The years ended December 31, 2020 and 2019 reflect a full year of Linde plc; the year ended December 31, 2018 reflects Praxair for the entire year and Linde AG for the period beginning October 31, 2018 (the merger date).


(Millions of dollars) Year Ended December 31,	2020		2019		2018
United States	$	1,253	$	1,161	$	931
Foreign (a)	2,131		1,766		4,118
Total income before income taxes	$	3,384	$	2,927	$	5,049

(a) 2019 includes a $164 million gain related to the Praxair India divestiture and 2018 includes a $3,294 million gain related to the Praxair Europe divestiture (See Note 2).


(Millions of dollars) Year Ended December 31,	2020		2019 (a)		2018(b)
Current tax expense (benefit)
U.S. federal	$	185	$	64	$	390
State and local	17		39		(7)
Foreign	1,013		969		620
	1,215		1,072		1,003
Deferred tax expense (benefit)
U.S. federal	20		85		8
State and local	7		—		15
Foreign	(395)		(388)		(209)
	(368)		(303)		(186)
Total income taxes	$	847	$	769	$	817

(a)2019 includes $70 million related to divestitures, foreign current tax expense of $48 million and foreign deferred tax expense of $22 million.

(b)2018 includes a benefit of $61 million related to the Tax Act (See below) and a charge of $371 million ($252 million U.S., $4 million state, $114 million foreign current tax expense and $1 million of U.S. deferred income tax expense) related to divestitures (See Note 2).

Following the enactment of the Tax Cuts and Jobs Act (“Tax Act”) in 2017, the company completed its accounting and updated its provisional estimates in accordance with SAB 118 in the fourth quarter of 2018, resulting in a net reduction to tax expense of $61 million, $41 million U.S. federal and $20 million of state income tax (net of federal tax benefit).

As of December 31, 2020 and 2019, the tax payable related to the deemed repatriation tax is $230 million and $261 million, respectively, of which $204 million and $235 million is classified as other long-term liabilities on the consolidated balance sheet (See Note 7), respectively. The company is required to fund the balance in annual installments through 2025.

For purposes of the effective tax rate reconciliation, the company utilizes the U.S. statutory income tax rate of 21%. An analysis of the difference between the provision for income taxes and the amount computed by applying the U.S. statutory income tax rate to pre-tax income follows:


(Dollar amounts in millions) Year Ended December 31,	2020				2019				2018
U.S. statutory income tax	$	711	21.0	%	$	615	21.0	%	$	1,060	21.0	%
State and local taxes – net of federal benefit	21		0.6	%	31		1.1	%	30		0.6	%
U.S. tax credits and deductions (a)	(8)		(0.2)	%	(31)		(1.1)	%	(12)		(0.2)	%
Foreign tax differentials (b)	167		4.9	%	113		3.9	%	57		1.1	%

Share-Based compensation	(53)		(1.6)	%	(41)		(1.4)	%	(22)		(0.4)	%
Tax Act	—		—	%	—		—	%	(61)		(1.2)	%
Divestitures (c)	—		—	%	36		1.2	%	(321)		(6.4)	%
Other – net (d)	9		0.3	%	46		1.6	%	86		1.7	%
Provision for income taxes	$	847	25.0	%	$	769	26.3	%	$	817	16.2	%

(a)U.S. tax credits and deductions relate to foreign derived intangible income and the research and experimentation tax credit in 2020, 2019 and 2018.

(b)Primarily related to differences between the U.S. tax rate and the statutory tax rate in the countries where the company operates. Other permanent items and tax rate changes were not significant.

(c)Divestitures primarily relate to the sale of the company’s Indian business in 2019 and European business in 2018 (See Note 2).

(d)Other - net includes $11 million, $26 million and $34 million of U.S tax related to Global Intangible Low-Taxed Income in 2020, 2019 and 2018, respectively and an increase in unrecognized tax benefits in Europe of $44 million in 2018.


(Millions of dollars) December 31,	2020		2019
Deferred tax liabilities
Fixed assets	$	3,430	$	3,539
Goodwill	173		145
Other intangible assets	3,703		3,688
Subsidiary/equity investments	609		664
Other (a)	791		789
	$	8,706	$	8,825
Deferred tax assets
Carryforwards	$	386	$	441
Benefit plans and related (b)	814		721
Inventory	70		72
Accruals and other (c)	1,243		1,167
	$	2,513	$	2,401
Less: Valuation allowances (d)	(243)		(222)
	$	2,270	$	2,179
Net deferred tax liabilities	$	6,436	$	6,646
Recorded in the consolidated balance sheets as (Note 7):
Other long-term assets	268		243
Deferred credits	6,704		6,889
	$	6,436	$	6,646

(b)Includes deferred taxes of $560 million and $446 million in 2020 and 2019, respectively, related to pension / OPEB funded status (See Notes 7 and 16).

