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Income Taxes
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Earnings before income taxes, provision for income taxes and income tax rates consisted of the following:
For the Nine Months Ended September 30,For the Three Months Ended September 30,
(in millions)2024202320242023
Earnings before income taxes$10,881$8,193$3,026$2,908
Provision for income taxes2,6562,123733742
Income tax rate24.4 %25.9 %24.2 %25.5 %
Our income tax rate for the nine months ended September 30, 2024 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense, partially offset by an income tax benefit from the partial release of a valuation allowance recorded against a deferred tax asset associated with our JUUL-related losses. The valuation allowance release was due to our capital gain on the ABI Transaction. Our income tax rate for the three months ended September 30, 2024 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense.
Our income tax rate for the nine months ended September 30, 2023 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense and a valuation allowance recorded against a deferred tax asset related to the disposition of our former investment in JUUL. Our income tax rate for the three months ended September 30, 2023 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense.
The following chart provides a reconciliation of the beginning and ending valuation allowances for the nine months ended September 30, 2024:
(in millions)
Balance at beginning of year$2,256 
Additions to valuation allowance charged to income tax expense7 
Releases of valuation allowance credited to income tax benefit(94)
Foreign currency translation1 
Reductions to valuation allowance due to NJOY Transaction (no impact to earnings)
(4)
Balance at end of period$2,166 
We determine deferred tax assets and liabilities based on the differences 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 carryback and carryforward periods available under the tax law. There is a potential that sufficient positive evidence may be available in future periods to cause us to further reduce or eliminate the valuation allowance on certain deferred tax assets. That change to the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease in income tax expense in the period the release would be recorded.
The changes in the valuation allowances for the nine months ended September 30, 2024 were due primarily to the ABI Transaction. The cumulative valuation allowance at September 30, 2024 was primarily attributable to deferred tax assets recorded in connection with the unrealized capital losses related to our former investment in JUUL and our investment in Cronos. As we continue to evaluate all sources of potential income that may become available to utilize these losses, our valuation allowance position may change. For further discussion of the ABI Transaction, see Note 6. Investments in Equity Securities.
Agreement with the IRS
In October 2024, we entered into an agreement with the IRS regarding the tax treatment of the $6.4 billion ordinary loss we recognized in 2023 for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL. We fully reserved for the tax benefit associated with this ordinary loss by recording an unrecognized tax benefit in
2023. As a result of the agreement, we expect to record a tax benefit of approximately $0.9 billion in our consolidated statement of earnings in the fourth quarter of 2024 for the reversal of the unrecognized tax benefit, which results in the partial release of a valuation allowance against our JUUL-related losses.
Consistent with the terms of the agreement, we claimed a $4.0 billion ordinary loss and a $2.4 billion capital loss on our 2023 tax return. After giving effect to the agreement and $1.7 billion of capital losses previously utilized against capital gains related to the IQOS Transaction, we have $5.6 billion (which includes $0.9 billion of capital loss carryforwards available to offset capital gains through 2028) of the $12.8 billion tax loss related to our former investment in JUUL remaining to offset future potential capital gains. For financial statement purposes, none of the tax benefit for the $5.6 billion has been recognized