OMNICOM GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Income Taxes The components of income before income taxes were (in millions): The reconciliation from the statutory U.S. federal income tax rate to our effective tax rate is: Our effective tax rate for 2020 increased year-over-year to 27.1% from 26.0%. The non-deductibility in certain jurisdictions of a portion of the COVID-19 repositioning costs recorded in the second quarter of 2020 had the effect of increasing our effective tax rate for 2020. This increase was substantially offset by a lower effective tax rate on our foreign earnings resulting from a change in legislation. The effective tax rate for 2019 includes a reduction of $10.8 million primarily from the net favorable settlement of uncertain tax positions in various jurisdictions in the second quarter of 2019. The international tax rate differentials in 2020 and 2019 are primarily attributed to our earnings in Germany, Australia, France, Japan and Brazil being taxed at higher rates than the U.S. statutory tax rate. The Tax Cuts and Jobs Act of 2017, or Tax Act, among other things, implemented a territorial tax system and imposed a one-time transition tax on the deemed repatriation of accumulated earnings of foreign subsidiaries. At December 31, 2020 and 2019, the transition tax liability was $112.0 million and $123.6 million, respectively. The territorial tax system allows us to repatriate earnings of our foreign subsidiaries without incurring additional U.S. tax by providing a 100% dividend exemption. While a territorial tax system limits U.S. federal income tax to domestic source income, foreign source income is subject to tax in the appropriate foreign jurisdiction at the local rate, which in certain jurisdictions may be higher than the U.S. federal statutory income tax rate of 21%. As a result, the foreign tax rate differential will cause our effective tax rate to be higher than the U.S. federal statutory income tax rate. We have elected to account for any tax on the global intangible low-taxed income, or GILTI, in the period in which it is incurred. In 2020 and 2019, we provided $3.0 million and $14.7 million, respectively, for tax impacts of GILTI. Income tax expense in 2020, 2019 and 2018 includes $3.8 million, $2.2 million and $3.6 million, respectively, of interest, net of tax benefit, and penalties related to tax positions taken on our tax returns. At December 31, 2020 and 2019, accrued interest and penalties were $23.5 million and $20.0 million, respectively. F-23 Income tax expense (benefit) was (in millions): Year Ended December 31, 2020 2019 2018 Domestic $ 711.1  $ 913.1  $ 643.7  International 698.2  1,025.2  1,280.6  $ 1,409.3  $ 1,938.3  $ 1,924.3  Year Ended December 31, 2020 2019 2018 Current: U.S. federal $ 172.2  $ 180.2  $ 273.8  U.S. state and local 39.5  33.9  35.5  International 189.1  306.9  305.2  400.8  521.0  614.5  Deferred: U.S. federal (17.4) 19.1  (104.2) U.S. state and local (6.1) (22.5) 2.8  International 4.4  (13.2) (20.4) (19.1) (16.6) (121.8) $ 381.7  $ 504.4  $ 492.7  2020 2019 2018 Statutory U.S. federal income tax rate 21.0 % 21.0 % 21.0 % U.S. state and local income taxes, net of U.S. federal income tax benefit 2.2  0.5  1.6  Effect of Tax Act —  —  1.5  Impact of foreign operations 3.4  4.5  3.8  Other 0.5  —  (2.3) Effective tax rate 27.1 % 26.0 % 25.6 %