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Income Taxes (Tables) | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income From Continuing Operations Before Income Tax | Income before income tax and the provision for income tax consist of the following (in millions):
| Years Ended December 31
| 2021 |  | 2020 |  | 2019
Income (loss) before income taxes: |  |  |  |  |
Ireland | $ | 15 |  |  | $ | (86) |  |  | $ | 200 |
U.K. | 549 |  |  | 634 |  |  | 228 |
U.S. | (818) |  |  | (28) |  |  | (220) |
Other | 2,185 |  |  | 1,946 |  |  | 1,662 |
Total | $ | 1,931 |  |  | $ | 2,466 |  |  | $ | 1,870 |
Income tax expense: |  |  |  |  |
Current: |  |  |  |  |
Ireland | $ | 2 |  |  | $ | 2 |  |  | $ | 1 |
U.K. | 50 |  |  | 30 |  |  | 20 |
U.S. federal | 197 |  |  | 126 |  |  | 22 |
U.S. state and local | 72 |  |  | 22 |  |  | 41 |
Other | 291 |  |  | 259 |  |  | 249 |
Total current tax expense | $ | 612 |  |  | $ | 439 |  |  | $ | 333 |
Deferred tax expense (benefit): |  |  |  |  |
Ireland | $ | (1) |  |  | $ | (1) |  |  | $ | (1) |
U.K. | 131 |  |  | 39 |  |  | 35 |
U.S. federal | (83) |  |  | (72) |  |  | (20) |
U.S. state and local | (30) |  |  | (4) |  |  | (27) |
Other | (6) |  |  | 47 |  |  | (23) |
Total deferred tax expense (benefit) | $ | 11 |  |  | $ | 9 |  |  | $ | (36) |
Total income tax expense | $ | 623 |  |  | $ | 448 |  |  | $ | 297 |
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 reflected in the Consolidated Financial Statements is as follows:
| Years Ended December 31
| 2021 |  | 2020 |  | 2019
Statutory tax rate | 25.0% |  | 25.0% |  | 19.0%
U.S. state income taxes, net of U.S. federal benefit | 1.5 |  | 1.0 |  | 0.5
Taxes on international operations (1) (4) | (15.4) |  | (9.8) |  | (6.0)
Nondeductible expenses | 3.3 |  | 2.1 |  | 1.6
Adjustments to prior year tax requirements | (0.2) |  | — |  | 0.1
Deferred tax adjustments, including statutory rate changes | 3.2 |  | 0.7 |  | —
Deferred tax adjustments, international earnings | 1.8 |  | 0.7 |  | —
Adjustments to valuation allowances | (0.2) |  | — |  | 1.8
Change in uncertain tax positions | 2.1 |  | 1.5 |  | 2.2
Excess tax benefits related to shared based compensation (2) | (2.4) |  | (2.2) |  | (2.8)
U.S. Tax Reform impact (3) | — |  | — |  | (0.3)
Capital Losses | — |  | (1.8) |  | —
Non-deductible transaction costs | 1.1 |  | 1.3 |  | —
Non-deductible termination fee | 12.9 |  | — |  | —
Other — net | (0.4) |  | (0.3) |  | (0.2)
Effective tax rate | 32.3% |  | 18.2% |  | 15.9%
(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 25.0%, 25.0% and 19.0% at December 31, 2021, 2020, and 2019, 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. (2)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 Cuts and Jobs Act including adjustments to the Transition Tax. (4)In July 2020, final U.S. tax regulations were issued regarding the GILTI high tax election, allowing taxpayers to exclude from GILTI the income of a Controlled Foreign Corporation that incurs a foreign tax rate more than 90% of the top U.S. corporate tax rate. A GILTI high tax election may be made on an annual basis, and taxpayers may choose to apply the election to taxable years beginning after December 31, 2017. The Company expects to make the GILTI high-tax election for 2021 and therefore recorded the impact of making the election.
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 | 2021 |  | 2020
Deferred tax assets: |  |  |
Net operating loss, capital loss, interest, and tax credit carryforwards | $ | 581 |  |  | $ | 653 |
Lease liabilities | 207 |  |  | 248 |
Employee benefit plans | 160 |  |  | 312 |
Other accrued expenses | 132 |  |  | 103 |
Accrued interest | 97 |  |  | — |
Federal and state benefit of interest from uncertain tax positions (1) | 45 |  |  | 37 |
Deferred revenue | 36 |  |  | 36 |
Investment basis differences | 25 |  |  | 28 |
Lease and service guarantees | 1 |  |  | 2 |
Other | 25 |  |  | 17 |
Total | 1,309 |  |  | 1,436 |
Valuation allowance on deferred tax assets | (230) |  |  | (205) |
Total | $ | 1,079 |  |  | $ | 1,231 |
Deferred tax liabilities: |  |  |
Intangibles and property, plant and equipment | $ | (243) |  |  | $ | (291) |
Lease right-of-use asset | (173) |  |  | (211) |
Deferred costs | (159) |  |  | (141) |
Unremitted earnings | (58) |  |  | (37) |
Other accrued expenses | (27) |  |  | (22) |
Unrealized foreign exchange gains | (22) |  |  | (26) |
Other | (32) |  |  | (41) |
Total | $ | (714) |  |  | $ | (769) |
Net deferred tax asset | $ | 365 |  |  | $ | 462 |
(1)The $37 million of Federal and state benefit of interest from uncertain tax positions as of December 31, 2020 was previously classified as Other.
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 | 2021 |  | 2020
Deferred tax assets — non-current | 766 |  |  | 724 |
Deferred tax liabilities — non-current | (401) |  |  | (262) |
Net deferred tax asset | $ | 365 |  |  | $ | 462 |
Summary of Operating and Capital Loss Carryforwards | The Company had the following carryforwards (in millions):
As of December 31 | 2021 |  | 2020
U.K. |  |  |
Operating loss carryforwards | $ | 41 |  |  | $ | 266 |
Capital loss carryforwards | $ | 573 |  |  | $ | 577 |
Interest carryforwards | $ | — |  |  | $ | 121 |
U.S. |  |  |
Federal operating loss carryforwards | $ | 25 |  |  | $ | 49 |
Federal capital loss carryforwards | $ | 112 |  |  | $ | 112 |
Federal interest carryforwards | $ | 1,140 |  |  | $ | 1,220 |
State operating loss carryforwards | $ | 398 |  |  | $ | 378 |
State capital loss carryforwards | $ | 123 |  |  | $ | 123 |
State interest carryforwards | $ | 551 |  |  | $ | 573 |
Other Non-U.S. |  |  |
Operating loss carryforwards | $ | 301 |  |  | $ | 400 |
Capital loss carryforwards | $ | 35 |  |  | $ | 42 |
Interest carryforwards | $ | 26 |  |  | $ | 34 |
Other carryforwards | $ | 5 |  |  | $ | — |
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):
| 2021 |  | 2020
Balance at January 1 | $ | 321 |  |  | $ | 299 |
Additions based on tax positions related to the current year | 33 |  |  | 25 |
Additions for tax positions of prior years | 7 |  |  | 7 |
Reductions for tax positions of prior years | (4) |  |  | (3) |
Settlements | — |  |  | — |
Business combinations | — |  |  | — |
Lapse of statute of limitations | (10) |  |  | (7) |
Foreign currency translation | — |  |  | — |
Balance at December 31 | $ | 347 |  |  | $ | 321 |

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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=121826272&loc=d3e32639-109319 + Details
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