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DOMESTIC AND FOREIGN INCOME TAXES | 12 Months Ended
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Dec. 31, 2017
DOMESTIC AND FOREIGN INCOME TAXES |
DOMESTIC AND FOREIGN INCOME TAXES |
NOTE 10 DOMESTIC AND FOREIGN INCOME TAXES
The domestic and foreign components of income (loss) from continuing operations before domestic and foreign income taxes were as follows:
For the years ended December 31, (in millions) |  | Domestic |  | Foreign |  | Total |
2017 |  | $ | (609) |  | $ | 1,937 |  | $ | 1,328 |
2016 |  | $ | (2,698) |  | $ | 1,034 |  | $ | (1,664) |
2015 |  | $ | (5,810) |  | $ | (3,666) |  | $ | (9,476) |
The provisions (credits) for domestic and foreign income taxes on continuing operations consisted of the following:
For the years ended December 31, (in millions) |  | United States Federal |  | State and Local |  | Foreign |  | Total |
2017 |  |  |  |  |  |  |  |  |
Current |  | $ | (81) |  | $ | 11 |  | $ | 806 |  | $ | 736 |
Deferred |  | (856) |  | 23 |  | 114 |  | (719) |
|  | $ | (937) |  | $ | 34 |  | $ | 920 |  | $ | 17 |
2016 |  |  |  |  |  |  |  |  |
Current |  | $ | (784) |  | $ | 9 |  | $ | 630 |  | $ | (145) |
Deferred |  | (504) |  | (19) |  | 6 |  | (517) |
|  | $ | (1,288) |  | $ | (10) |  | $ | 636 |  | $ | (662) |
2015 |  |  |  |  |  |  |  |  |
Current |  | $ | (810) |  | $ | (31) |  | $ | 883 |  | $ | 42 |
Deferred |  | (1,146) |  | (83) |  | (143) |  | (1,372) |
|  | $ | (1,956) |  | $ | (114) |  | $ | 740 |  | $ | (1,330) |
The following reconciliation of the United States federal statutory income tax rate to Occidental’s worldwide effective tax rate on income from continuing operations is stated as a percentage of pre-tax income:
For the years ended December 31, |  | 2017 |  | 2016 |  | 2015 |
United States federal statutory tax rate |  | 35% |  | 35% |  | 35% |
Other than temporary loss on available for sale investment in California Resources stock |  | — |  | (2) |  | (1) |
Enhanced oil recovery credit |  | (9) |  | 5 |  | — |
Tax benefit due to write off of exploration blocks |  | — |  | 14 |  | — |
Change in federal income tax rate |  | (44) |  | — |  | — |
Tax expense due to reversal of indefinite reinvestment assertion |  | 7 |  | — |  | — |
Operations outside the United States |  | 12 |  | (14) |  | (21) |
State income taxes, net of federal benefit |  | 2 |  | — |  | 1 |
Other |  | (2) |  | 2 |  | — |
Worldwide effective tax rate |  | 1% |  | 40% |  | 14% |
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (Tax Reform) was enacted which made significant changes to the U.S. federal income tax law, including lowering the federal corporate income tax rate from 35 percent to 21 percent, repealing the corporate alternative minimum tax (AMT) and mandating a deemed repatriation of accumulated earnings and profits of U.S.-owned foreign corporations. In accordance with the guidance from the SEC, Occidental recorded a provisional estimate for the federal and state income tax associated with the mandatory deemed repatriation and the resulting impact to the net federal deferred tax liability. Tax Reform introduced a new tax on certain foreign income which the statute refers to as global intangible low-tax income (GILTI). GILTI is income of a U.S.-owned foreign corporation (net of allowed deductions) in excess of a 10 percent rate of return on the assets of the subsidiary. Tax Reform also introduced a base-erosion anti-abuse tax (BEAT) that aims to reduce the ability of multinational companies to use cross-border payments to shift income to affiliates in lower-taxed countries. Based on current analysis and interpretation of Tax Reform, Occidental does not anticipate a material GILTI or BEAT-related tax obligation and is recording no current or deferred tax impact with regards to GILTI or BEAT on a provisional basis. Further, pending definitive technical guidance from the states in which it is subject to income tax, Occidental has recorded a reasonable estimate of $10 million for the state tax associated with the mandatory deemed repatriation on a provisional basis. The ultimate impact of Tax Reform may differ from Occidental’s estimates due to changes in interpretations and assumptions, as well as additional regulatory guidance. Occidental will adjust provisional amounts as updated information is evaluated. The tax effects of temporary differences resulting in deferred income taxes at December 31, 2017, and 2016 were as follows:
