XML 59 R18.htm IDEA: XBRL DOCUMENT
v3.8.0.1

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Geographic sources of income (losses) before income taxes and equity in affiliated companies’ net earnings (losses) for the years ended December 31 consist of the following:
| 2017 |  | 2016 |  | 2015
U.S. | $ | 20 |  |  | $ | (5,179 | ) |  | $ | (14,589 | )
Foreign | 2,882 |  | a | 1,707 |  |  | 461 |
Total | $ | 2,902 |  |  | $ | (3,472 | ) |  | $ | (14,128 | )
a. | As a result of the unfavorable Peruvian Supreme Court ruling on the Cerro Verde royalty dispute, FCX incurred pre-tax charges of $348 million to income from continuing operations and $7 million of net tax expense for the year 2017. Refer to Note 12 for further discussion.
Income taxes are provided on the earnings of FCX’s material foreign subsidiaries under the assumption that these earnings will be distributed. FCX has not provided deferred income taxes for other differences between the book and tax carrying amounts of its investments in material foreign subsidiaries as FCX considers its ownership positions to be permanent in duration, and quantification of the related deferred tax liability is not practicable. FCX’s (provision for) benefit from income taxes for the years ended December 31 consist of the following:
| 2017 |  | 2016 |  | 2015 |
Current income taxes: |  |  |  |  |  |
Federal | $ | (3 | ) |  | $ | 164 |  |  | $ | 89 |  |
State | (10 | ) |  | 17 |  |  | 2 |  |
Foreign | (1,426 | ) |  | (352 | ) |  | (160 | ) |
Total current | (1,439 | ) |  | (171 | ) |  | (69 | ) |
Deferred income taxes: |  |  |  |  |  |
Federal | 64 |  |  | 137 |  |  | 3,403 |  |
State | 10 |  |  | 41 |  |  | 154 |  |
Foreign | 89 |  |  | (451 | ) |  | (163 | ) |
Total deferred | 163 |  |  | (273 | ) |  | 3,394 |  |
Adjustments | 393 |  | a | 13 |  | b | (1,374 | ) | c
Operating loss carryforwards | — |  |  | 60 |  |  | — |  |
(Provision for) benefit from income taxes | $ | (883 | ) |  | $ | (371 | ) |  | $ | 1,951 |  |
a. | Reflects provisional tax credits associated with the Tax Cuts and Jobs Act (the Act), including reversal of valuation allowances associated with anticipated refunds of alternative minimum tax (AMT) credits ($272 million, net of reserves) and a decrease in corporate income tax rates ($121 million). Refer to “Tax Reform” below for further discussion.
b. | Benefit related to changes in Peruvian tax rules.
c. | Adjustments include net provisions of $1.2 billion associated with an increase in the beginning of the year valuation allowance related to the impairment of U.S. oil and gas properties and $0.2 billion resulting from the termination of PT-FI’s Delaware domestication.
A reconciliation of the U.S. federal statutory tax rate to FCX’s effective income tax rate for the years ended December 31 follows:
| 2017 |  | 2016 |  | 2015
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent
U.S. federal statutory tax rate | $ | (1,016 | ) |  | (35 | )% |  | $ | 1,215 |  |  | (35 | )% |  | $ | 4,945 |  |  | (35 | )%
Valuation allowance, net | 28 |  | a | 1 |  |  | (1,680 | ) | b | 48 |  |  | (2,955 | ) | b | 21 |
Foreign tax credit limitation | (159 | ) |  | (5 | ) |  | (598 | ) |  | 17 |  |  | (228 | ) |  | 2 |
Tax reform | 393 |  |  | 14 |  |  | — |  |  | — |  |  | — |  |  | — |
Mining royalty dispute | (129 | ) |  | (5 | ) |  | — |  |  | — |  |  | — |  |  | — |
Impairment of oil and gas properties | — |  |  | — |  |  | 520 | c | (15 | ) |  | — |  |  | — |
Percentage depletion | 227 |  |  | 8 |  |  | 211 |  |  | (6 | ) |  | 186 |  |  | (1 | )
Withholding and other impacts on |  |  |  |  |  |  |  |  |  |  |
foreign earnings | (216 | ) |  | (7 | ) |  | (93 | ) |  | 3 |  |  | (193 | ) |  | 1 |
Effect of foreign rates different than the U.S. |  |  |  |  |  |  |  |  |  |  |
federal statutory rate | 17 |  |  | 1 |  |  | 45 |  |  | (1 | ) |  | 12 |  |  | — |
State income taxes | (5 | ) |  | (1 | ) |  | 46 |  | b | (1 | ) |  | 105 |  | b | (1 | )
Other items, net | (23 | ) |  | (1 | ) |  | (37 | ) |  | 1 |  |  | 79 |  |  | (1 | )
(Provision for) benefit from income taxes | $ | (883 | ) | d | (30 | )% |  | $ | (371 | ) | e | 11 | % |  | $ | 1,951 |  |  | (14 | )%
a. | Refer to “Valuation Allowance” below for further discussion of current year changes.
