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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Taxes |
Income Taxes | 8. Income Taxes Income Tax Expense Our income tax expense consisted of the following for the year ended December 31 (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
Current: |  | ​ |  |  | ​ |  |  | ​ |
Federal | ​ | $ | 436 | ​ | $ | 114 | ​ | $ | 204
State | ​ |  | 132 | ​ |  | 91 | ​ |  | 94
Foreign | ​ |  | 41 | ​ | ​ | 27 | ​ | ​ | 36
​ | ​ |  | 609 | ​ | ​ | 232 | ​ | ​ | 334
Deferred: | ​ |  |  | ​ | ​ |  | ​ | ​ |
Federal | ​ |  | (55) | ​ | ​ | 149 | ​ | ​ | 94
State | ​ |  | (22) | ​ | ​ | 10 | ​ | ​ | 8
Foreign | ​ |  | — | ​ | ​ | 6 | ​ | ​ | (2)
​ | ​ |  | (77) | ​ | ​ | 165 | ​ | ​ | 100
Income tax expense | ​ | $ | 532 | ​ | $ | 397 | ​ | $ | 434
​ The U.S. federal statutory income tax rate is reconciled to the effective income tax rate for the year ended December 31 as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  |  | 2020 |  | ​ | 2019 |
Income tax expense at U.S. federal statutory rate |  | 21.00 | % |  | 21.00 | % | ​ | 21.00 | %
State and local income taxes, net of federal income tax benefit |  | 4.14 |  |  | 4.46 |  | ​ | 4.39 | ​
Federal tax credits |  | (2.69) |  |  | (3.78) |  | ​ | (4.38) | ​
Taxing authority audit settlements and other tax adjustments |  | 0.53 |  |  | (0.17) |  | ​ | (0.74) | ​
Tax impact of equity-based compensation transactions |  | (0.60) |  |  | (1.12) |  | ​ | (0.91) | ​
Tax impact of impairments |  | (0.29) |  |  | (0.35) |  | ​ | 0.72 | ​
Tax rate differential on foreign income |  | 0.37 |  |  | 0.33 |  | ​ | 0.40 | ​
Other |  | 0.16 |  |  | 0.57 |  | ​ | 0.13 | ​
Effective income tax rate |  | 22.62 | % |  | 20.94 | % | ​ | 20.61 | %
​ The comparability of our income tax expense for the reported periods has been primarily affected by (i) variations in our income before income taxes; (ii) federal tax credits; (iii) excess tax benefits associated with equity-based compensation transactions; (iv) the realization of state net operating losses and credits; (v) tax audit settlements; (vi) adjustments to our accruals and deferred taxes; (vii) the tax implications of divestitures; (viii) non-deductible transaction costs and (ix) the tax implications of impairments. For financial reporting purposes, income before income taxes by source for the year ended December 31 was as follows (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
Domestic | ​ | $ | 2,211 | ​ | $ | 1,780 | ​ | $ | 2,025
Foreign | ​ |  | 138 | ​ | ​ | 113 | ​ | ​ | 80
Income before income taxes | ​ | $ | 2,349 | ​ | $ | 1,893 | ​ | $ | 2,105
​ Investments Qualifying for Federal Tax Credits — We have significant financial interests in entities established to invest in and manage low-income housing properties. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments qualify for federal tax credits that we expect to realize through 2030 under Section 42 or Section 45D of the Internal Revenue Code. We also held a residual financial interest in an entity that owned a refined coal facility that qualified for federal tax credits under Section 45 of the Internal Revenue Code through 2019. The entity sold the majority of its assets in the first quarter of 2020, which resulted in a $7 million non-cash impairment of our investment at that time. We account for our investments in these entities using the equity method of accounting, recognizing our share of each entity’s results of operations and other reductions in the value of our investments in equity in net losses of unconsolidated entities within our Consolidated Statements of Operations. During the years ended December 31, 2021, 2020 and 2019, we recognized net losses of $51 million, $73 million (including the $7 million impairment of the refined coal facility noted above) and $46 million, respectively, and a reduction in our income tax expense of $74 million, $87 million and $96 million, respectively, primarily due to tax credits realized from these investments as well as the tax benefits from the pre-tax losses realized. See Note 18 for additional information related to these unconsolidated variable interest entities. Other Federal Tax Credits — During 2021, 2020 and 2019, we recognized federal tax credits in addition to the tax credits realized from our investments in low-income housing properties and the refined coal facility, resulting in a reduction in our income tax expense of $5 million, $7 million and $11 million, respectively. Equity-Based Compensation — During 2021, 2020 and 2019, we recognized excess tax benefits related to the vesting or exercise of equity-based compensation awards resulting in a reduction in our income tax expense of $18 million, $27 million and $25 million, respectively. State Net Operating Losses and Credits — During 2021, 2020 and 2019, we recognized state net operating losses and credits resulting in a reduction in our income tax expense of $15 million, $12 million and $14 million, respectively. Tax Audit Settlements — We file income tax returns in the U.S. and Canada, as well as other state and local jurisdictions. We are currently under audit by various taxing authorities, as discussed below, and our audits are in various stages of completion. During the reported periods, we settled various tax audits which resulted in a reduction in our income tax expense of $13 million, $10 million and $2 million for the years ended December 31, 2021, 2020 and 2019, respectively. We participate in the IRS’s Compliance Assurance Process, which means we work with the IRS throughout the year towards resolving any material issues prior to the filing of our annual tax return. Any unresolved issues as of the tax return filing date are subject to routine examination procedures. We are currently in the examination phase of IRS audits for the 2017, 2020 and 2021 tax years and expect these audits to be