
	Year Ended December 31,
(in millions)	2020		2019		2018
Current tax benefit (expense)
Federal	$	17	$	24	$	39
State	(84)		(70)		(63)
Foreign	(10)		2		(25)
Total current tax expense	(77)		(44)		(49)
Deferred tax benefit (expense)
Federal	(676)		(954)		(750)
State	(34)		(125)		(160)
Foreign	1		(12)		(70)
Total deferred tax expense	(709)		(1,091)		(980)
Total income tax expense	$	(786)	$	(1,135)	$	(1,029)


	Year Ended December 31,
	2020		2019		2018
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
Effect of law and rate changes	(0.8)		0.4		1.9
Change in valuation allowance	(2.6)		(1.8)		(1.6)
State taxes, net of federal benefit	4.8		5.1		4.8
Foreign taxes, net of federal benefit	0.3		0.3		2.4
Permanent differences	0.4		0.6		0.7
Federal tax credits, net of reserves	(0.9)		(0.8)		(2.9)
Equity-based compensation	(2.5)		(0.6)		(0.8)
Non-deductible compensation	2.3		0.6		0.8
Other, net	0.3		(0.1)		—
Effective income tax rate	22.3	%	24.7	%	26.3	%


(in millions)	December 31, 2020		December 31, 2019
Deferred tax assets
Loss carryforwards	$	4,540	$	823

Lease liabilities	8,031		3,403
Property and equipment	90		—
Reserves and accruals	1,348		659
Federal and state tax credits	411		331

Other	2,665		903
Deferred tax assets, gross	17,085		6,119
Valuation allowance	(878)		(129)
Deferred tax assets, net	16,207		5,990
Deferred tax liabilities
Spectrum licenses	17,518		5,902
Property and equipment	—		2,506
Lease right-of-use assets	7,239		2,881
Other intangible assets	912		19
Other	504		289
Total deferred tax liabilities	26,173		11,597
Net deferred tax liabilities	$	9,966	$	5,607

Classified on the balance sheet as:
Deferred tax liabilities	$	9,966	$	5,607

As of December 31, 2020, we have tax effected federal net operating loss (“NOL”) carryforwards of $3.5 billion, state NOL carryforwards of $1.5 billion and foreign NOL carryforwards of $67 million, expiring through 2040. Federal and certain state NOLs generated in and after 2018 do not expire. As of December 31, 2020, our tax effected federal, state and foreign NOL carryforwards for financial reporting purposes were approximately $176 million, $455 million and $26 million, respectively, less than our NOL carryforwards for federal, state and foreign income tax purposes, due to unrecognized tax benefits of the same amount. The unrecognized tax benefit amounts exclude offsetting tax effects of $144 million in other jurisdictions.

As of December 31, 2020, we have research and development, foreign tax and other general business credit carryforwards with a combined value of $569 million for federal income tax purposes, an immaterial amount of which begins to expire in 2021.

As a result of the Merger, we acquired additional deferred tax assets for which a valuation allowance reserve is deemed to be necessary, as well as additional uncertain tax benefit reserves. Due to the size and complexity of the Merger, our estimate of these amounts is preliminary and is subject to finalization and adjustment, which could be material, during the measurement period of up to one year from the Merger close date. During the measurement period, we will adjust these amounts if new information is obtained about facts or circumstances that existed as of the acquisition date that, if known, would have changed these amounts. See Note 2 - Business Combination for further information.

As of December 31, 2020, 2019 and 2018, our valuation allowance was $878 million, $129 million and $210 million, respectively. The change from December 31, 2019, to December 31, 2020, primarily related to $848 million of deferred tax assets acquired via the Merger for which a valuation allowance is deemed necessary, partially offset by a reduction in the valuation allowance against deferred tax assets in federal and certain other jurisdictions associated with additional tax attribute utilization and expiration. The change from December 31, 2018, to December 31, 2019, primarily related to a reduction in the valuation allowance against deferred tax assets in certain state jurisdictions resulting from legal entity reorganizations. We will continue to monitor positive and negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be provided. It is possible that our valuation allowance may change within the next 12 months.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. We are currently under examination by various states. Management does not believe the resolution of any of the audits will result in a material change to our financial condition, results of operations or cash flows. The IRS has concluded its audits of our federal tax returns through the 2009 tax year; however, NOL and other carryforwards for certain audited periods remain open for examination. U.S. federal, state and foreign examination for years prior to 2001 are generally closed.


	Year Ended December 31,
(in millions)	2020		2019		2018
Unrecognized tax benefits, beginning of year	$	514	$	462	$	412
Gross increases to tax positions in prior periods	6		—		16
Gross decreases to tax positions in prior periods	(28)		—		(11)
Gross increases to current period tax positions	45		64		39
Gross increases due to current period business acquisitions	624		—		10
Gross decreases due to settlements with taxing authorities	(2)		(12)		(4)

Unrecognized tax benefits, end of year	$	1,159	$	514	$	462

As of December 31, 2020, 2019 and 2018, we had $857 million, $310 million and $263 million, respectively, in unrecognized tax benefits that, if recognized, would affect our annual effective tax rate. The balance as of December 31, 2020 includes measurement period adjustments associated with the Merger to reflect facts and circumstances in existence as of the effective time of the Merger. Our estimate of these unrecognized tax benefits is preliminary and is subject to finalization and adjustment, which could be material, during the measurement period of up to one year from the Merger close date. Penalties and interest on income tax assessments are included in Selling, general and administrative expenses and Interest expense, respectively, in our Consolidated Statements of Comprehensive Income. The accrued interest and penalties associated with unrecognized tax benefits are insignificant.