Reductions based on tax positions related to prior years

  
Federal and foreign income tax expense for the years ended December 31, 2021, 2020, and 2019, consisted of the following:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Year Ended December 31 |
| ($ in millions) |  | 2021 |  | 2020 |  | 2019 |
| Income Taxes on Operations |  |  |  |  |  |  |
| Federal and foreign income taxes currently payable (receivable) |  | $ | (12) |  |  | $ | 90  |  |  | $ | 50  |  |
| Change in deferred federal and foreign income taxes |  | 90  |  |  | 24  |  |  | 84  |  |
| Total federal and foreign income taxes |  | $ | 78  |  |  | $ | 114  |  |  | $ | 134  |  |

  
Earnings and income tax from foreign operations are not material for any periods presented.  
Income tax expense differed from the amount based on the statutory federal income tax rate applied to earnings (loss) before income taxes due to the following:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Year Ended December 31 |
| ($ in millions) |  | 2021 |  | 2020 |  | 2019 |
| Income tax expense (benefit) on operations at statutory rate |  | $ | 131  |  |  | $ | 170  |  |  | $ | 143  |  |
|  |  |  |  |  |  |  |
| Tax benefit - sale of business |  | (11) |  |  | —  |  |  | —  |  |
|  |  |  |  |  |  |  |
| Stock compensation - net excess tax (benefits)/ shortfall |  | —  |  |  | 1  |  |  | (3) |  |
|  |  |  |  |  |  |  |
| Unrecognized tax benefits |  | 30  |  |  | 5  |  |  | 5  |  |
| Research and development tax credit |  | (78) |  |  | (66) |  |  | (16) |  |
|  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
| Other, Net |  | 6  |  |  | 4  |  |  | 5  |  |
| Total federal and foreign income taxes |  | $ | 78  |  |  | $ | 114  |  |  | $ | 134  |  |

  
Unrecognized Tax Benefits - Unrecognized tax benefits represent the gross value of the Company's uncertain tax positions that have not been reflected in the consolidated statements of operations. If the income tax benefits from federal tax positions are ultimately realized, such realization would affect the Company's income tax expense, while the realization of state tax benefits would be recorded in general and administrative expenses.   
The changes in unrecognized tax benefits (exclusive of interest and penalties) for the years ended December 31, 2021, 2020, and 2019 are summarized in the following table:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | December 31 |
| ($ in millions) |  | 2021 |  | 2020 |  | 2019 |
| Unrecognized tax benefits at beginning of the year |  | $ | 47  |  |  | $ | 36  |  |  | $ | 25  |  |
| Additions based on tax positions related to the current year |  | 7  |  |  | 8  |  |  | 6  |  |
| Additions based on tax positions related to prior years |  | 27  |  |  | 17  |  |  | 5  |  |
| Reductions based on tax positions related to prior years |  | —  |  |  | (7) |  |  | —  |  |
| Reductions based on settlement with taxing authorities |  | —  |  |  | (7) |  |  | —  |  |
|  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |
| Net change in unrecognized tax benefits |  | 34  |  |  | 11  |  |  | 11  |  |
| Unrecognized tax benefits at end of the year |  | $ | 81  |  |  | $ | 47  |  |  | 36  |  |

  
As of December 31, 2021 and 2020, the estimated amounts of the Company's uncertain tax positions, excluding interest and penalties, were liabilities of $81 million and $47 million, respectively. Assuming sustainment of these positions, as of December 31, 2021 and 2020, the reversal of $63 million and $34 million, respectively, of the amounts accrued would favorably affect the Company's effective federal income tax rate in future periods.  
The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. As a result of the unrecognized tax benefits noted above, income tax expense increased by $1 million in 2021 for interest and penalties, resulting in a liability of $3 million for interest and penalties as of December 31, 2021. In 2020, there was a net decrease in income tax expense of less than $1 million for interest and penalties, resulting in a liability of $2 million for interest and penalties as of December 31, 2020. The 2020 changes in interest expense related to a 86
