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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Note 17—Income Taxes Components of income tax provision (benefit) were:
| Millions of Dollars
| 2023 |  | 2022 |  | 2021
Income Taxes |  |  |  |  |
Federal |  |  |  |  |
Current | $ | 1,054 |  |  | 1,263 |  |  | 32 |
Deferred | 825 |  |  | 1,629 |  |  | 1,161 |
Foreign |  |  |  |  |
Current | 2,931 |  |  | 5,813 |  |  | 3,128 |
Deferred | 254 |  |  | 387 |  |  | 66 |
State and local |  |  |  |  |
Current | 202 |  |  | 386 |  |  | 127 |
Deferred | 65 |  |  | 70 |  |  | 119 |
Total tax provision (benefit) | $ | 5,331 |  |  | 9,548 |  |  | 4,633 |
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Major components of deferred tax liabilities and assets at December 31 were:
| Millions of Dollars
| 2023 | 2022
Deferred Tax Liabilities |  |
PP&E and intangibles | $ | 11,992 |  | 11,100 |
Inventory | 46 |  | 48 |
Other | 216 |  | 190 |
Total deferred tax liabilities | 12,254 |  | 11,338 |
Deferred Tax Assets |  |
Benefit plan accruals | 413 |  | 450 |
Asset retirement obligations and accrued environmental costs | 2,608 |  | 2,333 |
Investments in joint ventures | 2,133 |  | 1,917 |
Other financial accruals and deferrals | 448 |  | 736 |
Loss and credit carryforwards | 5,629 |  | 6,354 |
Other | 121 |  | 112 |
Total deferred tax assets | 11,352 |  | 11,902 |
Less: valuation allowance | (7,656) |  | (8,049) |
Total deferred tax assets net of valuation allowance | 3,696 |  | 3,853 |
Net deferred tax liabilities | $ | 8,558 |  | 7,485 |
At December 31, 2023, noncurrent assets and liabilities included deferred taxes of $255 million and $8,813 million, respectively. At December 31, 2022, noncurrent assets and liabilities included deferred taxes of $241 million and $7,726 million, respectively. At December 31, 2023, the loss and credit carryforward deferred tax assets were primarily related to U.S. foreign tax credit carryforwards of $4.7 billion and various jurisdictions net operating loss and credit carryforwards of $0.9 billion. If not utilized, U.S. foreign tax credits and net operating losses will begin to expire in 2024. The following table shows a reconciliation of the beginning and ending deferred tax asset valuation allowance for 2023, 2022 and 2021:
| Millions of Dollars
| 2023 | 2022 | 2021
Balance at January 1 | $ | 8,049 |  | 8,342 |  | 9,965 |
Charged to expense (benefit) | (2) |  | 5 |  | (45) |
Other* | (391) |  | (298) |  | (1,578) |
Balance at December 31 | $ | 7,656 |  | 8,049 |  | 8,342 |
*Represents changes due to originating deferred tax assets that have no impact to our effective tax rate, acquisitions/dispositions/revisions and the effect of translating foreign financial statements. Valuation allowances have been established to reduce deferred tax assets to an amount that will, more likely than not, be realized. At December 31, 2023, we have maintained a valuation allowance with respect to substantially all U.S. foreign tax credit carryforwards, basis differences in our APLNG investment, and certain net operating loss carryforwards for various jurisdictions. During 2022, the valuation allowance movement charged to earnings primarily relates to the impact of 2022 changes to Norway’s Petroleum Tax System which is partly offset by the U.S. tax impact of the disposition of our CVE common shares. Other movements are primarily related to valuation allowances on expiring tax attributes. Based on our historical taxable income, expectations for the future, and available tax-planning strategies, management expects deferred tax assets, net of valuation allowances, will primarily be realized as offsets to reversing deferred tax liabilities. During the second quarter of 2022, Norway enacted changes to the Petroleum Tax System. As a result of the enactment, a valuation allowance of $58 million was recorded during the second quarter to reflect changes to our ability to realize certain deferred tax assets under the new law. During 2021, the valuation allowance movement charged to earnings primarily relates to the fair value measurement of our CVE common shares that are not expected to be realized, and the expected realization of certain U.S. tax attributes associated with our planned disposition of our Indonesia assets. This is partially offset by Australian tax benefits associated with our impairment of APLNG that we do not expect to be realized. Other movements are primarily related to valuation allowances on expiring tax attributes. For more information on our Indonesia disposition see Note 3. At December 31, 2023, unremitted income considered to be permanently reinvested in certain foreign subsidiaries and foreign corporate joint ventures totaled approximately $4,975 million. Deferred income taxes have not been provided on this amount, as we do not plan to initiate any action that would require the payment of income taxes. The estimated amount of additional tax, primarily local withholding tax, that would be payable on this income if distributed is approximately $249 million. The following table shows a reconciliation of the beginning and ending unrecognized tax benefits for 2023, 2022 and 2021:
| Millions of Dollars
| 2023 | 2022 | 2021
Balance at January 1 | $ | 710 |  | 1,345 |  | 1,206 |
Additions based on tax positions related to the current year | 5 |  | 6 |  | 15 |
Additions for tax positions of prior years | 1 |  | 6 |  | 177 |