b. | Includes tax charges totaling $1.6 billion in 2016 and $3.3 billion in 2015 as a result of the impairment to U.S. oil and gas properties to establish valuation allowances against U.S. federal and state deferred tax assets that will not generate a future benefit.
c. | Reflects a loss under U.S. federal income tax law related to the impairment of investments in oil and gas properties.
d. | Includes net charges of $7 million associated with the Cerro Verde mining royalties dispute, consisting of tax charges of $136 million for disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $129 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013. Refer to Note 12 for further discussion.
e. | Includes a net tax benefit related to changes in Peruvian tax rules of $13 million.
FCX paid federal, state and foreign income taxes totaling $702 million in 2017, $203 million in 2016 (including $27 million for discontinued operations) and $893 million in 2015 (including $187 million for discontinued operations). FCX received refunds of federal, state and foreign income taxes of $329 million in 2017, $247 million in 2016 and $334 million in 2015. The components of deferred taxes follow:
| December 31,
| 2017 |  | 2016
Deferred tax assets: |  |  |
Foreign tax credits | $ | 2,129 |  |  | $ | 2,094 |
Accrued expenses | 789 |  |  | 923 |
Oil and gas properties | 236 |  |  | 346 |
AMT credits | — |  |  | 444 |
Net operating losses | 2,043 |  |  | 2,898 |
Employee benefit plans | 248 |  |  | 403 |
Other | 259 |  |  | 485 |
Deferred tax assets | 5,704 |  |  | 7,593 |
Valuation allowances | (4,575 | ) |  | (6,058 | )
Net deferred tax assets | 1,129 |  |  | 1,535 |
Deferred tax liabilities: |  |  |
Property, plant, equipment and mine development costs | (3,710 | ) |  | (4,326 | )
Undistributed earnings | (811 | ) |  | (779 | )
Other | (226 | ) |  | (195 | )
Total deferred tax liabilities | (4,747 | ) |  | (5,300 | )
Net deferred tax liabilities | $ | (3,618 | ) |  | $ | (3,765 | )
Tax Attributes. At December 31, 2017, FCX had (i) U.S. foreign tax credits of $2.1 billion that will expire between 2018 and 2027, (ii) U.S. federal net operating losses of $6.4 billion that expire between 2032 and 2036, (iii) U.S. federal capital losses of $160 million that expire in 2021 and 2022, (iv) U.S. state net operating losses of $10.6 billion that expire between 2018 and 2037 and (v) Spanish net operating losses of $566 million that can be carried forward indefinitely. Valuation Allowance. On the basis of available information at December 31, 2017, including positive and negative evidence, FCX has provided valuation allowances for certain of its deferred tax assets where it believes it is more likely than not that some portion or all of such assets will not be realized. Valuation allowances totaled $4.6 billion at December 31, 2017, and $6.1 billion at December 31, 2016, and covered all of FCX’s U.S. foreign tax credits, U.S. federal net operating losses, U.S. federal capital losses, foreign net operating losses, and substantially all of its U.S. state net operating losses. FCX’s valuation allowances at December 31, 2016, also covered substantially all of its U.S. AMT credits. The valuation allowance related to FCX’s U.S. foreign tax credits totaled $2.1 billion at December 31, 2017. FCX has operations in tax jurisdictions where statutory income taxes and withholding taxes are in excess of the U.S. federal income tax rate. Valuation allowances are recorded on foreign tax credits for which no benefit is expected to be realized. The valuation allowance related to FCX’s U.S. federal, state and foreign net operating losses totaled $2.1 billion at December 31, 2017, including $280 million related to FCX’s U.S. federal and state deferred tax assets. Deferred tax assets represent future deductions for which a benefit will only be realized to the extent these deductions offset future income. FCX develops an estimate of which future tax deductions will be realized and provides a valuation allowance to the extent these deductions are not expected to be realized in future periods. Valuation allowances will continue to be carried on U.S. foreign tax credits and U.S. federal, state and foreign net operating losses until such time that (i) FCX generates taxable income against which any of the assets, credits or net operating losses can be used, (ii) forecasts of future income provide sufficient positive evidence to support reversal of the valuation allowances or (iii) FCX identifies a prudent and feasible means of securing the benefit of the assets, credits or net operating losses that can be implemented. The $1.5 billion net decrease in the valuation allowances during 2017 primarily related to a $1.1 billion decrease associated with a reduction