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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes For financial reporting purposes, income before income taxes includes the following components:
For the Years Ended December 31,
(In millions of dollars) | 2020 |  | 2019 |  | 2018
Income before income taxes: |  |  |  |  |
U.S. | $ | 1,075 |  |  | $ | 657 |  |  | $ | 460 |
Other | 1,718 |  |  | 1,782 |  |  | 1,784 |
| $ | 2,793 |  |  | $ | 2,439 |  |  | $ | 2,244 |
The expense (benefit) for income taxes is comprised of: |  |  |  |
Current – |  |  |  |  |
U.S. Federal | $ | 172 |  |  | $ | 70 |  |  | $ | 82 |
Other national governments | 456 |  |  | 455 |  |  | 449 |
U.S. state and local | 79 |  |  | 57 |  |  | 82 |
| 707 |  |  | 582 |  |  | 613 |
Deferred – |  |  |  |  |
U.S. Federal | 40 |  |  | 69 |  |  | (30) |
Other national governments | (14) |  |  | (16) |  |  | (1) |
U.S. state and local | 14 |  |  | 31 |  |  | (8) |
| 40 |  |  | 84 |  |  | (39) |
Total income taxes | $ | 747 |  |  | $ | 666 |  |  | $ | 574 |
The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:
December 31,
(In millions of dollars) | 2020 |  | 2019
Deferred tax assets: |  |  |
Accrued expenses not currently deductible | $ | 547 |  |  | $ | 492 |
Differences related to non-U.S. operations (a) | 294 |  |  | 324 |
Accrued U.S. retirement benefits | 494 |  |  | 438 |
Net operating losses (b) | 60 |  |  | 70 |
Income currently recognized for tax | 25 |  |  | 19 |
Other | 43 |  |  | 27 |
| $ | 1,463 |  |  | $ | 1,370 |
Deferred tax liabilities: |  |  |
Differences related to non-U.S. operations | $ | 569 |  |  | $ | 400 |
Depreciation and amortization | 491 |  |  | 594 |
Accrued retirement & postretirement benefits - non-U.S. operations | 143 |  |  | 151 |
Capitalized expenses currently recognized for tax | 87 |  |  | 77 |
Other | 32 |  |  | 37 |
| $ | 1,322 |  |  | $ | 1,259 |
(a)Net of valuation allowances of $123 million in 2020 and $54 million in 2019. (b)Net of valuation allowances of $75 million in 2020 and $72 million in 2019.
December 31,
(In millions of dollars) | 2020 |  | 2019
Balance sheet classifications: |  |  |
Deferred tax assets | $ | 702 |  |  | $ | 676 |
Other liabilities | $ | 561 |  |  | $ | 565 |
The amount of cumulative undistributed earnings that are indefinitely reinvested in non-U.S. subsidiaries is approximately $700 million as of December 31, 2020. While no additional U.S. federal income tax would be required if such earnings were repatriated, additional state and withholding taxes would apply. The amount of these additional taxes is estimated to be approximately $60 million. Future U.S. federal tax costs related to basis differences in Non-U.S. subsidiaries would primarily be realized through the U.S. GILTI tax regime. The Company elected to recognize GILTI tax costs as a period cost and therefore, has not provided deferred tax liabilities on these basis differences. A reconciliation from the U.S. Federal statutory income tax rate to the Company’s effective income tax rate is shown below:
For the Years Ended December 31, | 2020 |  | 2019 |  | 2018
U.S. Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
U.S. state and local income taxes—net of U.S. Federal income tax benefit | 2.5 |  |  | 3.0 |  |  | 2.3 |
Differences related to non-U.S. operations | 2.3 |  |  | 3.0 |  |  | 3.3 |
U.S. Tax Reform | — |  |  | — |  |  | (0.3) |
Equity compensation | (1.4) |  |  | (1.3) |  |  | (1.0) |
Uncertain Tax Positions | 1.1 |  |  | — |  |  | — |
Other | 1.2 |  |  | 1.6 |  |  | 0.3 |
Effective tax rate | 26.7 | % |  | 27.3 | % |  | 25.6 | %
The Company’s consolidated effective tax rate was 26.7%, 27.3% and 25.6% in 2020, 2019 and 2018, respectively. The rates in all periods reflect the effects of tax planning and the ongoing impact of the Tax Cuts and Jobs Act ("TCJA"), including regulatory and other guidance as it became available. The tax rate in 2020 includes a valuation allowance for certain tax credits, the impact of uncertain tax positions, and certain tax planning benefits. The 2019 rate includes certain tax costs related to JLT integration and restructuring activity. The 2018 rate includes the effect of a charge related to the Company’s investment in Alexander Forbes. A valuation allowance was recorded