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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | 16. INCOME TAXES Income Statement Components Income (loss) before income tax expense (benefit) was as follows (in millions):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
U.S. operations | $ | 1,023 |  |  | $ | (2,072) |  |  | $ | 2,496 |
Foreign operations | 520 |  |  | 62 |  |  | 990 |
Income (loss) before income tax expense (benefit) | $ | 1,543 |  |  | $ | (2,010) |  |  | $ | 3,486 |
Statutory income tax rates applicable to the countries in which we operate during each of the years ended December 31, 2021, 2020, and 2019 were as follows:
U.S. | 21 | %
Canada | 15 | %
U.K. | 19 | %
Ireland | 13 | %
Peru | 30 | %
Mexico | 30 | %
The following is a reconciliation of income tax expense (benefit) computed by applying statutory income tax rates to actual income tax expense (benefit) (in millions):
| U.S. |  | Foreign |  | Total
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent
Year ended December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Income tax expense at statutory rates | $ | 215 |  |  | 21.0 | % |  | $ | 73 |  |  | 14.0 | % |  | $ | 288 |  |  | 18.7 | %
U.S. state and Canadian provincial tax expense, net of federal income tax effect | 16 |  |  | 1.6 | % |  | 53 |  |  | 10.2 | % |  | 69 |  |  | 4.5 | %
Permanent differences | (34) |  |  | (3.3) | % |  | (14) |  |  | (2.7) | % |  | (48) |  |  | (3.1) | %
Changes in tax law (a) | (10) |  |  | (1.0) | % |  | 74 |  |  | 14.2 | % |  | 64 |  |  | 4.1 | %
CARES Act (b) | (56) |  |  | (5.5) | % |  | — |  |  | — |  |  | (56) |  |  | (3.6) | %
GILTI tax | 125 |  |  | 12.2 | % |  | — |  |  | — |  |  | 125 |  |  | 8.1 | %
Foreign tax credits | (103) |  |  | (10.1) | % |  | — |  |  | — |  |  | (103) |  |  | (6.7) | %
Settlements | (22) |  |  | (2.1) | % |  | — |  |  | — |  |  | (22) |  |  | (1.4) | %
Tax effects of income associated with noncontrolling interests | (74) |  |  | (7.2) | % |  | 30 |  |  | 5.8 | % |  | (44) |  |  | (2.9) | %
Other, net | (7) |  |  | (0.7) | % |  | (11) |  |  | (2.1) | % |  | (18) |  |  | (1.2) | %
Income tax expense | $ | 50 |  |  | 4.9 | % |  | $ | 205 |  |  | 39.4 | % |  | $ | 255 |  |  | 16.5 | %
________________________ See notes on page 117.
| U.S. |  | Foreign |  | Total
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent
Year ended December 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Income tax benefit at statutory rates | $ | (435) |  |  | 21.0 | % |  | $ | (10) |  |  | (16.1) | % |  | $ | (445) |  |  | 22.1 | %
U.S. state and Canadian provincial tax expense (benefit), net of federal income tax effect | (33) |  |  | 1.6 | % |  | 27 |  |  | 43.5 | % |  | (6) |  |  | 0.3 | %
Permanent differences | (23) |  |  | 1.1 | % |  | 15 |  |  | 24.2 | % |  | (8) |  |  | 0.4 | %
CARES Act (b) | (360) |  |  | 17.4 | % |  | — |  |  | — |  |  | (360) |  |  | 17.9 | %
Lapse of federal statute of limitations | (39) |  |  | 1.8 | % |  | — |  |  | — |  |  | (39) |  |  | 1.9 | %
Change in tax law | — |  |  | — |  |  | 21 |  |  | 33.9 | % |  | 21 |  |  | (1.0) | %
Tax effects of income associated with noncontrolling interests | (66) |  |  | 3.2 | % |  | (8) |  |  | (12.9) | % |  | (74) |  |  | 3.7 | %
Other, net | 7 |  |  | (0.3) | % |  | 1 |  |  | 1.6 | % |  | 8 |  |  | (0.4) | %
Income tax expense (benefit) | $ | (949) |  |  | 45.8 | % |  | $ | 46 |  |  | 74.2 | % |  | $ | (903) |  |  | 44.9 | %
Year ended December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
Income tax expense at statutory rates | $ | 524 |  |  | 21.0 | % |  | $ | 147 |  |  | 14.8 | % |  | $ | 671 |  |  | 19.2 | %
U.S. state and Canadian provincial tax expense, net of federal income tax effect | 16 |  |  | 0.7 | % |  | 88 |  |  | 8.9 | % |  | 104 |  |  | 3.0 | %
Permanent differences | (36) |  |  | (1.5) | % |  | 10 |  |  | 1.0 | % |  | (26) |  |  | (0.7) | %
GILTI tax | 115 |  |  | 4.6 | % |  | — |  |  | — |  |  | 115 |  |  | 3.3 | %
Foreign tax credits | (95) |  |  | (3.8) | % |  | — |  |  | — |  |  | (95) |  |  | (2.7) | %
Repatriation withholding tax | 45 |  |  | 1.8 | % |  | — |  |  | — |  |  | 45 |  |  | 1.3 | %
Tax effects of income associated with noncontrolling interests | (77) |  |  | (3.1) | % |  | 2 |  |  | 0.2 | % |  | (75) |  |  | (2.2) | %
Other, net | (36) |  |  | (1.4) | % |  | (1) |  |  | (0.1) | % |  | (37) |  |  | (1.1) | %
Income tax expense | $ | 456 |  |  | 18.3 | % |  | $ | 246 |  |  | 24.8 | % |  | $ | 702 |  |  | 20.1 | %
