Income Taxes

Income tax expense (benefit) was as follows (in millions):



	Years ended December 31,
	2019		2018		2017
Current:
Federal	$	989	$	1,037	$	1,286
State	226		228		163
Total current	1,215		1,265		1,449
Deferred:
Federal	470		366		(6,555		)
State	84		13		134
Total deferred	554		379		(6,421		)
Total	$	1,769	$	1,644	$	(4,972	)

Reconciliation of the U.S. federal statutory income tax rate to the effective tax rate was as follows:



	Years ended December 31,
	2019		2018		2017
U.S. Federal statutory income tax rate	21.0	%	21.0	%	35.0	%
State income taxes, net of federal tax benefit	3.4		2.8		2.9
Tax law change	—		—		(116.0	)
Other, net	—		0.2		(0.5	)
Effective tax rate	24.4	%	24.0	%	(78.6	)%

The components of deferred tax assets and liabilities were as follows (in millions):



	December 31, 2019			December 31, 2018
Deferred tax liabilities:
Property and equipment	$	(14,313	)	$	(13,860	)
Operating lease right-of-use assets	(492		)	—
Other	(524		)	(346		)
Total deferred tax liabilities	(15,329		)	(14,206		)
Deferred tax assets:
Operating lease liabilities	475			—
Compensation and benefits	158			165
Casualty and environmental	114			122
Other	229			124
Total deferred tax assets	976			411
Net deferred tax liability	$	(14,353	)	$	(13,795	)

BNSF is included in the consolidated U.S. federal income tax return of Berkshire. BNSF’s tax expense and liabilities have been computed on a stand-alone basis, and all of its currently payable federal income taxes are remitted to Berkshire. See Note 14 to the Consolidated Financial Statements for information related to income taxes paid to Berkshire during 2019.

All U.S. federal income tax returns of BNSF are closed for audit through the tax period ended December 31, 2011. BNSF is currently under examination for the years 2012 through 2016 as part of Berkshire's consolidated U.S. federal income tax return.

BNSF and its subsidiaries have various state income tax returns in the process of examination, administrative appeal or litigation. State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

Tax Reform

As a result of the Tax Act signed into law on December 22, 2017, the provision for income taxes for the fourth quarter of 2017 was adjusted to reflect the revaluation of BNSF’s deferred tax liability by $7.3 billion as a result of the reduction of the federal income tax rate from 35 percent to 21 percent effective January 1, 2018. The effective tax rate for 2017 was negative 78.6 percent. Without the decrease to income tax expense arising from the Tax Act, the effective tax rate for 2017 would have been positive 37.4 percent.

Uncertain Tax Positions

The amount of unrecognized tax benefits for the years ended December 31, 2019, 2018 and 2017, was $46 million, $50 million, and $57 million, respectively. The amount of unrecognized tax benefits as of December 31, 2019 that would affect the Company’s effective tax rate if recognized was $33 million, computed at the federal income tax rate expected to be applicable in the taxable period in which the amount may be incurred by the Company. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):



	Years ended December 31,
	2019			2018			2017
Beginning balance	$	50		$	57		$	62
Additions for tax positions related to current year	8			2			7
Additions (reductions) for tax positions taken in prior years	(6		)	5			(1		)
Additions (reductions) for tax positions as a result of:
Lapse of statute of limitations	(6		)	(14		)	(11		)
Ending balance	$	46		$	50		$	57

It is expected that the amount of unrecognized tax benefits will change in the next twelve months; however, BNSF does not expect the change to have a significant impact on the results of operations, the financial position or the cash flows of the Company.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in income tax expense in the Consolidated Statements of Income. The Company had recorded a liability of approximately $7 million for interest for both years ended December 31, 2019 and 2018.