Future Effective Federal Income Tax Rate, Percent

FORD MOTOR COMPANY AND SUBSIDIARIESNOTES TO THE FINANCIAL STATEMENTSNOTE 7. INCOME TAXES (Continued)  
Components of Income Taxes  
Components of income taxes excluding cumulative effects of changes in accounting principles, other comprehensive income, and equity in net results of affiliated companies accounted for after-tax for the years ended December 31 were as follows:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | 2019 |  | 2020 |  | 2021 |
| Income/(Loss) before income taxes (in millions) |   |  |   |  |   |
| U.S. | $ | 2,656  |  |  | $ | (231) |  |  | $ | 10,043  |  |
| Non-U.S. | (3,296) |  |  | (885) |  |  | 7,737  |  |
| Total | $ | (640) |  |  | $ | (1,116) |  |  | $ | 17,780  |  |
| Provision for/(Benefit from) income taxes (in millions) |   |  |   |  |   |
| Current |   |  |   |  |   |
| Federal | $ | (101) |  |  | $ | (23) |  |  | $ | 102  |  |
| Non-U.S. | 738  |  |  | 554  |  |  | 598  |  |
| State and local | 33  |  |  | (45) |  |  | 26  |  |
| Total current | 670  |  |  | 486  |  |  | 726  |  |
| Deferred |   |  |   |  |   |
| Federal | (1,190) |  |  | (523) |  |  | 2,290  |  |
| Non-U.S. | (70) |  |  | 168  |  |  | (3,254) |  |
| State and local | (134) |  |  | 29  |  |  | 108  |  |
| Total deferred | (1,394) |  |  | (326) |  |  | (856) |  |
| Total | $ | (724) |  |  | $ | 160  |  |  | $ | (130) |  |
| Reconciliation of effective tax rate |   |  |   |  |   |
| U.S. statutory rate | 21.0  | % |  | 21.0  | % |  | 21.0  | % |
| Non-U.S. tax rates under U.S. rates | 46.9  |  |  | (2.6) |  |  | 1.3  |  |
| State and local income taxes | 12.4  |  |  | 8.9  |  |  | 0.5  |  |
| General business credits | 67.0  |  |  | 35.1  |  |  | (2.3) |  |
| Dispositions and restructurings (a) | 45.5  |  |  | (0.4) |  |  | (18.8) |  |
| U.S. tax on non-U.S. earnings | (49.2) |  |  | 27.0  |  |  | 2.4  |  |
| Prior year settlements and claims | (5.0) |  |  | 8.3  |  |  | (0.3) |  |
| Tax incentives | 20.7  |  |  | (6.0) |  |  | (0.6) |  |
| Enacted change in tax laws | (12.5) |  |  | 1.5  |  |  | 1.1  |  |
| Valuation allowances | (18.7) |  |  | (108.8) |  |  | (4.7) |  |
| Other | (15.0) |  |  | 1.7  |  |  | (0.3) |  |
| Effective rate | 113.1  | % |  | (14.3) | % |  | (0.7) | % |

\_\_\_\_\_\_\_\_\_\_(a)Includes a benefit of $2.9 billion to recognize deferred tax assets resulting from changes in our global tax structure in 2021.  
On December 22, 2017, the Tax Cuts and Jobs Act (H.R. 1) was signed into law. This act includes, among other items, a permanent reduction to the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, and requires immediate taxation of accumulated, unremitted non-U.S. earnings. For the year ended December 31, 2019, our tax provision includes additional expense of $95 million related to the impact of the act and subsequently issued Treasury regulations on our global operations.  
During 2020, based on all available evidence, we established U.S. valuation allowances of $1.3 billion, primarily against tax credits as it was deemed more likely than not that these deferred tax assets would not be realized. In assessing the realizability of deferred tax assets, we consider the trade-offs between cash preservation and cash outlays to preserve tax credits. In 2021, we reversed $918 million of the previously established U.S. valuation allowances. The reversal primarily reflects a change in our intent to pursue planning actions involving cash outlays to preserve tax credits.  
At December 31, 2021, $16.7 billion of non-U.S. earnings are considered indefinitely reinvested in operations outside the United States, for which deferred taxes have not been provided. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.126