________________________ (a)During the three months ended June 30, 2021, certain statutory income tax rate changes (primarily an increase in the U.K. rate from 19 percent to 25 percent effective in 2023) were enacted that resulted in the remeasurement of our deferred tax liabilities and related deferred income tax expense. (b)See “CARES Act” on page 122 for a discussion of significant changes in tax law in the U.S. that were enacted in 2020. Components of income tax expense (benefit) were as follows (in millions):
| U.S. |  | Foreign |  | Total
Year ended December 31, 2021 |  |  |  |  |
Current: |  |  |  |  |
Country | $ | 68 |  |  | $ | 215 |  |  | $ | 283 |
U.S. state / Canadian provincial | 1 |  |  | 97 |  |  | 98 |
Total current | 69 |  |  | 312 |  |  | 381 |
Deferred: |  |  |  |  |
Country | 5 |  |  | (63) |  |  | (58) |
U.S. state / Canadian provincial | (24) |  |  | (44) |  |  | (68) |
Total deferred | (19) |  |  | (107) |  |  | (126) |
Income tax expense | $ | 50 |  |  | $ | 205 |  |  | $ | 255 |
Year ended December 31, 2020 |  |  |  |  |
Current: |  |  |  |  |
Country | $ | (1,033) |  |  | $ | (34) |  |  | $ | (1,067) |
U.S. state / Canadian provincial | 9 |  |  | (3) |  |  | 6 |
Total current | (1,024) |  |  | (37) |  |  | (1,061) |
Deferred: |  |  |  |  |
Country | 126 |  |  | 53 |  |  | 179 |
U.S. state / Canadian provincial | (51) |  |  | 30 |  |  | (21) |
Total deferred | 75 |  |  | 83 |  |  | 158 |
Income tax expense (benefit) | $ | (949) |  |  | $ | 46 |  |  | $ | (903) |
Year ended December 31, 2019 |  |  |  |  |
Current: |  |  |  |  |
Country | $ | 145 |  |  | $ | 186 |  |  | $ | 331 |
U.S. state / Canadian provincial | 37 |  |  | 100 |  |  | 137 |
Total current | 182 |  |  | 286 |  |  | 468 |
Deferred: |  |  |  |  |
Country | 290 |  |  | (28) |  |  | 262 |
U.S. state / Canadian provincial | (16) |  |  | (12) |  |  | (28) |
Total deferred | 274 |  |  | (40) |  |  | 234 |
Income tax expense | $ | 456 |  |  | $ | 246 |  |  | $ | 702 |
Income Taxes Paid (Refunded) Income taxes paid to (received from) U.S. and foreign taxing authorities were as follows (in millions):
| Year Ended December 31, |
| 2021 |  | 2020 |  | 2019 |
U.S. | $ | (878) |  | (a) | $ | 130 |  |  | $ | (298) |  | (b)
Foreign | 36 |  |  | 73 |  |  | 182 |  |
Income taxes paid (refunded), net | $ | (842) |  |  | $ | 203 |  |  | $ | (116) |  |
________________________ (a)This amount includes a refund of $962 million that we received related to our U.S. federal income tax return for 2020. (b)This amount includes a refund of $348 million, including interest, that we received related to the settlement of the combined audit of our U.S. federal income tax returns for 2010 and 2011. See “Tax Returns Under Audit–U.S. Federal” on page 121. Deferred Income Tax Assets and Liabilities The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):
| December 31,
| 2021 |  | 2020
Deferred income tax assets: |  |  |
Tax credit carryforwards | $ | 679 |  |  | $ | 681 |
NOLs | 697 |  |  | 678 |
Inventories | 217 |  |  | 70 |
Compensation and employee benefit liabilities | 123 |  |  | 199 |
Environmental liabilities | 53 |  |  | 64 |
Other | 149 |  |  | 128 |
Total deferred income tax assets | 1,918 |  |  | 1,820 |
Valuation allowance | (1,262) |  |  | (1,223) |
Net deferred income tax assets | 656 |  |  | 597 |
Deferred income tax liabilities: |  |  |
Property, plant, and equipment | 4,866 |  |  | 4,895 |
Deferred turnaround costs | 308 |  |  | 302 |
Inventories | 191 |  |  | 269 |
Investments | 268 |  |  | 171 |
Other | 233 |  |  | 235 |
Total deferred income tax liabilities | 5,866 |  |  | 5,872 |
Net deferred income tax liabilities | $ | 5,210 |  |  | $ | 5,275 |
We had the following income tax credit and loss carryforwards as of December 31, 2021 (in millions):
| Amount |  | Expiration
U.S. state income tax credits (gross amount) | $ | 80 |  |  | 2022 through 2033
U.S. state income tax credits (gross amount) | 21 |  |  | Unlimited
U.S. foreign tax credits | 598 |  |  | 2027
U.S. state income tax NOLs (gross amount) | 12,394 |  |  | 2022 through 2041
U.S. state income tax NOLs (gross amount) | 465 |  |  | Unlimited
Foreign NOLs (gross amount) | 38 |  |  | 2025 through 2031
Foreign NOLs (gross amount) | 59 |  |  | Unlimited