in the corporate income tax rate applicable to U.S. federal deferred tax assets (refer to “Tax Reform” below for further discussion) and $371 million for the reversal of valuation allowances on U.S. federal AMT credits. FCX will continue to assess whether its valuation allowances are effected by various aspects of the Act. Tax Reform. The Act, which was enacted on December 22, 2017, includes significant modifications to existing U.S. tax laws and creates many new complex tax provisions. The Act reduces the corporate income tax rate to 21 percent, eliminates the corporate AMT, provides for a refund of AMT credits, maintains hard minerals percentage depletion, allows for immediate expensing of certain qualified property and generally broadens the tax base. The Act also creates a territorial tax system (with a one-time mandatory tax on previously deferred foreign earnings), creates anti-base erosion rules that require companies to pay a minimum tax on foreign earnings and disallows certain payments from U.S. corporations to foreign related parties. As further described below, FCX has made reasonable estimates of the tax effects related to its existing deferred tax balances, AMT credit refunds and the transition tax. While FCX has not completed its analysis, its 2017 income tax provision includes provisional net tax benefits associated with the Act totaling $393 million, which includes $272 million (net of reserves) for the reversal of valuation allowances associated with anticipated refunds of AMT credits and $121 million for the decrease in corporate income tax rates. For certain provisions of the Act, FCX has not been able to make a reasonable estimate. For these items, FCX’s accounting continues to be based on existing income tax accounting guidance and the provisions of the tax laws that were in effect immediately prior to enactment of the Act. FCX will continue to refine its calculations as it gains a more thorough understanding of the Act. Elimination of Corporate AMT and Refund of AMT Credits. For tax years beginning after December 31, 2017, the corporate AMT was repealed. FCX has historically incurred an AMT liability in excess of regular tax liability, resulting in accumulated AMT credits totaling $490 million as of December 31, 2017. The Act allows the use of existing corporate AMT credits to offset regular tax liability for tax years after December 31, 2017. AMT credits in excess of regular liability are refundable in the years 2018 through 2021. At December 31, 2016, FCX had estimated a $72 million benefit for AMT credits, and during 2017 recognized a $38 million benefit, all of which was expected to be refunded under prior tax law. As a result of the Act, FCX recognized an additional net benefit of $272 million in 2017, consisting of a $380 million tax benefit for additional historical AMT credits expected to be refunded, partially offset by a $108 million tax charge to establish a reserve for uncertain tax positions. FCX will continue to refine these provisional amounts as historical data is gathered and analyzed. Reduction in Corporate Income Tax Rate. The Act reduces the U.S. federal corporate income tax rate from 35 percent to 21 percent. While applicable for years after December 31, 2017, existing income tax accounting guidance requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. In fourth-quarter 2017, FCX recognized this change in the federal statutory rate and recorded a net benefit of $121 million, consisting of a $1.1 billion tax benefit associated with changes in related valuation allowances, partly offset by a $975 million tax charge related to existing net U.S. federal deferred tax assets and liabilities. FCX will continue to refine these provisional amounts as further analysis of the laws’ impacts are completed, including effects on U.S. state income taxes and the realizability of deferred tax assets in future years. Transition Tax on Previously Deferred Foreign Earnings. Under the Act, U.S. shareholders owning at least 10 percent of a foreign subsidiary generally must recognize taxable income equal to the shareholder’s pro rata share of accumulated post-1986 historical Earnings and Profits (E&P). The portion of any E&P associated with cash or cash equivalents is taxed at a rate of 15.5 percent, while any remaining E&P is taxed at a reduced rate of 8 percent. The resulting tax liability (Transition Tax) may be reduced by available foreign tax credits. Because FCX operates in foreign jurisdictions with statutory tax rates in excess of the U.S. historical statutory tax rate of 35 percent, the Transition Tax is fully offset by foreign tax credits generated in the current year. Although its 2017 income tax provision was not impacted by this one-time Transition Tax