Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN AIRLINES GROUP INC The components of our deferred tax assets and liabilities were (in millions): At December 31, 2020, we had approximately $16.5 billion of federal net operating losses (NOLs) available to reduce future federal taxable income, of which $8.5 billion will expire beginning in 2023 if unused and $8.0 billion can be carried forward indefinitely (NOL Carryforwards). We also had approximately $5.0 billion of NOL Carryforwards to reduce future state taxable income at December 31, 2020, which will expire in taxable years 2020 through 2040 if unused. Our ability to use our NOL Carryforwards depends on the amount of taxable income generated in future periods. We provide a valuation allowance for our deferred tax assets, which include our NOLs, when it is more likely than not that some portion, or all of our deferred tax assets, will not be realized. We consider all available positive and negative evidence and make certain assumptions in evaluating the realizability of our deferred tax assets. Many factors are considered that impact our assessment of future profitability, including conditions which are beyond our control, such as the health of the economy, the availability and price volatility of aircraft fuel and travel demand. We presently have a $34 million valuation allowance on certain net deferred tax assets related to state NOL Carryforwards. There can be no assurance that an additional valuation allowance on our net deferred tax assets will not be required. Such valuation allowance could be material. Our ability to deduct our NOL Carryforwards and to utilize certain other available tax attributes can be substantially constrained under the general annual limitation rules of Section 382 where an “ownership change” has occurred. Substantially all of our remaining federal NOL Carryforwards attributable to US Airways Group are subject to limitation under Section 382; however, our ability to utilize such NOL Carryforwards is not anticipated to be effectively constrained as a result of such limitation. Similar limitations may apply for state income tax purposes. Our ability to utilize any new NOL Carryforwards arising after the ownership changes is not affected by the annual limitation rules imposed by Section 382 unless another ownership change occurs. Under the Section 382 limitation, cumulative stock ownership changes among material stockholders exceeding 50% during a rolling three-year period can potentially limit our future use of NOLs and tax credits. At December 31, 2019, we had an AMT credit carryforward of approximately $170 million available for federal income tax purposes, which was fully refunded in 2020 as a result of the CARES Act. In 2020, we recorded an income tax benefit of $2.6 billion, with an effective rate of approximately 22%, which was substantially non-cash. Substantially all of our income before income taxes is attributable to the United States. 125 December 31, 2020 2019 Deferred tax assets: Operating loss carryforwards and other credits $ 4,027  $ 2,103  Loyalty program liability 1,977  1,755  Leases 1,913  2,077  Pensions 1,405  1,229  Postretirement benefits other than pensions 203  145  Rent expense 96  126  Reorganization items 28  30  Alternative minimum tax (AMT) credit carryforwards —  90  Other 847  613  Total deferred tax assets 10,496  8,168  Valuation allowance (34) (34) Net deferred tax assets 10,462  8,134  Deferred tax liabilities: Accelerated depreciation and amortization (5,028) (5,196) Leases (1,818) (1,979) Other (386) (343) Total deferred tax liabilities (7,232) (7,518) Net deferred tax asset $ 3,230  $ 616 