We have recorded a valuation allowance as of December 31, 2021 and 2020 due to uncertainties related to our ability to utilize some of our deferred income tax assets associated with our U.S. foreign tax credits, certain U.S. state income tax credits, certain foreign deferred tax assets, and certain NOLs before they expire. The valuation allowance is based on our estimates of future taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable. The valuation allowance increased by $39 million in 2021 primarily due to increases in U.S. state income tax NOLs and unrealizable assets in a foreign jurisdiction. Unrecognized Tax Benefits Change in Unrecognized Tax Benefits The following is a reconciliation of the change in unrecognized tax benefits, excluding related interest and penalties, (in millions):
| Year Ended December 31,
| 2021 |  | 2020 |  | 2019
Balance as of beginning of year | $ | 847 |  |  | $ | 897 |  |  | $ | 970 |
Additions for tax positions related to the current year | 3 |  |  | 5 |  |  | 19 |
Additions for tax positions related to prior years | 13 |  |  | 9 |  |  | 30 |
Reductions for tax positions related to prior years | (25) |  |  | (20) |  |  | (101) |
Reductions for tax positions related to the lapse of applicable statute of limitations | — |  |  | (44) |  |  | (14) |
Settlements | (22) |  |  | — |  |  | (7) |
Balance as of end of year | $ | 816 |  |  | $ | 847 |  |  | $ | 897 |
Liability for Unrecognized Tax Benefits The following is a reconciliation of unrecognized tax benefits to our liability for unrecognized tax benefits presented in our balance sheets (in millions).
| December 31,
| 2021 |  | 2020
Unrecognized tax benefits | $ | 816 |  |  | $ | 847 |
Tax refund claims not yet filed but that we intend to file | (28) |  |  | (26) |
Interest and penalties | 86 |  |  | 110 |
Liability for unrecognized tax benefits presented in our balance sheets | $ | 874 |  |  | $ | 931 |
Our liability for unrecognized tax benefits is reflected in the following balance sheet line items (in millions):
| December 31,
| 2021 |  | 2020
Income taxes payable | $ | 1 |  |  | $ | 59 |
Other long-term liabilities | 863 |  |  | 859 |
Deferred tax liabilities | 10 |  |  | 13 |
Liability for unrecognized tax benefits presented in our balance sheets | $ | 874 |  |  | $ | 931 |
As of December 31, 2021 and 2020, our liability for unrecognized tax benefits included $525 million of refund claims associated with taxes paid on incentive payments received from the U.S. federal government for blending biofuels into petroleum-based transportation fuels. We recorded a tax refund receivable of $525 million in connection with our refund claims, but we also recorded a liability for unrecognized tax benefits of $525 million due to the complexity of this matter and uncertainties with respect to sustaining these refund claims. Therefore, our financial position, results of operations, and liquidity will not be negatively impacted if we are unsuccessful in sustaining these refund claims. As of December 31, 2021 and 2020, there was $708 million and $729 million, respectively, of unrecognized tax benefits that if recognized would reduce our annual effective tax rate. During the next 12 months, it is reasonably possible that our tax audit resolutions could reduce our liability for unrecognized tax benefits either because our tax positions are sustained upon audit or because we agree to their disallowance. We do not expect these reductions to have a material impact on our financial statements because such reductions would not materially affect our annual effective tax rate. Tax Returns Under Audit U.S. Federal In 2019, we settled the combined audit related to our U.S. federal income tax returns for 2010 and 2011 and received a refund of $348 million, including interest. We did not have a significant change to our liability for unrecognized tax benefits upon settlement of the audit. As of December 31, 2021, our U.S. federal income tax returns for 2012 through 2015, 2017, and 2018 were under audit by the Internal Revenue Service (IRS). The IRS has proposed adjustments for certain open years and we are currently contesting the proposed adjustments with the Office of Appeals of the IRS. We are continuing to work with the IRS to resolve these matters and we believe that they will be resolved for amounts consistent with our recorded amounts of unrecognized tax benefits associated with these matters. We have amended our U.S federal income tax returns for 2005 through 2011 to exclude from taxable income incentive payments received from the U.S. federal government for blending biofuels into petroleum-based transportation fuels, and we have claimed $525 million in refunds. The 2005 through 2009 amended return refund claims have been disallowed by the IRS and we have filed a lawsuit in a U.S. district court seeking refunds for