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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes In August 2022, the U.S. Government enacted legislation commonly referred to as the Inflation Reduction Act. The main provisions of the Inflation Reduction Act that we anticipate may impact us are (i) a 15% corporate alternative minimum tax (“Corporate AMT”) and (ii) a 1% excise tax on share repurchases, which we expect to record in equity on our consolidated statements of stockholders’ equity (deficit), in each case effective for tax years beginning after December 31, 2022. We will be considered an “applicable corporation” for purposes of the new Corporate AMT. Our regular federal income tax liability will generally exceed our Corporate AMT liability. Certain unique circumstances, however, may result in a Corporate AMT liability, including when tax losses are reported in a different year than book losses. Earnings (losses) before income taxes and provision (benefit) for income taxes consisted of the following:
| For the Years Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Earnings (losses) before income taxes: |  |  |  |  |
United States | $ | 7,628 |  |  | $ | 4,239 |  |  | $ | 6,842 |
Outside United States | (239) |  |  | (415) |  |  | 48 |
Total | $ | 7,389 |  |  | $ | 3,824 |  |  | $ | 6,890 |
Provision (benefit) for income taxes: |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | 1,968 |  |  | $ | 1,965 |  |  | $ | 2,025 |
State and local | 603 |  |  | 542 |  |  | 553 |
Outside United States | 1 |  |  | 2 |  |  | 22 |
| 2,572 |  |  | 2,509 |  |  | 2,600 |
Deferred: |  |  |  |  |
Federal | (893) |  |  | (1,190) |  |  | (130) |
State and local | (54) |  |  | 30 |  |  | (34) |
| (947) |  |  | (1,160) |  |  | (164) |
Total provision for income taxes | $ | 1,625 |  |  | $ | 1,349 |  |  | $ | 2,436 |
Our U.S. subsidiaries join in the filing of a U.S. federal consolidated income tax return. The U.S. federal income tax statute of limitations remains open for the year 2017 and forward, with years 2017 through 2020 currently under examination by the Internal Revenue Service (“IRS”) as part of an audit conducted in the ordinary course of business. State statutes of limitations generally remain open for the year 2017 and forward. Certain of our state tax returns are currently under examination by various states as part of routine audits conducted in the ordinary course of business. A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:
| For the Years Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Balance at beginning of year | $ | 53 |  |  | $ | 74 |  |  | $ | 64 |
Additions based on tax positions related to the current year | 1 |  |  | — |  |  | — |
Additions for tax positions of prior years | 16 |  |  | 40 |  |  | 12 |
Reductions for tax positions due to lapse of statutes of limitations | — |  |  | (5) |  |  | — |
Reductions for tax positions of prior years | — |  |  | (23) |  |  | (2) |
Tax settlements | (1) |  |  | (33) |  |  | — |
Balance at end of year | $ | 69 |  |  | $ | 53 |  |  | $ | 74 |
The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2022 was $44 million, along with $25 million affecting deferred taxes. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2021 was $31 million, along with $22 million affecting deferred taxes. At December 31, 2022, 2021 and 2020, the amount of accrued interest and penalties on our consolidated balance sheets was $18 million, $11 million and $15 million, respectively. For the years ended December 31, 2022, 2021 and 2020, we recognized in our consolidated statements of earnings $8 million, $(4) million and $4 million, respectively, of gross interest (income) expense associated with uncertain tax positions. We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision. We are subject to income taxation in many jurisdictions. Unrecognized tax benefits reflect the difference between tax positions taken or expected to be taken on income tax returns and the amounts recognized in the financial statements. Resolution of the related tax positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within our control. It is reasonably possible that within the next 12 months certain examinations will be resolved, which could result in a decrease in unrecognized tax benefits of approximately $1 million. A reconciliation between actual income taxes and amounts computed by applying the federal statutory rate to earnings before income taxes was as follows:
|  | For the Years Ended December 31,
|  | 2022 |  | 2021 |  | 2020
(dollars in millions) |  | $ |  | % |  | $ |  | % |  | $ |  | %
U.S. federal statutory rate |  | $ | 1,552 |  |  | 21.0 | % |  | $ | 803 |  |  | 21.0 | % |  | $ | 1,447 |  |  | 21.0 | %
Increase (decrease) resulting from: |  |  |  |  |  |  |  |  |  |  |  |
State and local income taxes, net of federal tax benefit |  | 435 |  |  | 5.9 |  |  | 451 |  |  | 11.8 |  |  | 410 |  |  | 6.0 |
Tax basis in foreign investments |  | 11 |  |  | 0.1 |  |  | 25 |  |  | 0.7 |  |  | 23 |  |  | 0.3 |
Uncertain tax positions |  | — |  |  | — |  |  | (25) |  |  | (0.7) |  |  | 9 |  |  | 0.1 |
Investment in ABI |  | (24) |  |  | (0.3) |  |  | (16) |  |  | (0.4) |  |  | 3 |  |  | 0.1 |
Investment in JUUL |  | 306 |  |  | 4.1 |  |  | 7 |  |  | 0.2 |  |  | 537 |  |  | 7.8 |
