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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Earnings (losses) before income taxes by geographical area consisted of the following (in millions of dollars):
| For the Years Ended December 31,
| 2020 |  | 2019 |  | 2018
U.S. | $ | 1,015 |  |  | $ | 1,226 |  |  | $ | 1,163 |
Foreign | (68) |  |  | (17) |  |  | (82) |
Total | $ | 947 |  |  | $ | 1,209 |  |  | $ | 1,081 |
Income tax expense consisted of the following (in millions of dollars):
| For the Years Ended December 31,
| 2020 |  | 2019 |  | 2018
Current income tax expense: |  |  |  |  |
U.S. Federal | $ | 119 |  |  | $ | 199 |  |  | $ | 166 |
U.S. State | 28 |  |  | 44 |  |  | 32 |
Foreign | 65 |  |  | 58 |  |  | 47 |
Total current | 212 |  |  | 301 |  |  | 245 |
Deferred income tax expense | (20) |  |  | 13 |  |  | 13 |
Total income tax expense | $ | 192 |  |  | $ | 314 |  |  | $ | 258 |
The income tax effects of temporary differences that gave rise to the net deferred tax asset (liability) as of December 31, 2020 and 2019 were as follows (in millions of dollars):
| As of December 31,
| 2020 |  | 2019
Deferred tax assets: |  |  |
Inventory | $ | 14 |  |  | $ | 4 |
Accrued expenses | 93 |  |  | 86 |
Foreign operating loss carryforwards | 45 |  |  | 67 |
Accrued employment-related benefits | 37 |  |  | 49 |
Tax credit carryforward | 25 |  |  | 22 |
Other | 8 |  |  | 8 |
Deferred tax assets | 222 |  |  | 236 |
Less valuation allowance | (53) |  |  | (72) |
Deferred tax assets, net of valuation allowance | $ | 169 |  |  | $ | 164 |
Deferred tax liabilities: |  |  |
Property, buildings, equipment and other capital assets | (145) |  |  | (134) |
Intangibles | (68) |  |  | (83) |
Other | (10) |  |  | (12) |
Deferred tax liabilities | (223) |  |  | (229) |
Net deferred tax liability | $ | (54) |  |  | $ | (65) |
The net deferred tax asset (liability) is classified as follows: |  |  |
Noncurrent assets | $ | 14 |  |  | $ | 11 |
Noncurrent liabilities (foreign) | (68) |  |  | (76) |
Net deferred tax liability | $ | (54) |  |  | $ | (65) |
At December 31, 2020 the Company had $207 million of net operating loss (NOLs) carryforwards related primarily to foreign operations. Some of the operating loss carryforwards may expire at various dates through 2040. The Company has recorded a valuation allowance, which represents a provision for uncertainty as to the realization of the tax benefits of these carryforwards and deferred tax assets that may not be realized. The Company's valuation allowance changed as follows (in millions of dollars):
| For the Years Ended December 31,
| 2020 |  | 2019
Balance at beginning of period | $ | (72) |  |  | $ | (72) |
Increases primarily related to foreign NOLs | (16) |  |  | (9) |
Releases related to foreign NOLs | — |  |  | 10 |
Foreign subsidiaries tax impacts due to divestiture | 39 |  |  | — |
Other changes, net | (2) |  |  | — |
Increase related to U.S. foreign tax credits | (2) |  |  | (1) |
Balance at end of period | $ | (53) |  |  | $ | (72) |
A reconciliation of income tax expense with federal income taxes at the statutory rate follows (in millions of dollars):
| For the Years Ended December 31,
| 2020 |  | 2019 |  | 2018
Federal income tax | $ | 199 |  |  | $ | 254 |  |  | $ | 227 |
State income taxes, net of federal income tax benefit | 33 |  |  | 36 |  |  | 32 |
Clean energy credit | — |  |  | — |  |  | (20) |
Foreign rate difference | 23 |  |  | 25 |  |  | 20 |
Foreign subsidiaries tax impacts due to divestiture | (61) |  |  | — |  |  | 20 |
Change in valuation allowance | 16 |  |  | 11 |  |  | 4 |
Excess tax benefits from stock-based compensation | (4) |  |  | (2) |  |  | (15) |
Other - net | (14) |  |  | (10) |  |  | (10) |
Income tax expense | $ | 192 |  |  | $ | 314 |  |  | $ | 258 |
Effective tax rate | 20.3 | % |  | 26.0 | % |  | 23.9 | %
The changes to the Company's effective tax rate for the year ended December 31, 2020 was primarily driven by tax losses in the Company's investment in Fabory due to 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 2 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. On December 27, 2020, the Consolidated Appropriations Act (CAA) was enacted and extended several of the CARES Act provisions. Neither the CARES or CAA Act had a material impact on the Company’s consolidated financial condition or results of operations as of and for the year ended December 31, 2020. Foreign Undistributed Earnings Estimated gross undistributed earnings of foreign subsidiaries at December 31, 2020, amounted to $429 million. The Company considers these undistributed earnings permanently reinvested in its foreign operations and is not recording a deferred tax liability for any foreign withholding taxes on such amounts. If at some future date the Company ceases to be permanently reinvested in its foreign subsidiaries, the Company may be subject to foreign withholding and other taxes on these undistributed earnings and may need to record a deferred tax liability for any outside basis difference in its investments in its foreign subsidiaries. Tax Uncertainties The Company recognizes in the financial statements a provision for tax uncertainties, resulting from application of complex tax regulations in multiple tax jurisdictions. The changes in the liability for tax uncertainties, excluding interest, are as follows (in millions of dollars):
| For the Years Ended December 31,
| 2020 |  | 2019 |  | 2018
Balance at beginning of year | $ | 28 |  |  | $ | 37 |  |  | $ | 45 |
Additions for tax positions related to the current year | 23 |  |  | 3 |  |  | 4 |
Additions for tax positions of prior years | — |  |  | 1 |  |  | 3 |
Reductions for tax positions of prior years | (2) |  |  | (1) |  |  | (5) |
Reductions due to statute lapse | (10) |  |  | (10) |  |  | (9) |
Settlements, audit payments, refunds - net | — |  |  | (2) |  |  | (1) |
Balance at end of year | $ | 39 |  |  | $ | 28 |  |  | $ | 37 |
The Company classifies the liability for tax uncertainties in deferred income taxes and tax uncertainties. Included in this amount are $4 million and $8 million at December 31, 2020 and 2019, respectively, of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Any changes in the timing of deductibility of these items would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authorities to an earlier period. Excluding the timing items, the remaining amounts would affect the annual tax rate. In 2020, the changes to tax positions related generally to the tax losses on the Company’s investment in Fabory along with impact of expiring statutes, conclusion of audits and audit settlements. Estimated interest and penalties were not material. The Company regularly undergoes examination of its federal income tax returns by the Internal Revenue Service. The statute of limitations expired for the Company's 2016 federal tax return while tax years 2017 through 2020 are open. The Company is also subject to audit by state, local and foreign taxing authorities. Tax years 2012-2019 remain subject to state and local audits and 2007-2019 remain subject to foreign audits. The amount of liability associated with the Company's tax uncertainties may change within the next 12 months due to the pending audit activity, expiring statutes or tax payments. A reasonable estimate of such change cannot be made.

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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