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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Geographic sources of income (losses) before income taxes and equity in affiliated companies’ net earnings for the years ended December 31 consist of the following:
| 2022 |  | 2021 |  | 2020
U.S. | $ | 840 |  |  | $ | 1,861 |  |  | $ | (40) |
Foreign | 5,875 |  |  | 5,798 |  |  | 1,837 |
Total | $ | 6,715 |  |  | $ | 7,659 |  |  | $ | 1,797 |
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 income taxes for the years ended December 31 consists of the following:
| 2022 |  | 2021 |  | 2020 |
Current income taxes: |  |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | 53 |  | a
State | 1 |  |  | (11) |  |  | (1) |  |
Foreign | (2,232) |  |  | (2,460) |  |  | (816) |  | b
Total current | (2,231) |  |  | (2,471) |  |  | (764) |  |
Deferred income taxes: |  |  |  |  |  |
Federal | (149) |  |  | (184) |  |  | 3 |  |
State | (6) |  |  | (4) |  |  | 5 |  |
Foreign | (144) |  |  | (23) |  |  | (306) |  |
Total deferred | (299) |  |  | (211) |  |  | (298) |  |
Adjustments | 1 |  |  | 193 |  | c | 37 |  |
Operating loss carryforwards | 262 |  |  | 190 |  |  | 81 |  |
Provision for income taxes | $ | (2,267) |  |  | $ | (2,299) |  |  | $ | (944) |  |
a.Includes a credit of $53 million associated with the reversal of the charge associated with the sale of FCX’s interest in the lower zone of the Timok exploration project. b.Includes a charge of $135 million associated with the gain on sale of FCX’s interest in the Kisanfu undeveloped project. c.Primarily reflects the release of valuation allowances on NOLs at PT Rio Tinto (see below). A reconciliation of the U.S. federal statutory tax rate to FCX’s effective income tax rate for the years ended December 31 follows:
| 2022 |  | 2021 |  | 2020
| Amount |  | % |  | Amount |  | % |  | Amount |  | %
U.S. federal statutory tax rate | $ | (1,410) |  |  | (21) | % |  | $ | (1,608) |  |  | (21) | % |  | $ | (377) |  |  | (21) | %
Withholding and other impacts on |  |  |  |  |  |  |  |  |  |  |
foreign earnings | (673) |  |  | (10) |  |  | (678) |  |  | (9) |  |  | (193) |  |  | (11) |
Effect of foreign rates different than the U.S. |  |  |  |  |  |  |  |  |  |  |
federal statutory rate | (314) |  |  | (5) |  |  | (328) |  |  | (4) |  |  | (109) |  |  | (6) |
Percentage depletion | 189 |  |  | 3 |  |  | 221 |  |  | 3 |  |  | 104 |  |  | 6 |
Foreign tax credit limitation | (28) |  |  | (1) |  |  | (11) |  |  | — |  |  | 28 |  |  | 2 |
Uncertain tax positions | (17) |  |  | — |  |  | 13 |  |  | — |  |  | (15) |  |  | (1) |
PT-FI historical tax disputes a | (8) |  |  | — |  |  | (193) |  |  | (3) |  |  | (8) |  |  | — |
Valuation allowance b | 6 |  |  | — |  |  | 221 |  |  | 3 |  |  | (210) |  |  | (12) |
State income taxes | (4) |  |  | — |  |  | (14) |  |  | — |  |  | (2) |  |  | — |
PT Rio Tinto valuation allowance b | — |  |  | — |  |  | 189 |  |  | 2 |  |  | — |  |  | — |
Sale of Kisanfu | — |  |  | — |  |  | — |  |  | — |  |  | (135) |  |  | (8) |
Timok exploration project sale | — |  |  | — |  |  | — |  |  | — |  |  | 53 |  |  | 3 |
Cerro Verde historical tax disputes | — |  |  | — |  |  | — |  |  | — |  |  | (39) |  |  | (2) |
Other items, net | (8) |  |  | — |  |  | (111) |  |  | (1) |  |  | (41) |  |  | (3) |
Provision for income taxes | $ | (2,267) |  |  | (34) | % |  | $ | (2,299) |  |  | (30) | % |  | $ | (944) |  |  | (53) | %
a.Refer to “Indonesia Tax Matters” below. b.Refer to “Valuation Allowances” below. FCX paid federal, state and foreign income taxes totaling $3.1 billion in 2022, $1.3 billion in 2021 and $397 million in 2020. FCX received refunds of federal, state and foreign income taxes totaling $46 million in 2022, $109 million in 2021 and $265 million in 2020. The components of deferred taxes follow:
| December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Foreign tax credits | $ | 1,514 |  |  | $ | 1,536 |
NOLs | 1,923 |  |  | 2,220 |
Accrued expenses | 1,303 |  |  | 1,193 |
Employee benefit plans | 99 |  |  | 105 |
Other | 230 |  |  | 252 |
Deferred tax assets | 5,069 |  |  | 5,306 |
Valuation allowances | (3,985) |  |  | (4,087) |
Net deferred tax assets | 1,084 |  |  | 1,219 |
Deferred tax liabilities: |  |  |
Property, plant, equipment and mine development costs | (4,330) |  |  | (4,492) |
Undistributed earnings | (810) |  |  | (807) |
Other | (211) |  |  | (152) |
Total deferred tax liabilities | (5,351) |  |  | (5,451) |
Net deferred tax liabilities | $ | (4,267) |  |  | $ | (4,232) |