Investment in Cronos |  | 30 |  |  | 0.4 |  |  | 128 |  |  | 3.3 |  |  | 20 |  |  | 0.3 |
Valuation allowance releases |  | (664) |  |  | (9.0) |  |  | (15) |  |  | (0.4) |  |  | (19) |  |  | (0.3) |
Other |  | (21) |  |  | (0.2) |  |  | (9) |  |  | (0.2) |  |  | 6 |  |  | 0.1 |
Effective tax rate |  | $ | 1,625 |  |  | 22.0 | % |  | $ | 1,349 |  |  | 35.3 | % |  | $ | 2,436 |  |  | 35.4 | %
The tax provision (benefit) in 2022 included tax benefits of $664 million due primarily to the release of valuation allowances related to the anticipated ability to utilize a portion of existing capital losses. These tax benefits were partially offset by tax expense of $306 million for a valuation allowance recorded against a deferred tax asset related to the decreases in the estimated fair value of our investment in JUUL and by the state tax treatment of the impairment charge on our equity investment in ABI. The tax provision (benefit) in 2021 was impacted by the state tax treatment of the impairment charge on our equity investment in ABI. The tax provision (benefit) in 2021 also included net tax expense of $128 million related to our Investment in Cronos, including an addition to a valuation allowance on a deferred tax asset. The tax provision (benefit) in 2020 included tax expense of $612 million for a valuation allowance on a deferred tax asset related to our impairment of our investment in JUUL in the third quarter of 2020, partially offset by a $24 million tax benefit reflecting the decrease of a portion of the valuation allowance related to a reduction of a deferred tax asset associated with an increase in the estimated fair value of JUUL in the fourth quarter of 2020. The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following at December 31:
(in millions) | 2022 |  | 2021
Deferred income tax assets: |  |  |
Accrued postretirement and postemployment benefits | $ | 303 |  |  | $ | 387 |
Settlement charges | 729 |  |  | 835 |
Investment in JUUL | 3,001 |  |  | 2,652 |
Investment in Cronos | 407 |  |  | 403 |
Net operating losses and tax credit carryforwards | 31 |  |  | 46 |
Total deferred income tax assets | 4,471 |  |  | 4,323 |
Deferred income tax liabilities: |  |  |
Property, plant and equipment | (233) |  |  | (216) |
Intangible assets | (2,849) |  |  | (2,802) |
Investment in ABI | (1,226) |  |  | (1,695) |
Finance assets, net | — |  |  | (29) |
Accrued pension costs | (70) |  |  | (55) |
Other | (115) |  |  | (94) |
Total deferred income tax liabilities | (4,493) |  |  | (4,891) |
Valuation allowances | (2,800) |  |  | (3,097) |
Net deferred income tax liabilities | $ | (2,822) |  |  | $ | (3,665) |
At December 31, 2022, we had estimated gross state tax net operating losses of $19 million that, if unused, will expire in 2035 through 2038. A reconciliation of the beginning and ending valuation allowances was as follows:
|  | For the Years Ended December 31,
(in millions) |  | 2022 |  | 2021 |  | 2020
Balance at beginning of year |  | $ | 3,097 |  |  | $ | 2,817 |  |  | $ | 2,324 |
Additions to valuation allowance charged to income tax expense |  | 429 |  |  | 401 |  |  | 692 |
Reductions to valuation allowance credited to income tax benefit |  | (730) |  |  | (118) |  |  | (200) |
Foreign currency translation |  | 4 |  |  | (3) |  |  | 1 |
Balance at end of year |  | $ | 2,800 |  |  | $ | 3,097 |  |  | $ | 2,817 |
We determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized. We determine the realizability of deferred tax assets based on the weight of all available positive and negative evidence. In reaching this determination, we consider the character of the assets and the possible sources of taxable income of the appropriate character within the available carryback and carryforward periods available under the tax law. The additions to valuation allowances during 2022 were primarily due to deferred tax assets recorded in connection with decreases in the estimated fair value of our investment in JUUL. The reductions to valuation allowances during 2022 were primarily due to the anticipated ability to utilize a portion of existing losses related to our investment in JUUL and the abandonment of our Cronos warrant. The cumulative valuation allowance at December 31, 2022 was primarily attributable to deferred tax assets recorded in connection with our investment in JUUL ($2,394 million) and our Investment in Cronos ($379 million). The changes in valuation allowances during 2021 were primarily due to deferred tax assets recorded in connection with our Investment in Cronos. The cumulative valuation allowance at December 31, 2021 was primarily attributable to deferred tax assets recorded in connection with our investment in JUUL ($2,652 million) and our Investment in Cronos ($407 million). The 2020 valuation allowance was primarily attributable to deferred tax assets recorded in connection with the impairments of our investment in JUUL ($2,610 million), and our Investment in Cronos ($121 million). For a discussion regarding the change in estimated fair value of our investment in JUUL, the impairment of our investment in ABI and the impairment of our Investment in Cronos, see Note 5. Investments in Equity Securities.

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