Accumulated undistributed profits of non-U.S. subsidiaries considered indefinitely reinvested

  
Unrecognized Tax BenefitsThe following is a rollforward of the Company’s unrecognized tax benefits:  


|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
| In millions of dollars | 2021 | 2020 | 2019 |
| Total unrecognized tax benefits at January 1 | $ | 861  |  | $ | 721  |  | $ | 607  |  |
| Net amount of increases for current year’s tax positions | 97  |  | 51  |  | 50  |  |
| Gross amount of increases for prior years’ tax positions | 515  |  | 217  |  | 151  |  |
| Gross amount of decreases for prior years’ tax positions | (107) |  | (74) |  | (44) |  |
| Amounts of decreases relating to settlements | (64) |  | (40) |  | (21) |  |
| Reductions due to lapse of statutes of limitation | (2) |  | (13) |  | (23) |  |
| Foreign exchange, acquisitions and dispositions | (4) |  | (1) |  | 1  |  |
| Total unrecognized tax benefits at December 31 | $ | 1,296  |  | $ | 861  |  | $ | 721  |  |

The portions of the total unrecognized tax benefits at December 31, 2021, 2020 and 2019 that, if recognized, would affect Citi’s tax expense are $1.0 billion, $0.7 billion and $0.6 billion, respectively. The remaining uncertain tax positions have offsetting amounts in other jurisdictions or are temporary differences.Interest and penalties (not included in unrecognized tax benefits above) are a component of Provision for income taxes. 

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | 2021 | 2020 | 2019 |
| In millions of dollars | Pretax | Net of tax | Pretax | Net of tax | Pretax | Net of tax |
| Total interest and penalties on the Consolidated Balance Sheet at January 1 | $ | 118  |  | $ | 96  |  | $ | 100  |  | $ | 82  |  | $ | 103  |  | $ | 85  |  |
| Total interest and penalties in the Consolidated Statement of Income | 32  |  | 24  |  | 14  |  | 10  |  | (4) |  | (4) |  |
| Total interest and penalties on the Consolidated Balance Sheet at December 31(1) | 214  |  | 164  |  | 118  |  | 96  |  | 100  |  | 82  |  |

  
(1)Includes $3 million, $4 million and $3 million for non-U.S. penalties in 2021, 2020 and 2019, respectively. Also includes $0 million, $1 million and $1 million for state penalties in 2021, 2020 and 2019, respectively.  
As of December 31, 2021, Citi was under audit by the Internal Revenue Service and other major taxing jurisdictions around the world. It is thus reasonably possible that significant changes in the gross balance of unrecognized tax benefits may occur within the next 12 months. The potential range of amounts that could affect Citi’s effective tax rate is between $0 and $500 million.The following are the major tax jurisdictions in which the Company and its affiliates operate and the earliest tax year subject to examination:  


|  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |
| Jurisdiction | Tax year |
| United States | 2016 |
| Mexico | 2016 |
| New York State and City | 2009 |
| United Kingdom | 2016 |
| India | 2017 |
|  |  |
| Singapore | 2019 |
| Hong Kong | 2015 |
| Ireland | 2017 |

  
Non-U.S. EarningsNon-U.S. pretax earnings approximated $12.9 billion in 2021, $13.8 billion in 2020 and $16.7 billion in 2019. As a U.S. corporation, Citigroup and its U.S. subsidiaries are currently subject to U.S. taxation on all non-U.S. pretax earnings of non-U.S. branches. Beginning in 2018, there is a separate foreign tax credit (FTC) basket for branches. Also, dividends from a non-U.S. subsidiary or affiliate are effectively exempt from U.S. taxation. The Company provides income taxes on the book over tax basis differences of non-U.S. subsidiaries except to the extent that such differences are indefinitely reinvested outside the U.S. At December 31, 2021, $6.5 billion of basis differences of non-U.S. entities was indefinitely invested. At the existing tax rates (including withholding taxes), additional taxes (net of U.S. FTCs and valuation allowances) of $1.8 billion would have to be provided if such assertions were reversed.Income taxes are not provided for the Company’s “savings bank base year bad debt reserves” that arose before 1988, because under current U.S. tax rules, such taxes will become payable only to the extent that such amounts are distributed in excess of limits prescribed by federal law. At December 31, 2021, the amount of the base year reserves totaled approximately $358 million (subject to a tax of $75 million).184