to adjust deferred tax assets to the amount that the Company believes is more likely than not to be realized. Valuation allowances had net increases of $72 million, $60 million and $36 million in 2020, 2019 and 2018, respectively. Adjustments of the beginning of the year balances of valuation allowances decreased income tax expense by $14 million during 2020. There was no change to income tax expense as a result of adjustments of the beginning of the year valuation allowances in 2019, while in 2018 changes to the beginning of year valuation allowance increased income tax expense by $1 million. Approximately 58% of the Company’s net operating loss carryforwards expire from 2021 through 2037, and others are unlimited. The potential tax benefit from net operating loss carryforwards at the end of 2020 comprised federal, state and local, and non-U.S. tax benefits of $24 million, $25 million, and $94 million, respectively, before reduction for valuation allowances. Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018:
(In millions of dollars) | 2020 |  | 2019 |  | 2018
Balance at January 1, | $ | 86 |  |  | $ | 78 |  |  | $ | 71 |
Additions, based on tax positions related to current year | 9 |  |  | 8 |  |  | 6 |
Additions for tax positions of prior years | 25 |  |  | 15 |  |  | 6 |
Reductions for tax positions of prior years | (9) |  |  | (1) |  |  | — |
Settlements | (4) |  |  | (1) |  |  | (2) |
Lapses in statutes of limitation | (9) |  |  | (13) |  |  | (3) |
Balance at December 31, | $ | 98 |  |  | $ | 86 |  |  | $ | 78 |
Of the total unrecognized tax benefits at December 31, 2020, 2019 and 2018, $90 million, $75 million and $64 million, respectively, represent the amount that, if recognized, would favorably affect the effective tax rate in any future periods. The total gross amount of accrued interest and penalties at December 31, 2020, 2019 and 2018, before any applicable federal benefit, was $40 million, $31 million and $15 million, respectively. The Company is routinely examined by the jurisdictions in which it has significant operations. In the U.S. federal jurisdiction, the Company participates in the Internal Revenue Service’s (IRS) Compliance Assurance Process (CAP), which is structured to be, in effect, a real-time audit. The IRS is currently examining the Company’s 2017, 2018 and 2019 tax returns. The Company was accepted into the Bridge phase of the CAP process for tax year 2020. New York is a significant tax jurisdiction for the Company. During 2019, New York State initiated an audit for the 2015 tax year; and during 2020 included the 2016 tax year. During 2020, New York City initiated an audit for tax years 2016 through 2018. During 2018, New York State and New York City closed the examination of tax years 2007 through 2009. In addition, New York State and New York City have continuing examinations underway for various entities covering the years 2010 through 2014. The status of audits for significant jurisdictions outside the United States are summarized in the table below:
Tax Audit (Years) |  |  |  |  |  |
Jurisdiction: | Initiated in 2020 |  | Ongoing |  | Concluded |
Canada | 2017, 2019-2020 |  | 2018 |  | 2013-2016 during 2019 |
France |  |  | 2017-2018 |  | 2011, 2012 during 2018 |
Germany | 2015-2018 |  | 2013-2016 |  | 2009-2012 during 2018 |
Italy | 2017 |  | 2015-2016 |  |  |
Singapore | 2018 |  | 2018 |  | 2016, 2017 during 2020 |
United Kingdom | 2018 |  | 2016-2017 |  | 2014, 2015 during 2018 |
The Company has established liabilities for uncertain tax positions in relation to potential assessments in the jurisdictions in which it operates. The Company believes the resolution of tax matters will not have a material effect on the consolidated financial position of the Company, although a resolution of tax matters could have a material impact on the Company's net income or cash flows and on its effective tax rate in a particular future period. It is reasonably possible that the total amount of unrecognized tax benefits will decrease between zero and approximately $33 million within the next twelve months due to settlement of audits and expiration of statutes of limitation.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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