Basis difference in LYONs

[Table of Contents](#ia72a687f7b8a4bb1b43219ab5b663314_7)NOTE 7. INCOME TAXES Earnings from continuing operations before income taxes for the years ended December 31 were as follows ($ in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
| United States | $ | 2,500  |  |  | $ | 1,655  |  |  | $ | 854  |  |
| Non-U.S. | 5,098  |  |  | 2,840  |  |  | 2,451  |  |
| Total | $ | 7,598  |  |  | $ | 4,495  |  |  | $ | 3,305  |  |

The provision for income taxes from continuing operations for the years ended December 31 were as follows ($ in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |  | 2019 |
| Current: |  |  |  |  |  |
| Federal U.S. | $ | 183  |  |  | $ | (321) |  |  | $ | 453  |  |
| Non-U.S. | 1,134  |  |  | 580  |  |  | 800  |  |
| State and local | 163  |  |  | 72  |  |  | 35  |  |
| Deferred: |  |  |  |  |  |
| Federal U.S. | (156) |  |  | 530  |  |  | (297) |  |
| Non-U.S. | (23) |  |  | (16) |  |  | (128) |  |
| State and local | (50) |  |  | 4  |  |  | 10  |  |
| Income tax provision | $ | 1,251  |  |  | $ | 849  |  |  | $ | 873  |  |

Noncurrent deferred tax assets and noncurrent deferred tax liabilities are included in other assets and other long-term liabilities, respectively, in the accompanying Consolidated Balance Sheets. Deferred income tax assets and liabilities as of December 31 were as follows ($ in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|  | 2021 |  | 2020 |
| Deferred tax assets: |  |  |  |
| Allowance for doubtful accounts | $ | 19  |  |  | $ | 24  |  |
| Inventories | 93  |  |  | 99  |  |
| Pension and postretirement benefits | 105  |  |  | 259  |  |
| Environmental and regulatory compliance | 38  |  |  | 27  |  |
| Other accruals and prepayments | 348  |  |  | 341  |  |
| Stock-based compensation expense | 76  |  |  | 68  |  |
| Operating lease liabilities | 252  |  |  | 215  |  |
| Tax credit and loss carryforwards | 544  |  |  | 569  |  |
| Valuation allowances | (242) |  |  | (264) |  |
| Total deferred tax asset | 1,233  |  |  | 1,338  |  |
| Deferred tax liabilities: |  |  |  |
| Property, plant and equipment | (79) |  |  | (50) |  |
| Insurance, including self-insurance | (520) |  |  | (713) |  |
| Basis difference in LYONs | —  |  |  | (11) |  |
| Operating lease right-of-use assets | (235) |  |  | (204) |  |
| Goodwill and other intangibles | (3,962) |  |  | (3,814) |  |
| Total deferred tax liability | (4,796) |  |  | (4,792) |  |
| Net deferred tax liability | $ | (3,563) |  |  | $ | (3,454) |  |

The Company evaluates the future realizability of tax credits and loss carryforwards considering the anticipated future earnings of the Company’s subsidiaries as well as tax planning strategies in the associated jurisdictions. Deferred taxes associated with U.S. entities consist of net deferred tax liabilities of approximately $2.1 billion and $1.9 billion as of December 31, 2021 and 2020, respectively. Deferred taxes associated with non-U.S. entities consist of net deferred tax liabilities of approximately $1.5 billion and $1.6 billion as of December 31, 2021 and 2020, respectively. During 2021, the Company’s valuation allowance 83
