INCOME TAXES

9 Months Ended

Sep. 30, 2020

The reconciliations of income tax expense with federal income taxes at the statutory rate are as follows (in millions of dollars):


	Three Months Ended September 30,									Nine Months Ended September 30,
	2020			2019			2020			2019
Federal income tax	$	76		$	67		$	145		$	218
States income taxes, net of federal benefit	12			9			23			28
Foreign rate difference	12			4			18			14

Foreign subsidiaries tax impacts, non operating	5			—			(71)			—

Change in valuation allowance	4			2			8			5

Other, net	(3)			(4)			(5)			(4)
Income tax expense	$	106		$	78		$	118		$	261
Effective tax rate	29.3		%	24.2		%	17.3		%	25.1		%

The changes to the Company's effective tax rate for the nine months ended September 30, 2020 was primarily driven by tax losses in the Company's investment in Fabory per the impairment and internal reorganization of the Company's holdings of Fabory in the first quarter of 2020. The Company divested Fabory during the second quarter of 2020 (see Note 1 to the Financial Statements).

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The CARES Act did not have a material impact on the Company's consolidated financial condition or results of operations as of and for the nine months ended September 30, 2020.

- 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.

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