liability, FCX has yet to complete its final calculation of the total accumulated post-1986 E&P. As a result, FCX’s estimate of Transition Tax may change when the underlying calculations are finalized. Anti-Base Erosion Rules. For tax years that begin after December 31, 2017, applicable taxpayers are required to pay the Base Erosion Anti-Abuse Tax (BEAT). BEAT is an alternative tax calculation that disallows deduction of certain amounts paid or accrued by a U.S. taxpayer to a foreign related party. The new BEAT rules are complex and FCX is evaluating this provision in the context of its global structure and operations and existing tax accounting guidance. Based on FCX’s current evaluations, it is unclear if BEAT will impact FCX and no adjustments were made related to BEAT in its 2017 income tax provision. The Act also includes provisions to tax a new class of income called Global Intangible Low-Taxed Income (GILTI). Because of the complexity of the new GILTI tax rules, FCX is continuing to evaluate this provision of the Act and the application of existing income tax accounting guidance. Under U.S. generally accepted accounting principles, FCX is allowed to make an accounting policy choice of either (i) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current period expense when incurred or (ii) factoring such amounts into the measurement of deferred taxes. FCX has not made a policy decision regarding whether to record deferred taxes on GILTI, and the selection of an accounting policy will depend, in part, on analyzing its global income to determine whether FCX expects to have future U.S. inclusions and, if so, what impact is expected. No adjustments were made related to potential GILTI tax in FCX’s 2017 income tax provision. Executive Compensation Limitation. For tax years beginning after December 31, 2017, tax deductible compensation of covered employees is limited to $1 million. In addition, the definition of covered employees is revised to include the principal executive officer, the principal financial officer, and the three other highest paid officers. If an individual is a covered employee for a tax year beginning after December 31, 2016, the individual remains a covered employee for all future years. Under a transition rule, the changes do not apply to any remuneration under specified contracts in effect on November 2, 2017. FCX is continuing to analyze the impacts of this provision. No adjustments were made related to the future disallowance of executive compensation in FCX’s 2017 income tax provision. Other. As of December 31, 2017, FCX has offset $5.3 billion of foreign source income with U.S. source losses. Under existing U.S. tax law, FCX has the ability to re-characterize $5.3 billion of future U.S. source income into foreign source income. While utilization of U.S. foreign tax credits is dependent upon FCX generating future U.S. tax liabilities within the carryforward period, this re-sourcing may permit FCX to utilize up to $1.1 billion of the $2.1 billion foreign tax credits that would otherwise expire unused. FCX continues to evaluate the impact of the Act on these income re-sourcing provisions. Other Events. In October 2017, the Peruvian Supreme Court issued a ruling in favor of SUNAT, Peru’s national tax authority, that the assessments of royalties for the year 2008 on ore processed by the Cerro Verde concentrator were proper under Peruvian law. SUNAT has assessed mining royalties on ore processed by the Cerro Verde concentrator for the period December 2006 to December 2011, which Cerro Verde has contested on the basis that its 1998 stability agreement exempts from royalties all minerals extracted from its mining concessions, irrespective of the method used for processing those minerals. As a result of the unfavorable Peruvian Supreme Court decision, FCX incurred pre-tax charges of $348 million and $7 million of net income tax expense for the year 2017, consisting of tax charges of $136 million for disputed royalties and other related mining taxes for the period October 2011 through the year 2013 (when royalties were determined based on operating income), mostly offset by a tax benefit of $129 million associated with disputed royalties and other related mining taxes for the period December 2006 through the year 2013. Refer to Note 12 for further discussion. In December 2016, the Peruvian parliament passed tax legislation that, in part, modified the applicable tax rates established in its December 2014 tax legislation, which progressively decreased the corporate income tax rate from 30 percent in 2014 to 26 percent in 2019 and thereafter, and also increased the dividend tax rate on distributions from 4.1 percent in 2014 to 9.3 percent in 2019 and thereafter. Under the tax