|  | 2017 |  | 2016 |
Tax effects of temporary differences (in millions) |  | Deferred Tax Assets |  | Deferred Tax Liabilities |  | Deferred Tax Assets |  | Deferred Tax Liabilities |
Property, plant and equipment differences |  | $ | — |  | $ | 2,272 |  | $ | — |  | $ | 3,345 |
Equity investments, partnerships and foreign subsidiaries |  | — |  | 134 |  | — |  | 58 |
Environmental reserves |  | 191 |  | — |  | 314 |  | — |
Postretirement benefit accruals |  | 145 |  | — |  | 342 |  | — |
Deferred compensation and benefits |  | 151 |  | — |  | 222 |  | — |
Asset retirement obligations |  | 228 |  | — |  | 406 |  | — |
Foreign tax credit carryforwards |  | 2,750 |  | — |  | 2,046 |  | — |
Corporate alternative minimum tax credit carryforwards |  | — |  | — |  | 226 |  | — |
General business credit carryforwards |  | 407 |  | — |  | 186 |  | — |
Net operating loss carryforward |  | 437 |  | — |  | — |  | — |
Federal benefit of state income taxes |  | 10 |  | — |  | 8 |  | — |
All other |  | 146 |  | — |  | 370 |  | — |
Subtotal |  | 4,465 |  | 2,406 |  | 4,120 |  | 3,403 |
Valuation allowance |  | (2,640) |  | — |  | (1,849) |  | — |
Total deferred taxes |  | $ | 1,825 |  | $ | 2,406 |  | $ | 2,271 |  | $ | 3,403 |
Total deferred tax assets, after valuation allowances, were $1.8 billion and $2.3 billion as of December 31, 2017, and 2016, respectively. Occidental expects to realize the recorded deferred tax assets, net of any allowances, through future operating income and reversal of temporary differences. The reduction in the net deferred tax liabilities is primarily related to the reduction in the federal corporate income tax rate from 35 percent to 21 percent and the addition of $221 million of general business credits to the credit carryforward balance. Occidental had, as of December 31, 2017, foreign tax credit carryforwards of $2.8 billion, which expire in varying amounts through 2027, $35 million of state operating loss carryforwards, which have varying carryforward periods through 2037, $402 million of federal operating loss carryforwards that expire in 2037, and $407 million of general business credit carryforwards that expire between 2033 and 2037. Occidental had, as of December 31, 2017, corporate AMT carryforwards of $221 million, that have been classified as non-current receivables due to Tax Reform. At December 31, 2017, Occidental reversed its indefinite re-investment assertion with regards to its investments in foreign subsidiaries and, as a result, a deferred foreign tax liability of $99 million was recorded. Occidental’s valuation allowance provides for substantially all of the foreign tax credit carryforwards and approximately $4 million of the state net operating loss carryforwards. Discontinued operations include income tax charges of $249 million and $1 million in 2016, and 2015, respectively. As of December 31, 2017, Occidental had liabilities for unrecognized tax benefits of approximately $22 million included in deferred credits and other liabilities – other, all of which, if subsequently recognized, would favorably affect Occidental’s effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
For the years ended December 31, (in millions) |  | 2017 |  | 2016 |  | 2015 |
Balance at January 1, |  | $ | 22 |  | $ | 22 |  | $ | 61 |
Reductions based on tax positions related to prior years and settlements |  | — |  | — |  | (39) |
Balance at December 31, |  | $ | 22 |  | $ | 22 |  | $ | 22 |
Management believes it is unlikely that Occidental’s liabilities for unrecognized tax benefits related to existing matters would increase or decrease within the next 12 months by a material amount. Occidental cannot reasonably estimate a range of potential changes in such benefits due to the unresolved nature of the various audits. Occidental has recognized $76 million and $761 million in income tax receivables at December 31, 2017, and 2016, respectively, which were recorded in other current assets. Occidental is subject to audit by various tax authorities in varying periods. See Note 9 for a discussion of these matters. Occidental records estimated potential interest and penalties related to liabilities for unrecognized tax benefits in the provisions for domestic and foreign income taxes and these amounts were not material for the years ended December 31, 2017, 2016 and 2015.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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