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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income from continuing operations before income tax | Income before income tax from continuing operations and the provision for income tax from continuing operations consist of the following (in millions):
Years ended December 31 | 2019 |  | 2018 |  | 2017
Income before income taxes: |  |  |  |  |
U.K. | $ | 228 |  |  | $ | (240 | ) |  | $ | (420 | )
U.S. | (219 | ) |  | (601 | ) |  | (765 | )
Other | 1,862 |  |  | 2,087 |  |  | 1,870 |
Total | $ | 1,871 |  |  | $ | 1,246 |  |  | $ | 685 |
Income tax expense (benefit): |  |  |  |  |
Current: |  |  |  |  |
U.K. | $ | 20 |  |  | $ | 21 |  |  | $ | 1 |
U.S. federal | 22 |  |  | 101 |  |  | 48 |
U.S. state and local | 41 |  |  | 35 |  |  | 18 |
Other | 250 |  |  | 214 |  |  | 201 |
Total current tax expense | $ | 333 |  |  | $ | 371 |  |  | $ | 268 |
Deferred tax expense (benefit): |  |  |  |  |
U.K. | $ | 35 |  |  | $ | 19 |  |  | $ | (5 | )
U.S. federal | (20 | ) |  | (165 | ) |  | 12 |
U.S. state and local | (27 | ) |  | (56 | ) |  | (35 | )
Other | (24 | ) |  | (23 | ) |  | 10 |
Total deferred tax benefit | $ | (36 | ) |  | $ | (225 | ) |  | $ | (18 | )
Total income tax expense | $ | 297 |  |  | $ | 146 |  |  | $ | 250 |
Reconciliation of the income tax provisions based on the U.S. statutory corporate tax rate to the provisions reflected in the Consolidated Financial Statements | The reconciliation to the provisions from continuing operations reflected in the Consolidated Financial Statements is as follows:
Years ended December 31 | 2019 |  | 2018 |  | 2017
Statutory tax rate | 19.0% |  | 19.0% |  | 19.3%
U.S. state income taxes, net of U.S. federal benefit | 0.5 |  | (0.4) |  | (1.5)
Taxes on international operations (1) | (6.0) |  | (7.3) |  | (30.3)
Nondeductible expenses | 1.6 |  | 2.7 |  | 3.4
Adjustments to prior year tax requirements | 0.1 |  | 0.9 |  | 2.0
Adjustments to valuation allowances | 1.8 |  | 3.8 |  | (1.8)
Change in uncertain tax positions | 2.2 |  | 0.9 |  | 1.6
Excess tax benefits related to shared based compensation (2) | (2.8) |  | (3.6) |  | (8.0)
U.S. Tax Reform impact (3) | (0.3) |  | 7.1 |  | 51.2
Loss on disposition | — |  | (10.2) |  | —
Other — net | (0.2) |  | (1.2) |  | 0.6
Effective tax rate | 15.9% |  | 11.7% |  | 36.5%
(1) | The Company determines the adjustment for taxes on international operations based on the difference between the statutory tax rate applicable to earnings in each foreign jurisdiction and the enacted rate of 19.0%, 19.0% and 19.3% at December 31, 2019, 2018, and 2017, respectively. The benefit to the Company’s effective income tax rate from taxes on international operations relates to benefits from lower-taxed global operations, primarily due to the use of global funding structures and the tax holiday in Singapore. The impact decreased from 2017 to 2018 primarily as a result of the decrease in the U.S. federal tax rate.
(2) | With the adoption of ASU 2016-09 in 2017, excess tax benefits and deficiencies from share-based payment transactions are recognized as income tax expense or benefit in the Company’s Consolidated Statements of Income.
(3) The impact of the Tax Reform Act including the Transition Tax, the re-measurement of U.S. deferred tax assets and liabilities from 35% to 21%, withholding tax accruals, and the allocation of tax benefit between continuing operations and discontinued operations related to utilization of foreign tax credits.