legislation, which was effective January 1, 2017, the corporate income tax rate was 29.5 percent, and the dividend tax rate on distributions of earnings was 5 percent. Cerro Verde’s current mining stability agreement subjects FCX to a stable income tax rate of 32 percent through the expiration of the agreement on December 31, 2028. The tax rate on dividend distributions is not stabilized by the agreement. During 2015, PT-FI’s Delaware domestication was terminated. As a result, PT-FI is no longer a U.S. income tax filer, and tax attributes related to PT-FI, which were fully reserved with a related valuation allowance, are no longer available for use in FCX’s U.S. federal consolidated income tax return. There was no resulting net impact to FCX’s consolidated statement of operations. PT-FI remains a limited liability company organized under Indonesian law. In September 2014, the Chilean legislature approved a tax reform package that implemented a dual tax system, which was amended in January 2016. Under previous rules, FCX’s share of income from Chilean operations was subject to an effective 35 percent tax rate allocated between income taxes and dividend withholding taxes. Under the amended tax reform package, FCX’s Chilean operation is subject to the “Partially-Integrated System,” resulting in FCX’s share of income from El Abra being subject to progressively increasing effective tax rates of 35 percent through 2019 and 44.5 percent in 2020 and thereafter. In November 2017, the progression of increasing tax rates was delayed by the Chilean legislature so that the 35 percent rate continues through 2021 increasing to 44.5 percent in 2022 and thereafter. In 2010, the Chilean legislature approved an increase in mining royalty taxes to help fund earthquake reconstruction activities, education and health programs. Mining royalty taxes at FCX’s El Abra mine were 4 percent for the years 2013 through 2017. Beginning in 2018 and through 2023, rates move to a sliding scale of 5 to 14 percent (depending on a defined operational margin). Uncertain Tax Positions. FCX accounts for uncertain income tax positions using a threshold and measurement criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FCX’s policy associated with uncertain tax positions is to record accrued interest in interest expense and accrued penalties in other income and expense rather than in the provision for income taxes. A summary of the activities associated with FCX’s reserve for unrecognized tax benefits for the years ended December 31 follows:
| 2017 |  | 2016 |  | 2015
Balance at beginning of year | $ | 101 |  |  | $ | 110 |  |  | $ | 104 |
Additions: |  |  |  |  |
Prior year tax positions | 302 |  |  | 5 |  |  | 7 |
Current year tax positions | 6 |  |  | 28 |  |  | 11 |
Decreases: |  |  |  |  |
Prior year tax positions | (1 | ) |  | (3 | ) |  | (6 | )
Settlements with taxing authorities | (17 | ) |  | — |  |  | — |
Lapse of statute of limitations | (1 | ) |  | (39 | ) |  | (6 | )
Balance at end of year | $ | 390 |  |  | $ | 101 |  |  | $ | 110 |
The total amount of accrued interest and penalties associated with unrecognized tax benefits included in the consolidated balance sheets was $22 million at December 31, 2017, $19 million at December 31, 2016, and $16 million at December 31, 2015. The reserve for unrecognized tax benefits of $390 million at December 31, 2017, included $344 million ($272 million net of income tax benefits and valuation allowances) that, if recognized, would reduce FCX’s provision for income taxes. Changes to the reserve for unrecognized tax benefits associated with current year tax positions were primarily related to uncertainties associated with FCX’s tax treatment of social welfare payments. Changes in the reserve for unrecognized tax benefits associated with prior year tax positions were primarily related to uncertainties associated with royalties and other related mining taxes and AMT credit refunds. Changes to the reserve for unrecognized tax benefits associated with the lapse of statute of limitations were primarily related to social welfare payments. There continues to be uncertainty related to the timing of settlements with taxing authorities, but if additional settlements are agreed upon during 2018, FCX could experience a change in its reserve for unrecognized tax benefits. FCX or its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The tax years for FCX’s major tax jurisdictions that remain subject to examination are as follows:
Jurisdiction |  | Years Subject to Examination |  | Additional Open Years
U.S. Federal |  | N/A |  | 2014-2017
Indonesia |  | 2008, 2011-2016 |  | 2017
Peru |  | 2012 |  | 2013-2017
Chile |  | 2015-2016 |  | 2017

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration