Table of Contents Note D. Income Taxes The CNA Tax Group is included in the consolidated federal income tax return of Loews and its eligible subsidiaries. Loews and the Company have agreed that for each taxable year, the Company will 1) be paid by Loews the amount, if any, by which the Loews consolidated federal income tax liability is reduced by virtue of the inclusion of the CNA Tax Group in the Loews consolidated federal income tax return, or 2) pay to Loews an amount, if any, equal to the federal income tax that would have been payable by the CNA Tax Group filing a separate consolidated tax return. In the event that Loews should have a net operating loss in the future computed on the basis of filing a separate consolidated tax return without the CNA Tax Group, the Company may be required to repay tax recoveries previously received from Loews. This agreement may be canceled by either party upon 30 days written notice. For the years ended December 31, 2019, 2018 and 2017, the Company paid $239 million, $275 million and $127 million to Loews related to federal income taxes. For 2017 through 2019, the Internal Revenue Service (IRS) has accepted Loews and the Company into the Compliance Assurance Process (CAP), which is a voluntary program for large corporations. Under CAP, the IRS conducts a real-time audit and works contemporaneously with the Company to resolve any issues prior to the filing of the tax return. The Company believes that this approach should reduce tax-related uncertainties, if any. As of December 31, 2019 and 2018, there were no unrecognized tax benefits. The Company recognizes interest accrued related to unrecognized tax benefits and tax refund claims in Income tax (expense) benefit on the Consolidated Statements of Operations. The Company recognizes penalties (if any) in Income tax (expense) benefit on the Consolidated Statements of Operations. During 2019, 2018 and 2017 the Company recognized no interest and no penalties. There were no amounts accrued for interest or penalties as of December 31, 2019 or 2018. On December 22, 2017, H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” was signed into law (Tax Reform Legislation). The Tax Reform Legislation provided for a permanent reduction in the Federal corporate income tax rate from 35% to 21% effective January 1, 2018, among other provisions. The Company was required to recognize the effect of this tax rate change on its deferred tax assets in the period the tax rate change was signed into law. Consequently, the Company recorded a non- cash increase to Income tax expense of $83 million in the Consolidated Statements of Operations for the year ended December 31, 2017. Based on the filed 2017 tax return, the effect of the tax rate change decreased Income tax expense by $6 million for the year ended December 31, 2018. The following table presents a reconciliation between the Company's federal income tax expense at statutory rates and the recorded income tax expense. As of December 31, 2019, no deferred taxes are required on the undistributed earnings of subsidiaries subject to tax. Years ended December 31 (In millions) 2019 2018 2017 Income tax expense at statutory rates $ (257 ) $ (203 ) $ (459 ) Tax benefit from tax exempt income 53 63 131 Foreign taxes and credits (1 ) (1 ) 3 State income taxes (14) (13) (7) Net deferred tax asset remeasurement — 6 (83 ) Other tax expense (4) (3) 4 Income tax expense $ (223 ) $ (151 ) $ (411 ) 80