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INCOME TAXES | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Deferred Income Taxes Deferred income taxes reflect the impact of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and such amounts for tax purposes. The Company has a net deferred tax liability, primarily due to differences in depreciation rates for federal income tax purposes and for financial reporting purposes. Deferred tax (assets) and liabilities comprise the following (in millions):
| 2021 |  | 2020
Excess of tax over book depreciation | $ | 1,145 |  |  | $ | 1,126 |
Intangibles - net | 19 |  |  | 15 |
Operating lease assets | 351 |  |  | 342 |
Other - net | 76 |  |  | 106 |
Deferred tax liabilities | 1,591 |  |  | 1,589 |
Mileage Plan | (416) |  |  | (385) |
Inventory obsolescence | (17) |  |  | (17) |
Employee benefits | (127) |  |  | (215) |
Net operating losses | (25) |  |  | (27) |
Operating lease liabilities | (374) |  |  | (381) |
Leasehold maintenance | (40) |  |  | (73) |
Other - net | (34) |  |  | (103) |
Deferred tax assets | (1,033) |  |  | (1,201) |
Valuation allowance | 20 |  |  | 19 |
Net deferred tax liabilities | $ | 578 |  |  | $ | 407 |
At December 31, 2021, the Company has paid gross taxes of $52 million and expect to pay $21 million more for the tax year 2021. The Company is also awaiting payment of a $285 million federal tax refund receivable as a result of carrying back losses from the 2020 tax year and other various amendments of prior year tax returns. The Company also has gross state NOLs of approximately $413 million that expire beginning in 2023 and continuing through 2041. Virgin America experienced multiple “ownership changes” as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), the most recent being its acquisition by the Company. Section 382 of the Code imposes an annual limitation on the utilization of pre-ownership change NOLs. Any unused annual limitation may, subject to certain limits, be carried over to later years. During 2021, all remaining NOLs acquired through the acquisition of Virgin America were utilized to offset federal taxable income. Valuation allowances are provided to reduce the related deferred income tax assets to an amount which will, more likely than not, be realized. The Company has determined it is more likely than not that a portion of the state NOL carryforward will not be realized and, therefore, has provided a valuation allowance of $20 million for that portion as of December 31, 2021. The Company has likewise concluded it is more likely than not that all of its federal and the remaining state deferred income tax assets will be realized and thus no additional valuation allowance has been recorded. The Company reassesses the need for a valuation allowance each reporting period. Components of Income Tax Expense (Benefit) The components of income tax expense (benefit) are as follows (in millions):
| 2021 |  | 2020 |  | 2019
Current income tax expense (benefit): |  |  |  |  |
Federal | $ | 40 |  |  | $ | (212) |  |  | $ | 26 |
State | 16 |  |  | (11) |  |  | 13 |
Total current income tax expense (benefit) | 56 |  |  | (223) |  |  | 39 |
Deferred income tax expense (benefit): |  |  |  |  |
Federal | 80 |  |  | (246) |  |  | 175 |
State | 15 |  |  | (47) |  |  | 33 |
Total deferred income tax expense (benefit) | 95 |  |  | (293) |  |  | 208 |
Income tax expense (benefit) | $ | 151 |  |  | $ | (516) |  |  | $ | 247 |
Income Tax Rate Reconciliation Income tax expense (benefit) reconciles to the amount computed by applying the 2021 U.S. federal rate of 21% to income (loss) before income tax and for deferred taxes as follows (in millions):
| 2021 |  | 2020 |  | 2019
Income (loss) before income tax | $ | 629 |  |  | $ | (1,840) |  |  | $ | 1,016 |
Expected tax expense (benefit) | 132 |  |  | (386) |  |  | 213 |
Nondeductible expenses | 10 |  |  | 9 |  |  | 9 |
State income taxes | 20 |  |  | (62) |  |  | 36 |
Tax law changes | (14) |  |  | (93) |  |  | (9) |
Valuation allowance | 1 |  |  | 18 |  |  | — |
Other - net | 2 |  |  | (2) |  |  | (2) |
Actual tax expense (benefit) | $ | 151 |  |  | $ | (516) |  |  | $ | 247 |
Effective tax rate | 24.0 | % |  | 28.0 | % |  | 24.3 | %
The Company recorded a current tax benefit of $14 million in 2021 as a result of provisions outlined in the CARES Act. As a result of tax changes signed into law during 2017, with final regulations issued in 2019, the Company recorded a current tax benefit of $93 million in 2020. Uncertain Tax Positions The Company has identified its federal tax return and its state tax returns in Alaska, Oregon and California as “major” tax jurisdictions. A summary of the Company's jurisdictions and the periods that are subject to examination are as follows:
Jurisdiction | Period
Federal | 2007 to 2020
Alaska | 2015 to 2020
California | 2007 to 2020
Oregon | 2003 to 2020
Certain tax years are open to the extent of net operating loss carryforwards. Changes in the liability for gross unrecognized tax benefits during 2021, 2020 and 2019 are as follows (in millions):
| 2021 |  | 2020 |  | 2019
Balance at January 1, | $ | 35 |  |  | $ | 40 |  |  | $ | 40 |
Additions related to prior years | 3 |  |  | 1 |  |  | — |
Releases related to prior years | — |  |  | (1) |  |  | (1) |
Additions related to current year activity | 3 |  |  | — |  |  | 2 |
Releases due to settlements | — |  |  | (4) |  |  | — |
Releases due to lapse of statute of limitations | — |  |  | (1) |  |  | (1) |
Balance at December 31, | $ | 41 |  |  | $ | 35 |  |  | $ | 40 |
As of December 31, 2021, the Company had $41 million of accrued tax contingencies, of which $34 million, if fully recognized, would increase the effective tax rate. As of December 31, 2021, 2020 and 2019, the Company has accrued interest and penalties, net of federal income tax benefit, of $8 million, $6 million, and $7 million. In 2021, the Company recognized an expense of $2 million, compared to a benefit of $1 million in 2020, and expense of $1 million in 2019, for interest and penalties, net of federal income tax benefit. At December 31, 2021, the Company has unrecognized tax benefits recorded as a liability. The Company increased its reserves for uncertain tax positions in 2021 by $6 million, primarily due to current year activity and amended returns. These uncertain tax positions could change as a result of the Company's ongoing audits, settlement of issues, new audits and status of other taxpayer court cases. The Company cannot predict the timing of these actions. Due to the positions being taken in various jurisdictions, the amounts currently accrued are the Company's best estimate as of December 31, 2021.

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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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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