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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES |
NOTE 10 - INCOME TAXES
LEGAL ENTITY REORGANIZATION To align Occidental’s legal entity structure with the nature of its business activities after completing the acquisition of Anadarko and subsequent large scale post-acquisition divestiture programs, management undertook a legal entity reorganization that was completed in 2022. As a result of this legal entity reorganization, management made an adjustment to the tax basis in a portion of its operating assets, thus reducing Occidental’s deferred tax liabilities. Accordingly, in 2022, Occidental recorded a tax benefit of $2.7 billion in connection with this reorganization. The timing of any reduction in Occidental’s future cash taxes as a result of this legal entity reorganization will be dependent on a number of factors, including prevailing commodity prices, capital activity level and production mix. The legal entity reorganization transaction is currently under IRS review as part of the Company’s 2022 federal tax audit. INFLATION REDUCTION ACT In August 2022, Congress passed the IRA that contains, among other provisions, certain tax incentives related to climate change and clean energy. Since the enactment of the IRA, the Treasury has released a substantial amount of regulatory and sub-regulatory guidance. However, much of this guidance remains unfinalized, and significant questions persist regarding its application. In January 2025, the Trump Administration issued an executive order that pauses the disbursement of funds appropriated under the IRA. The ultimate impact of the IRA on Occidental’s businesses depends on several factors, including the Treasury's statutory interpretations in the final regulatory guidance pending issuance and potential changes to the IRA incentives in future tax legislation. PILLAR TWO Approximately 140 countries have agreed to support the OECD Pillar Two initiative that proposes to apply a 15% global minimum tax on multinational entities, applied jurisdiction-by-jurisdiction. Several countries, including European Union member states, Canada, and Oman, have enacted or are in the process of enacting legislation aligned with all, or portions of, Pillar Two. Widespread implementation of Pillar Two is anticipated in 2025. As the legislation becomes effective in countries in which Occidental operates, the Company’s cash tax could increase, and its effective tax rate could be negatively impacted. In January 2025, the Trump Administration issued an executive order indicating that any commitments made by the prior U.S. administration regarding Pillar Two “have no force or effect in the United States”. The order also suggested the U.S. will consider retaliatory measures against countries that attempt to apply extraterritorial taxes on U.S. companies. Occidental will continue to monitor the developments in the U.S., in addition to the status of legislation and guidance issued by both the OECD and the jurisdictions in which the Company operates, to assess the impact on the Company’s tax position. Occidental does not expect the global minimum tax provisions to have a material impact on its results of operations, financial position, or cash flows. The following summarizes domestic and foreign components of income from continuing operations before domestic and foreign income taxes for the years ended December 31:
millions | 2024 | 2023 | 2022
Domestic | $ | 2,398 |  | $ | 4,246 |  | $ | 11,314 |
Foreign | 1,672 |  | 2,183 |  | 2,803 |
Total income from continuing operations before income taxes | $ | 4,070 |  | $ | 6,429 |  | $ | 14,117 |
The following summarizes components of income tax (expense) benefit on continuing operations for the years ended December 31:
millions | 2024 | 2023 | 2022
Current |  |  |
Federal | $ | (956) |  | $ | (871) |  | $ | (1,272) |
State and local | (50) |  | (92) |  | (105) |
Foreign | (629) |  | (713) |  | (1,080) |
Total current tax expense | $ | (1,635) |  | $ | (1,676) |  | $ | (2,457) |
Deferred |  |  |
Federal | 389 |  | (37) |  | 1,569 |
State and local | 28 |  | 25 |  | 57 |
Foreign | 44 |  | (45) |  | 18 |
Total deferred tax (expense) benefit | $ | 461 |  | $ | (57) |  | $ | 1,644 |
Total income tax expense | $ | (1,174) |  | $ | (1,733) |  | $ | (813) |
The following reconciliation of the U.S. federal statutory income tax rate to Occidental’s worldwide effective tax rate on income from continuing operations for the years ended December 31 is stated as a percentage of income from continuing operations before income taxes:
| 2024 | 2023 | 2022
U.S. federal statutory tax rate | 21 | % | 21 | % | 21 | %
Legal entity reorganization | — |  | — |  | (18) |
Tax impact from foreign operations | 5 |  | 3 |  | 3 |
State income taxes, net of federal benefit | — |  | 1 |  | — |
Uncertain tax positions | 3 |  | 2 |  | — |
Other | — |  | — |  | — |
Worldwide effective tax rate | 29 | % | 27 | % | 6 | %