Components of Aon's deferred tax assets and liabilities | The components of the Company’s deferred tax assets and liabilities are as follows (in millions):
As of December 31 | 2019 |  | 2018
Deferred tax assets: |  |  |
Net operating loss, capital loss, interest, and tax credit carryforwards | $ | 440 |  |  | $ | 563 |
Employee benefit plans | 373 |  |  | 351 |
Lease liabilities | 247 |  |  | — |
Accrued interest | 116 |  |  | — |
Other accrued expenses | 68 |  |  | 98 |
Investment basis differences | 28 |  |  | 28 |
Deferred revenue | 24 |  |  | 29 |
Lease and service guarantees | 3 |  |  | 5 |
Other | 57 |  |  | 46 |
Total | 1,356 |  |  | 1,120 |
Valuation allowance on deferred tax assets | (200 | ) |  | (171 | )
Total | $ | 1,156 |  |  | $ | 949 |
Deferred tax liabilities: |  |  |
Intangibles and property, plant and equipment | $ | (251 | ) |  | $ | (310 | )
Lease right-of-use asset | (219 | ) |  | — |
Deferred costs | (128 | ) |  | (143 | )
Unremitted earnings | (28 | ) |  | (30 | )
Unrealized foreign exchange gains | (26 | ) |  | (26 | )
Other accrued expenses | (25 | ) |  | (36 | )
Other | (33 | ) |  | (24 | )
Total | $ | (710 | ) |  | $ | (569 | )
Net deferred tax asset | $ | 446 |  |  | $ | 380 |
Deferred income taxes (assets and liabilities netted by jurisdiction) as classified in the Consolidated Statements of Financial Position | Deferred income taxes (assets and liabilities have been netted by jurisdiction) have been classified in the Consolidated Statements of Financial Position as follows (in millions):
As of December 31 | 2019 |  | 2018
Deferred tax assets — non-current | $ | 645 |  |  | $ | 561 |
Deferred tax liabilities — non-current | (199 | ) |  | (181 | )
Net deferred tax asset | $ | 446 |  |  | $ | 380 |
Summary of operating and capital loss carryforwards | The Company had the following net operating loss, capital loss, and interest carryforwards (in millions):
As of December 31 | 2019 |  | 2018
U.K. |  |  |
Operating loss carryforwards | $ | 438 |  |  | $ | 541 |
Capital loss carryforwards | $ | 411 |  |  | $ | 400 |
Interest carryforwards | $ | 203 |  |  | $ | 53 |
U.S. |  |  |
Federal operating loss carryforwards | $ | 1 |  |  | $ | 2 |
Federal capital loss carryforwards | $ | 112 |  |  | $ | 367 |
Federal interest carryforwards | $ | 355 |  |  | $ | 424 |
State operating loss carryforwards | $ | 376 |  |  | $ | 315 |
State capital loss carryforwards | $ | 123 |  |  | $ | 221 |
State interest carryforwards | $ | 172 |  |  | $ | 227 |
Other Non-U.S. |  |  |
Operating loss carryforwards | $ | 308 |  |  | $ | 369 |
Capital loss carryforwards | $ | 29 |  |  | $ | 30 |
Interest carryforwards | $ | 159 |  |  | $ | 186 |
Reconciliation of the beginning and ending amount of unrecognized tax benefits | The following is a reconciliation of the Company’s beginning and ending amount of uncertain tax positions (in millions):
| 2019 |  | 2018
Balance at January 1 | $ | 279 |  |  | $ | 280 |
Additions based on tax positions related to the current year | 23 |  |  | 18 |
Additions for tax positions of prior years | 12 |  |  | 10 |
Reductions for tax positions of prior years | (5 | ) |  | (24 | )
Settlements | (5 | ) |  | — |
Business combinations | — |  |  | 1 |
Lapse of statute of limitations | (5 | ) |  | (6 | )
Foreign currency translation | — |  |  | — |
Balance at December 31 | $ | 299 |  |  | $ | 279 |

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- Definition Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32639-109319 + Details
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