completed within the next 15 months. We are also currently undergoing audits by various state and local jurisdictions for tax years that date back to 2014. Adjustments to Accruals and Related Deferred Taxes — Adjustments to our accruals and related deferred taxes primarily due to the filing of our income tax returns, analysis of our deferred tax balances and uncertain tax positions, and changes in state and foreign laws resulted in an increase in our income tax expense of $17 million for the year ended December 31, 2021, and a reduction in our income tax expense of $3 million and $22 million for the years ended December 31, 2020 and 2019, respectively. Tax Implications of Divestitures – During 2021, we recognized a pre-tax gain from the recognition of cumulative translation adjustments on the divestiture of certain non-strategic Canadian operations. This gain was not taxable, which resulted in a reduction in our income tax expense of $8 million. Non-Deductible Transaction Costs — During 2020 and 2019, we recognized the detrimental tax impact of $27 million and $10 million, respectively, of non-deductible transaction costs related to our acquisition of Advanced Disposal. The tax rules require the capitalization of certain facilitative costs on the acquisition of stock of a company resulting in the applicable costs not being deductible for tax purposes. Tax Implications of Impairments — Portions of the impairment charges recognized during 2019 were not deductible for tax purposes resulting in an increase in income tax expense of $15 million. The non-cash impairment charges recognized during 2021 and 2020 were deductible for tax purposes. See Note 11 for more information related to our impairment charges. Unremitted Earnings in Foreign Subsidiaries — In the third quarter of 2020, we modified our permanent reinvestment assertion and began providing additional income taxes for the undistributed current year earnings of our foreign subsidiaries. No additional income taxes have been provided for any remaining undistributed foreign earnings prior to 2020 not subject to the one-time, mandatory transition tax, or any additional outside basis difference, as these amounts continue to be indefinitely reinvested in foreign operations. Deferred Tax Assets (Liabilities) The components of net deferred tax liabilities as of December 31 are as follows (in millions): ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020(a)
Deferred tax assets: |  | ​ |  |  | ​ |
Net operating loss, capital loss and tax credit carry-forwards | ​ | $ | 189 | ​ | $ | 186
Landfill and environmental remediation liabilities | ​ |  | 238 | ​ |  | 202
Operating lease liabilities | ​ |  | 135 | ​ |  | 141
Miscellaneous and other reserves, net | ​ |  | 113 | ​ |  | 103
Subtotal | ​ |  | 675 | ​ |  | 632
Valuation allowance | ​ |  | (158) | ​ |  | (150)
Deferred tax liabilities: | ​ |  |  | ​ |  |
Property and equipment | ​ |  | (1,064) | ​ |  | (1,137)
Goodwill and other intangibles | ​ |  | (1,027) | ​ |  | (1,027)
Operating lease right-of-use assets | ​ |  | (120) | ​ |  | (124)
Net deferred tax liabilities | ​ | $ | (1,694) | ​ | $ | (1,806)
(a) | We have revised the classification between components of the net deferred tax liability as of December 31, 2020 in order to present the balances on a comparative basis with the classification as of December 31, 2021. These classification revisions were made as we finalized the integration of the Advanced Disposal tax processes.
As of December 31, 2021, we had $11 million of federal net operating loss carry-forwards with expiration dates through 2026 and $2.7 billion of state net operating loss carry-forwards with expiration dates through 2041. We also had $47 million of federal capital loss carry-forwards with expiration dates through 2025, $38 million of foreign tax credit carry-forwards with expiration dates through 2031 and $12 million of state tax credit carry-forwards with expiration dates through 2037. We have established valuation allowances for uncertainties in realizing the benefit of certain tax loss and credit carry-forwards and other deferred tax assets. While we expect to realize the deferred tax assets, net of the valuation allowances, changes in estimates of future taxable income or in tax laws may alter this expectation. Liabilities for Uncertain Tax Positions A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, including accrued interest, is as follows (in millions):
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | 2021 |  | 2020 |  | 2019
Balance as of January 1 | ​ | $ | 37 | ​ | $ | 40 | ​ | $ | 36
Additions based on tax positions related to the current year | ​ |  | 22 | ​ |  | 5 | ​ |  | 5
Additions based on tax positions of prior years | ​ |  | 18 | ​ |  | — | ​ |  | —
Accrued interest | ​ |  | 3 | ​ |  | 2 | ​ |  | 2
Settlements | ​ |  | (12) | ​ |  | — | ​ |  | —
Lapse of statute of limitations | ​ |  | (4) | ​ |  | (10) | ​ |  | (3)
Balance as of December 31 | ​ | $ | 64 | ​ | $ | 37 | ​ | $ | 40
​ These liabilities are included as a component of other long-term liabilities in our Consolidated Balance Sheets because the Company does not anticipate that settlement of the liabilities will require payment of cash within the next 12 months. As of December 31, 2021, we had $53 million of net unrecognized tax benefits that, if recognized in future periods, would impact our effective income tax rate. We recognize interest expense related to unrecognized tax benefits in our income tax expense, which was not material for the reported periods. We did not have any material accrued liabilities or expense for penalties related to unrecognized tax benefits for the reported periods.

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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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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