(c)Includes $255 million in 2020 and 2019 related to lease liabilities and $63 million and $81 million in 2020 and 2019, respectively, related to research and development costs.


	2020		2019		2018
Balance, January 1,	$	(222)	$	(237)	$	(76)
Income tax (charge) benefit	(21)		(31)		(51)
Merger with Linde AG	—		18		(121)
Other, including write-offs (i)	2		26		7
Translation adjustments	(2)		2		4
Balance, December 31,	$	(243)	$	(222)	$	(237)

The company evaluates deferred tax assets quarterly to ensure that estimated future taxable income will be sufficient in character (e.g., capital gain versus ordinary income treatment), amount and timing to result in their recovery. After considering the positive and negative evidence, a valuation allowance is established to reduce the assets to their realizable value when management determines that it is more likely than not (i.e., greater than 50% likelihood) that a deferred tax asset will not be realized. Considerable judgment is required in establishing deferred tax valuation allowances.

As of December 31, 2020, the company had $386 million of deferred tax assets relating to net operating losses (“NOLs”) and tax credits and $243 million of valuation allowances. These deferred tax assets include $276 million relating to NOLs of which $34 million expire within 5 years, $110 million expire after 5 years and $132 million have no expiration. The

deferred tax assets also include $110 million related to credits of which $9 million expire within 5 years, $93 million expire after 5 years, and $8 million have no expiration. The valuation allowances of $243 million primarily relate to NOLs and are required because management has determined, based on financial projections and available tax strategies, that it is unlikely that the NOLs will be utilized before they expire. If events or circumstances change, valuation allowances are adjusted at that time resulting in an income tax benefit or charge.

The company has $609 million of foreign income taxes accrued related to its investments in subsidiaries and equity investments as of December 31, 2020. A provision has not been made for any additional foreign income tax at December 31, 2020 on approximately $32 billion related to its investments in subsidiaries because the company intends to remain indefinitely reinvested. While the $32 billion could become subject to additional foreign income tax if there is a sale of a subsidiary, or earnings are remitted as dividends, it is not practicable to estimate the unrecognized deferred tax liability.

Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the consolidated financial statements. The company has unrecognized income tax benefits totaling $452 million, $472 million and $319 million as of December 31, 2020, 2019 and 2018, respectively. If recognized, essentially all of the unrecognized tax benefits and related interest and penalties would be recorded as a benefit to income tax expense on the consolidated statements of income.


(Millions of dollars)	2020		2019		2018
Unrecognized income tax benefits, January 1	$	472	$	319	$	54
Additions for tax positions of prior years (a)	35		151		104
Reductions for tax positions of prior years	(34)		(3)		(7)
Additions for current year tax positions (b)	11		33		179
Reductions for settlements with taxing authorities (c)	(39)		(26)		(3)
Foreign currency translation and other	7		(2)		(8)
Unrecognized income tax benefits, December 31	$	452	$	472	$	319

(a)Increase primarily relates to tax positions in the United States and Europe, $66 million in 2019 related to the merger with Linde AG.

(c)Settlements are uncertain tax positions that were effectively settled with the taxing authorities, including positions where the company has agreed to amend its tax returns to eliminate the uncertainty.

The company classifies interest income and expense related to income taxes as tax expense in the consolidated statements of income. The company recognized net interest expense of $29 million, $1 million and $32 million for the years ended December 31, 2020, December 31, 2019 and December 31, 2018, respectively. The company had $99 million and $65 million of accrued interest and penalties as of December 31, 2020 and December 31, 2019, respectively which were recorded in other long-term liabilities in the consolidated balance sheets (See Note 7).

As of December 31, 2020, the company remained subject to examination in the following major tax jurisdictions for the tax years as indicated below:



Major tax jurisdictions			Open Years
North and South America
United States			2017 through 2020
Canada			2013 through 2020
Mexico			2014 through 2020
Brazil			2003 through 2020

Europe and Africa
France			2014 through 2020
Germany			2015 through 2020
Netherlands			2015 through 2020
Republic of South Africa			2017 through 2020
Spain			2006 through 2020
United Kingdom			2015 through 2020

Asia and Australia
Australia			2016 through 2020
China			2015 through 2020
India			2006 through 2020
South Korea			2015 through 2020
Taiwan			2015 through 2020

The company is currently under audit in a number of jurisdictions. As a result, it is reasonably possible that some of these matters will conclude or reach the stage where a change in unrecognized income tax benefits may occur within the next twelve months. At the time new information becomes available, the company will record any adjustment to income tax expense as required. Final determinations, if any, are not expected to be material to the consolidated financial statements. The company is also subject to income taxes in many hundreds of state and local taxing jurisdictions that are open to tax examinations.