Tax Attributes. At December 31, 2022, FCX had (i) U.S. foreign tax credits of $1.5 billion that will expire between 2023 and 2027, (ii) U.S. federal NOLs of $5.5 billion that primarily expire between 2036 and 2037, of which $0.4 billion can be carried forward indefinitely, (iii) U.S. state NOLs of $10.5 billion that primarily expire between 2023 and 2042, (iv) Spanish NOLs of $0.5 billion that can be carried forward indefinitely and (v) Indonesia NOLs of $0.5 billion that expire between 2024 and 2026. Valuation Allowances. On the basis of available information at December 31, 2022, 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 $4.0 billion at December 31, 2022, and covered all of FCX’s U.S. foreign tax credits and U.S. federal NOLs, substantially all of its U.S. state NOLs, as well as a portion of its U.S. federal, state and foreign deferred tax assets and foreign NOLs. The valuation allowance related to FCX’s U.S. foreign tax credits totaled $1.5 billion at December 31, 2022. 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 recognized 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 NOLs totaled $1.8 billion and other deferred tax assets totaled $0.7 billion at December 31, 2022. NOLs and 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 recognizes 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, U.S. federal, state and foreign NOLs and U.S. federal, state and foreign deferred tax assets, until such time that (i) FCX generates taxable income against which any of the assets, credits or NOLs 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 NOLs that can be implemented. The $102 million net decrease in the valuation allowances during 2022 is primarily related to $163 million of U.S. federal NOLs utilized during 2022, and a $22 million decrease related to expirations of U.S. foreign tax credits partially offset by an increase of $104 million, primarily associated with current year changes in U.S. federal temporary differences. U.S. Inflation Reduction Act of 2022. In August 2022, the Act was signed into law, which includes, among other provisions, a new Corporate Alternative Minimum Tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period, and a new excise tax of 1% on the fair market value of net corporate stock repurchases. The Act had no impact on FCX’s consolidated financial statements for the year ended December 31, 2022. The provisions of the Act are applicable to FCX beginning January 1, 2023. Additional guidance related to how the CAMT provisions of the Act will be applied or otherwise administered is yet to be released by the U.S. Department of the Treasury, and may differ from FCX’s interpretations. FCX will continue to analyze the impacts as additional guidance is released. FCX expects the CAMT provisions will impact its U.S. tax position, and may further limit its ability to benefit from its U.S. NOLs. Other Events. In connection with the negative impacts of the COVID-19 pandemic on the global economy, governments throughout the world announced measures that are intended to provide tax and other financial relief. Such measures include the American Rescue Plan Act of 2021, enacted in March 2021, and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted in March 2020. None of these measures resulted in material impacts to FCX’s provision for income taxes for the years ended December 31, 2021 or 2020. However, certain provisions of the CARES Act provided FCX with the opportunity to accelerate collections of tax refunds, primarily those associated with the U.S. alternative minimum tax (AMT). FCX fully collected all outstanding U.S. AMT refunds of $24 million in 2021 and $244 million in 2020. Indonesia Tax Matters. In 2018, PT-FI received unfavorable Indonesia Tax Court decisions with respect to its appeal of capitalized mine development costs on its 2012 and 2014 corporate income tax returns. PT-FI appealed those decisions to the Indonesia Supreme Court. In 2019, the Indonesia Supreme Court communicated an unfavorable ruling regarding the treatment of mine development costs on PT-FI’s 2014 tax return. During fourth-quarter 2019, PT-FI met with the Indonesia Tax Office and developed a framework for resolution of the disputed matters. On December 30, 2019, PT-FI made a payment of $250 million based on its understanding of the framework for resolution of disputes arising from the audits of the tax years 2012 through 2016, as well as tax years 2017 and 2018, and recorded net charges totaling $304 million for the year 2019. During 2020, in connection with progress of the framework for resolution of the disputed matters, PT-FI recorded additional net charges of $46 million, including $9 million for non-deductible penalties recorded to other (expense) income, net and $35 million for non-deductible interest recorded to interest expense, net, and $2 million to provision for income tax expense. During 2021, PT-FI participated in discussions with the Indonesia Tax Office regarding progress on the framework for resolution of disputes arising from the audits of tax years 2012 through 2016. As a result of these discussions and the revised positions taken by both the Indonesia Tax Office and PT-FI, FCX could no longer conclude a resolution of all of the disputed tax items at a more-likely-than-not threshold and PT-FI recorded additional net charges of $384 million, including $155 million for non-deductible penalties recorded to other income (expense), net, $43 million for non-deductible interest recorded to interest expense, net, and $186 million to provision for income tax expense. During 2022, in conjunction with the framework for resolution of disputed matters and the closure of the 2018 corporate income tax audit, PT-FI