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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Substantially all of the Company’s pre-tax earnings are derived from domestic operations in all periods presented. The income tax provision was as follows for the years ended December 31:
(In millions)202120202019
Components of income tax provision (benefit):
Current:
Federal$378 $(25)$25 
State138 71 69 
Foreign109 79 57 
625 125 151 
Deferred:
Federal(186)189 118 
State(106)(34)(18)
Foreign30 (84)(53)
(262)71 47 
Income tax provision $363 $196 $198 
A reconciliation of the statutory federal income tax rate to the Company’s effective income tax rate is as follows for the years ended December 31:
202120202019
Statutory federal income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal effect1.6 %2.0 %3.7 %
Foreign tax law changes8.0 %2.8 %— %
Foreign derived intangibles income deduction(3.1)%(3.2)%(0.2)%
Excess tax benefit from share-based awards(2.2)%(3.9)%(5.1)%
Sale of businesses and subsidiary restructuring(2.1)%0.7 %(2.6)%
Unrecognized tax benefits(2.7)%(1.0)%(0.1)%
Nondeductible executive compensation0.7 %2.0 %1.0 %
Valuation allowance(1.3)%(1.7)%0.3 %
Other, net1.9 %(2.0)%0.3 %
Effective income tax rate21.8 %16.7 %18.3 %
Foreign tax law changes include $134 million and $32 million of income tax expense attributed to the revaluation of certain net deferred tax liabilities in connection with enacted corporate income tax rate changes in the United Kingdom (tax rate increased from 19% to 25% starting in 2023) and Argentina (tax rate increased from 25% to 35%) in 2021, and in the United Kingdom (tax rate increased from 17% to 19%) in 2020, respectively.
Significant components of deferred tax assets and liabilities consisted of the following at December 31:
(In millions)20212020
Accrued expenses$171 $189 
Share-based compensation134 185 
Net operating loss and credit carry-forwards804 1,158 
Leasing liabilities194 171 
Other194 76 
Subtotal1,497 1,779 
Valuation allowance(697)(888)
Total deferred tax assets800 891 
Capitalized software development costs(633)(614)
Intangible assets(2,676)(2,993)
Property and equipment(280)(198)
Capitalized commissions(95)(87)
Investments in joint ventures(630)(908)
Leasing right-of-use assets(142)(141)
Other(474)(311)
Total deferred tax liabilities(4,930)(5,252)
Total$(4,130)$(4,361)
The Company maintained a valuation allowance of $697 million and $888 million at December 31, 2021 and 2020, respectively, against its deferred tax assets. The decrease in the valuation allowance in 2021 is primarily the result of subsidiary restructurings. Substantially all of the valuation allowance relates to certain foreign and state net operating loss carryforwards.
Deferred tax assets and liabilities are reported in the consolidated balance sheets as follows at December 31:
(In millions)20212020
Noncurrent assets$42 $28 
Noncurrent liabilities(4,172)(4,389)
Total$(4,130)$(4,361)
Noncurrent deferred tax assets are included in other long-term assets in the consolidated balance sheets at December 31, 2021 and 2020.
The following table presents the amounts of federal, state and foreign net operating loss carryforwards and general business credit carryforwards at December 31:
(In millions)20212020
Net operating loss carryforwards: (1)
   Federal$178 $443 
   State 3,763 3,944 
   Foreign 2,580 3,343 
General business credit carryforwards (2)
12 41 
(1)At December 31, 2021, the Company had federal net operating loss carryforwards of $178 million, most of which do not expire, state net operating loss carryforwards of $3.8 billion, most of which expire in 2022 through 2041, and foreign net operating loss carryforwards of $2.6 billion, of which $375 million expire in 2022 through 2041, and the remainder of which do not expire.
(2)At December 31, 2021, the Company had general business credit carryforwards of $12 million which expire in 2027.
The Company asserts that its investment in its foreign subsidiaries is intended to be indefinitely reinvested. Undistributed historical and future earnings of its foreign subsidiaries are not considered to be indefinitely reinvested. Should these earnings
be distributed in the future in the form of dividends or otherwise, the Company may be subject to foreign or U.S. taxes. The Company has the ability and intent to limit distributions so as to not make a distribution in excess of its investment in those subsidiaries. The Company will continue to monitor its global cash requirements and the need to recognize a deferred tax liability.
Unrecognized tax benefits were as follows at December 31:
(In millions)202120202019
Unrecognized tax benefits - Beginning of year$171 $145 $49 
Increases for assumed tax positions related to First Data— — 82 
Increases for tax positions taken during the current year16 9 8 
Increases for tax positions taken in prior years5 53 16 
Decreases for tax positions taken in prior years(41)(23)(2)
Decreases for settlements(1)(2)(1)
Lapse of the statute of limitations(26)(11)(7)
Unrecognized tax benefits - End of year$124 $171 $145 
At December 31, 2021, unrecognized tax benefits of $86 million, net of federal and state benefits, would affect the effective income tax rate if recognized. The Company believes it is reasonably possible that the liability for unrecognized tax benefits may decrease by up to $24 million over the next twelve months as a result of possible closure of federal tax audits, potential settlements with certain states and foreign countries, and the lapse of the statute of limitations in various state and foreign jurisdictions.
The Company classifies interest expense and penalties related to income taxes as components of its income tax provision. The income tax provision included interest expense (benefits) and penalties on unrecognized tax benefits of $(6) million in 2021, $3 million in 2020 and $2 million in 2019. Accrued interest expense and penalties related to unrecognized tax benefits totaled $15 million and $22 million at December 31, 2021 and 2020, respectively.
The Company’s U.S. federal income tax returns for 2020 and 2021, and tax returns in certain states and foreign jurisdictions for 2005 through 2021, remain subject to examination by taxing authorities.