Reductions for tax positions of prior years | (9) |  | (62) |  | (5) |
Settlements | (96) |  | (510) |  | — |
Lapse of statute | (224) |  | (75) |  | (48) |
Balance at December 31 | $ | 387 |  | 710 |  | 1,345 |
Included in the balance of unrecognized tax benefits for 2023, 2022 and 2021 were $378 million, $701 million and $1,261 million, respectively, which, if recognized, would impact our effective tax rate. The balance of the unrecognized tax benefits decreased in 2023 due to the lapsing of the statute of limitations on certain of our foreign subsidiaries of $224 million as well as the closing of our 2018 Canadian domestic audit that resulted in a reduction of $92 million. The balance of the unrecognized tax benefits decreased in 2022 due to the closing of the 2017 audit of our federal income tax return. As a result, we recognized federal and state tax benefits totaling $515 million relating to the recovery of outside tax basis previously offset by a full reserve. The balance of the unrecognized tax benefits increased in 2021 mainly due to U.S. tax credits acquired through our Concho acquisition. See Note 3 and Note 11. At December 31, 2023, 2022 and 2021, accrued liabilities for interest and penalties totaled $45 million, $35 million and $47 million, respectively, net of accrued income taxes. Interest and penalties resulted in a reduction to earnings of $10 million in 2023, an increase of $12 million in 2022 and a reduction to earnings of $1 million in 2021. We file tax returns in the U.S. federal jurisdiction and in many foreign and state jurisdictions. Audits in major jurisdictions are generally complete as follows: Canada (2016), Norway (2022) and U.S. (2019). Issues in dispute for audited years and audits for subsequent years are ongoing and in various stages of completion in the many jurisdictions in which we operate around the world. Consequently, the balance in unrecognized tax benefits can be expected to fluctuate from period to period. Within the next twelve months, we may have audit periods close that could significantly impact our total unrecognized tax benefits. It is reasonably possible such changes could be significant when compared with our total unrecognized tax benefits, but the amount of change is not estimable. The amounts of U.S. and foreign income (loss) before income taxes, with a reconciliation of tax at the federal statutory rate to the provision for income taxes, were:
| Millions of Dollars |  | Percent of Pre-Tax Income (Loss)
| 2023 | 2022 | 2021 |  | 2023 | 2022 | 2021
Income (loss) before income taxes |  |  |  |  |  |  |
United States | $ | 9,472 |  | 16,739 |  | 8,024 |  |  | 58.2 | % | 59.3 |  | 63.1 |
Foreign | 6,816 |  | 11,489 |  | 4,688 |  |  | 41.8 |  | 40.7 |  | 36.9 |
| $ | 16,288 |  | 28,228 |  | 12,712 |  |  | 100.0 | % | 100.0 |  | 100.0 |
Federal statutory income tax | $ | 3,421 |  | 5,928 |  | 2,670 |  |  | 21.0 | % | 21.0 |  | 21.0 |
Non-U.S. effective tax rates | 2,063 |  | 3,866 |  | 1,915 |  |  | 12.7 |  | 13.7 |  | 15.1 |
Recovery of outside basis | (4) |  | (30) |  | (55) |  |  | — |  | (0.1) |  | (0.4) |
Adjustment to tax reserves | (317) |  | (551) |  | (11) |  |  | (1.9) |  | (2.0) |  | (0.1) |
Adjustment to valuation allowance | (2) |  | 5 |  | (45) |  |  | — |  | — |  | (0.4) |
State income tax | 214 |  | 405 |  | 194 |  |  | 1.3 |  | 1.4 |  | 1.5 |
Enhanced oil recovery credit | — |  | (37) |  | (99) |  |  | — |  | (0.1) |  | (0.8) |
Other | (44) |  | (38) |  | 64 |  |  | (0.3) |  | (0.1) |  | 0.5 |
Total | $ | 5,331 |  | 9,548 |  | 4,633 |  |  | 32.7 | % | 33.8 |  | 36.4 |
Our effective tax rate for 2023 was driven by our jurisdictional tax rates for this profit mix with a favorable impact from routine tax credits. The adjustment to tax reserves primarily relates to the lapsing of the statute of limitations on certain of our foreign subsidiaries and the closing of the 2018 Canadian domestic audit. Our effective tax rate for 2022 was driven by our jurisdictional tax rates for this profit mix with net favorable impacts from routine tax credits and valuation allowance adjustments. The adjustment to tax reserves primarily relates to the closing of the audit of our 2017 U.S. federal tax return and the recognition of the U.S. federal and state tax benefits described above. Our effective tax rate for 2021 was driven by our jurisdictional tax rates for this profit mix with net favorable impacts from routine tax credits and valuation allowance adjustments. The valuation allowance adjustment is primarily related to the fair value measurement and disposition of our CVE common shares of $218 million and the ability to utilize the U.S. foreign tax credit and capital loss carryforward due to our anticipated disposition of our Indonesia entities of $29 million. This was partially offset by an increase to our valuation allowance related to the tax impact of the impairment of our APLNG investment of $206 million for which we do not expect to receive a tax benefit. On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022, which among other things, implements a 15 percent minimum tax on book income of certain large corporations, a 1 percent excise tax on net stock repurchases and several tax incentives to promote lower carbon energy. Based upon our current analysis, these law changes are not expected to have a material impact to our consolidated financial statements.

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