETS:
Accrued employee benefits	341			491
Rapid rewards loyalty liability	636			632
Operating lease liabilities	371			443
Customer travel credits	305			117
Construction obligation	—			72
Net operating losses and tax credits	36		(a)	60
Other	157			170
Total deferred tax assets	1,846			1,985
Net deferred tax liability	$	1,770		$	1,634

(a) At December 31, 2021 and 2020, the Company had approximately $44 million and $65 million, respectively, of state net operating loss carryforwards (tax effected) to reduce future state taxable income. These state net operating loss carryforwards will expire in years 2025 - 2040 if unused.

The provision (benefit) for income taxes is composed of the following:

(in millions)	2021		2020		2019
CURRENT:
Federal (a)	$	337	$	(273)	$	610
State	33		(5)		102
Change in federal statutory rate (b)	(2)		(188)		—
Total current	368		(466)		712
DEFERRED:
Federal (a)	(43)		(589)		(18)
State	2		(76)		(6)
State net operating losses	21		(51)		—
Change in federal statutory tax rate (c)	—		—		(31)
Total deferred	(20)		(716)		(55)
	$	348	$	(1,182)	$	657

(a) The CARES Act allows entities to carry back 2020 losses to prior periods of up to five years, and claim refunds of federal taxes paid. The Company has filed the refund claim with the IRS, and expects a refund of $472 million in the first six months of 2022.

(b) The benefit is representative of the excess refund generated as the result of carrying the 2020 losses back to a period when the federal statutory tax rate was 35 percent as opposed to the current tax rate of 21 percent.

(c) The Tax Cuts and Jobs Act was enacted in December 2017, which reduced the U.S. federal corporate tax rate from the previous rate of 35 percent to 21 percent.

The effective tax rate on Income (loss) before income taxes differed from the federal income tax statutory rate for the following reasons:

(in millions)	2021		2020			2019
Tax at statutory U.S. tax rates	$	278	$	(894)		$	621
State income taxes, net of federal benefit	45		(115)			76
Change in federal statutory tax rate	(2)		(188)		(a)	(31)		(b)
Other, net	27		15			(9)
Total income tax provision (benefit)	$	348	$	(1,182)		$	657

(a) The benefit is representative of the excess refund generated as the result of carrying the 2020 losses back to a period when the federal statutory tax rate was 35 percent as opposed to the current tax rate of 21 percent.

(b) The Tax Cuts and Jobs Act was enacted in December 2017, which reduced the U.S. federal corporate tax rate from the previous rate of 35 percent to 21 percent.

The only periods subject to examination for the Company’s federal tax return are the 2020 and 2021 tax years. The Company is also subject to various examinations from state and local income tax jurisdictions in the ordinary course of business. These examinations are not expected to have a material effect on the financial results of the Company.