recorded net charges of $13 million, including $5 million for non-deductible interest recorded to interest expense, net, and $8 million to provision for income taxes. PT-FI continues to engage with the Indonesia Tax Office in pursuit of clarification on certain aspects of the original framework for resolution of the disputed matters. In conjunction with the issuance of Government Regulation Number 50 of 2022, which stipulates that objection, tax court, and judicial review verdicts issued after the issuance of the harmonization law qualify for reduced penalties, PT-FI recorded net credits totaling $69 million in 2022 (including a credit of $76 million recorded to other income (expense), net and a charge of $7 million to provision for income taxes), which mostly related to the disputed matters discussed above. Peru Tax Matters. In 2016, the Peru parliament passed tax legislation that, in part, modified the applicable tax rates established in its 2014 tax legislation, which progressively decreased the corporate income tax rate to 26% in 2019 and thereafter, and also increased the dividend tax rate on distributions to 9.3% in 2019 and thereafter. Under the tax legislation, which was effective January 1, 2017, the corporate income tax rate was 29.5%, and the dividend tax rate on distributions of earnings was 5%. Cerro Verde’s current mining stability agreement subjects it to a stable income tax rate of 32% through the expiration of the agreement on December 31, 2028. The tax rate on dividend distributions is not stabilized by the agreement. Chile Tax Matters. In 2014, the Chile legislature approved a tax reform package that implemented a dual tax system, which was amended in 2016. Under previous rules, FCX’s share of income from El Abra was subject to an effective 35% tax rate allocated between income taxes and dividend withholding taxes. Under the amended tax reform package, El Abra 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% through 2019 and 44.5% in 2020 and thereafter. In 2017, the progression of increasing tax rates was delayed by the Chile legislature so that the 35% rate continued through 2021, increasing to 44.5% in 2022 and thereafter. In January 2020, the Chile legislature approved a tax reform package that would further delay the 44.5% rate until 2027 and thereafter. In 2010, the Chile legislature approved an increase in mining royalty taxes to help fund earthquake reconstruction activities, education and health programs. Beginning in 2018, and through 2023 mining royalty rates at FCX’s El Abra mine are based on a sliding scale of 5% to 14% (depending on a defined operational margin). Uncertain Tax Positions. Tax positions reflected in the consolidated financial statements are based on their technical merits, more-likely-than-not to be sustained upon examination by taxing authorities or have otherwise been effectively settled. Such tax positions reflect the largest amount of benefit, determined on a cumulative probability basis, that is more-likely-than-not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. FCX’s policy associated with uncertain tax positions is to record accrued interest in interest expense and accrued penalties in other income (expense), net 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.
| 2022 |  | 2021 |  | 2020
Balance at beginning of year | $ | 808 |  |  | $ | 474 |  |  | $ | 491 |
Additions: |  |  |  |  |
Prior year tax positions | 26 |  |  | 330 |  |  | 56 |
Current year tax positions | 25 |  |  | 71 |  |  | 60 |
Decreases: |  |  |  |  |
Prior year tax positions | (12) |  |  | (30) |  |  | (82) |
Settlements with taxing authorities | (37) |  |  | (37) |  |  | (51) |
Balance at end of year | $ | 810 |  |  | $ | 808 |  |  | $ | 474 |
The total amount of accrued interest and penalties associated with unrecognized tax benefits was $551 million at December 31, 2022, primarily relating to unrecognized tax benefits associated with cost recovery methods and royalties and other related mining taxes, $620 million at December 31, 2021, and $307 million at December 31, 2020. The reserve for unrecognized tax benefits of $810 million at December 31, 2022, included $689 million ($485 million net of income tax benefits and valuation allowances) that, if recognized, would reduce FCX’s provision for income taxes. Changes in the reserve for unrecognized tax benefits associated with current and prior-year tax positions were primarily related to uncertainties associated with FCX's tax treatment of cost recovery methods and various non-deductible costs. There continues to be uncertainty related to the timing of settlements with taxing authorities, but if additional settlements are agreed upon during the year 2023, 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 |  | 2017-2018 |  | 2014-2016, 2019-2022
Indonesia |  | 2012-2017 |  | 2020-2022
Peru |  | - |  | 2017-2022
Chile |  | 2020-2021 |  | 2019,2022

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- 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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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