these years. As noted above in the discussion of our liability for unrecognized tax benefits, an ultimate disallowance of these refund claims would not negatively impact our financial condition, results of operations, and liquidity. U.S. State In 2021, we settled the audits related to our California tax returns for 2004 through 2006. We did not have a significant change to our liability for unrecognized tax benefits upon settlement of the audits. As of December 31, 2021, our California tax returns for 2007 and 2011 through 2016 were under audit by the state of California. We do not expect the ultimate disposition of these audits will result in a material change to our financial condition, results of operations, and liquidity. We believe these audits will be resolved for amounts consistent with our recorded amounts for unrecognized tax benefits associated with these audits. Foreign As of December 31, 2021, certain of our Canadian subsidiaries’ federal tax returns for 2013 through 2018 were under audit by the Canada Revenue Agency and our Quebec provincial tax returns for 2013 through 2018 were under audit by Revenue Quebec. We are also protesting proposed adjustments related to our Peruvian subsidiary’s federal tax returns for 2016 and 2018, which were under audit by La Superintendencia Nacional de Aduanas y de Administración Tributaria. Additionally, our U.K. subsidiary’s tax returns for 2019 and 2020 were opened for inquiry by Her Majesty’s Revenue and Customs. We do not expect the ultimate disposition of these audits or inquiries will result in a material change to our financial condition, results of operations, and liquidity. CARES Act On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted, which resulted in significant changes to the U.S. Internal Revenue Code of 1986, as amended. The most significant changes affecting us were as follows: •Modification of the limitations previously set by Tax Reform by providing that tax NOLs arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. This provision allows the taxpayer to recover taxes previously paid at a 35 percent federal income tax rate during tax years prior to 2018. In addition, the CARES Act removed the taxable income limitation to allow a tax NOL to fully offset taxable income for tax years beginning before January 1, 2021. •Increased the deductibility of interest expense from 30 percent to 50 percent of adjusted taxable income for 2019 and 2020. Also, a taxpayer can elect to use its 2019 adjusted taxable income in 2020 to determine the deductible amount of interest expense in that year. Our income tax benefit for the year ended December 31, 2020 included a tax benefit of $360 million attributable to the tax NOL carryback provided under the CARES Act for our 2020 tax NOL to our 2015 tax year in which we paid federal income taxes at a 35 percent tax rate. Upon filing our superseding 2020 federal income tax return in the fourth quarter of 2021, we recorded an additional tax benefit of $56 million during the year ended December 31, 2021 related to the additional 2020 tax NOL carryback to 2015. Other Disclosures Undistributed Earnings of Foreign Subsidiaries As of December 31, 2021, the cumulative undistributed earnings of our foreign subsidiaries that is considered permanently reinvested in the relevant foreign countries were approximately $4.5 billion. We are able to distribute cash via a dividend from our foreign subsidiaries with a full dividend received deduction in the U.S. However, there may be a cost to repatriate the undistributed earnings of certain of our foreign subsidiaries to us, including, but not limited to, withholding taxes imposed by certain foreign jurisdictions, U.S. state income taxes, and U.S. federal income tax on foreign exchange gains. It is not practicable to estimate the amount of additional tax that would be payable on those earnings, if distributed. Our repatriation tax liability relates to our recognition of a one-time transition tax on the deemed repatriation of previously undistributed accumulated earnings and profits of our foreign subsidiaries. This transition tax will be remitted to the IRS over the eight-year period provided in the Code, with the first annual remittance paid in 2018. Interest and Penalties Interest and penalties incurred during the years ended December 31, 2021, 2020, and 2019 were immaterial.

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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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