Foreign rate differential

[Table of Contents](#i36695dc5143241f795c32e47bf5f4b3d_7)CBRE GROUP, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)15.Income TaxesThe components of income before provision for income taxes consisted of the following (dollars in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2021 |  | 2020 |  | 2019 |
| Domestic | $ | 1,683,710  |  |  | $ | 470,181  |  |  | $ | 839,899  |  |
| Foreign | 725,711  |  |  | 499,788  |  |  | 521,446  |  |
| Total | $ | 2,409,421  |  |  | $ | 969,969  |  |  | $ | 1,361,345  |  |

Our tax provision (benefit) consisted of the following (dollars in thousands):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2021 |  | 2020 |  | 2019 |
| Current provision: |  |  |  |  |  |
| Federal | $ | 274,987  |  |  | $ | 18,951  |  |  | $ | (51,980) |  |
| State | 115,196  |  |  | 33,291  |  |  | 52,403  |  |
| Foreign | 238,273  |  |  | 88,994  |  |  | 163,833  |  |
| Total current provision | 628,456  |  |  | 141,236  |  |  | 164,256  |  |
| Deferred provision: |  |  |  |  |  |
| Federal | 34,607  |  |  | 61,034  |  |  | (74,432) |  |
| State | (4,395) |  |  | 3,872  |  |  | (5,760) |  |
| Foreign | (91,162) |  |  | 7,959  |  |  | (14,169) |  |
| Total deferred provision | (60,950) |  |  | 72,865  |  |  | (94,361) |  |
| Total provision for income taxes | $ | 567,506  |  |  | $ | 214,101  |  |  | $ | 69,895  |  |

The following is a reconciliation stated as a percentage of pre-tax income of the U.S. statutory federal income tax rate to our effective tax rate:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Year Ended December 31, |
|  | 2021 |  | 2020 |  | 2019 |
| Federal statutory tax rate | 21  | % |  | 21  | % |  | 21  | % |
| Foreign rate differential | —  |  |  | —  |  |  | 4  |  |
| State taxes, net of federal benefit | 4  |  |  | 3  |  |  | 3  |  |
| Non-deductible expenses | —  |  |  | 1  |  |  | 1  |  |
| Reserves for uncertain tax positions | 1  |  |  | —  |  |  | 1  |  |
| Credits and exemptions | (1) |  |  | (2) |  |  | (4) |  |
| Outside basis differences recognized as a result of a legal entity restructuring | —  |  |  | —  |  |  | (20) |  |
|  |  |  |  |  |  |
| Other | (1) |  |  | (1) |  |  | (1) |  |
| Effective tax rate | 24  | % |  | 22  | % |  | 5  | % |

In the fourth quarter of 2019, we recognized a net tax benefit of approximately $277.2 million attributable to outside basis differences recognized as a result of a legal entity restructuring. The recognition of the outside tax basis differences generated a capital loss that offset capital gains generated during 2019. A portion of the capital loss was carried back to tax years 2016, 2017 and 2018 to offset capital gains in those years. The remaining capital loss was carried forward to tax years 2020 and forward to be utilized to offset capital gains in these years. Based on our strong history of capital gains in the prior years and the nature of our business we expect to generate sufficient capital gains in the remaining three year carry forward period and therefore concluded that it is more likely than not that we will realize the full tax benefit from the capital loss carried forward. Accordingly, we have not provided any valuation allowance against the deferred tax asset for the capital loss carried forward.105
