XML 55 R27.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note 17—Income Taxes
Components of income tax provision (benefit) were:
Millions of Dollars
202320222021
Income Taxes
Federal
Current$1,054 1,263 32 
Deferred825 1,629 1,161 
Foreign
Current2,931 5,813 3,128 
Deferred254 387 66 
State and local
Current202 386 127 
Deferred65 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
20232022
Deferred Tax Liabilities
PP&E and intangibles$11,992 11,100 
Inventory46 48 
Other216 190 
Total deferred tax liabilities12,254 11,338 
Deferred Tax Assets
Benefit plan accruals413 450 
Asset retirement obligations and accrued environmental costs2,608 2,333 
Investments in joint ventures2,133 1,917 
Other financial accruals and deferrals448 736 
Loss and credit carryforwards5,629 6,354 
Other121 112 
Total deferred tax assets11,352 11,902 
Less: valuation allowance(7,656)(8,049)
Total deferred tax assets net of valuation allowance3,696 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
202320222021
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
202320222021
Balance at January 1$710 1,345 1,206 
Additions based on tax positions related to the current year5 6 15 
Additions for tax positions of prior years1 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 DollarsPercent of Pre-Tax Income (Loss)
202320222021202320222021
Income (loss) before income taxes
United States$9,472 16,739 8,024 58.2 %59.3 63.1 
Foreign6,816 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 rates2,063 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 tax214 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.