In 2024 and 2023, Occidental’s worldwide effective tax rate was higher than the U.S. statutory rate of 21%, primarily driven by Occidental's jurisdictional mix of income, where international income is subject to tax at statutory rates as high as 55%. In 2022, Occidental’s worldwide effective tax rate was 6%, which was lower than the U.S. statutory rate of 21% and primarily driven by a tax benefit associated with Occidental's legal entity reorganization, as described above, partially offset by higher tax rates in the foreign jurisdictions in which Occidental operates. The tax effects of temporary differences resulting in deferred income taxes as of December 31:
millions | 2024 | 2023
Deferred tax liabilities |  |
Property, plant and equipment differences | $ | (7,100) |  | $ | (6,994) |
Equity investments, partnerships and international subsidiaries | (633) |  | (709) |
Gross long-term deferred tax liabilities | (7,733) |  | (7,703) |
Deferred tax assets |  |
Environmental reserves | 416 |  | 223 |
Postretirement benefit accruals | 249 |  | 229 |
Deferred compensation and benefits | 258 |  | 237 |
Asset retirement obligations | 788 |  | 722 |
Foreign tax credit carryforwards | 1,975 |  | 2,759 |
Business credit carryforwards | 54 |  | 43 |
Net operating loss carryforward | 1,031 |  | 1,056 |
Interest expense carryforward | 11 |  | 11 |
All other | 539 |  | 586 |
Gross long-term deferred tax assets | 5,321 |  | 5,866 |
Valuation allowance | (2,962) |  | (3,901) |
Net long-term deferred tax assets | $ | 2,359 |  | $ | 1,965 |
Total deferred income tax liability, net | $ | (5,374) |  | $ | (5,738) |
Less: foreign deferred tax asset in long-term receivables and other assets, net | (20) |  | (26) |
Total deferred income tax liability | $ | (5,394) |  | $ | (5,764) |
Total deferred tax assets, after valuation allowances, were $2.4 billion and $2.0 billion as of December 31, 2024 and 2023, respectively. Occidental expects to realize the recorded deferred tax assets, net of any allowances, through future operating income and reversal of temporary differences. The total deferred tax liabilities were $7.7 billion as of December 31, 2024 and 2023. As of December 31, 2024, Occidental had foreign tax credit carryforwards of $2.0 billion and state tax credit carryforwards of $38 million. Occidental had recorded a valuation allowance for $2.0 billion of the foreign tax credit carryforwards and $32 million of the state tax credit carryforwards. As of December 31, 2024, Occidental had tax-effected foreign net operating loss carryforwards of $838 million, state net operating loss carryforwards of $190 million, and federal net operating loss carryforwards of $3 million. The carryforward balances have varying carryforward periods through 2044, excluding certain attributes for which there is an indefinite carryforward period. A valuation allowance was recorded for $774 million of the tax-effected foreign net operating loss carryforwards and $153 million of the tax-effected state net operating loss carryforwards. Occidental had an additional valuation allowance of $25 million against other foreign deferred tax assets. In 2024, the Company evaluated its operations in foreign jurisdictions that maintained deferred tax assets offset with a full valuation allowance. Based on this assessment, the Company determined that $149 million of these deferred tax assets had a remote likelihood of recovery due to the lack of current or planned operating activity. Consequently, the Company reversed both the deferred tax assets and the associated valuation allowance in 2024. Occidental had a tax-effected state interest expense carryforward of $11 million with no valuation allowance as of December 31, 2024. A deferred tax liability had not been recognized for temporary differences related to unremitted earnings of certain consolidated international subsidiaries aggregating approximately $406 million as of December 31, 2024, as it is Occidental’s intention to reinvest such earnings indefinitely. If the earnings of these international subsidiaries were not indefinitely reinvested, an additional deferred tax liability of approximately $109 million would be required. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
millions | 2024 | 2023 | 2022
Balance as of January 1 | $ | 1,951 |  | $ | 2,010 |  | $ | 2,026 |
Increases related to prior-year positions | — |  | — |  | 2 |
Increases related to current-year positions | — |  | — |  | — |
Settlements | — |  | — |  | — |
Reductions for tax positions of prior years | — |  | (59) |  | (18) |
Balance as of December 31 | $ | 1,951 |  | $ | 1,951 |  | $ | 2,010 |
The December 31, 2024 balance of unrecognized tax benefits of $2.0 billion included potential benefits of $2.0 billion of which, if recognized, $1.5 billion would affect the effective tax rate on income. Also included were benefits of $45 million related to tax positions for which the ultimate deductibility is highly certain, but the timing of such deductibility is uncertain. Unrecognized tax benefits are included in deferred credits and other liabilities - other. Occidental records estimated potential interest and penalties related to liabilities for unrecognized tax benefits in the provisions for domestic and foreign income taxes. In 2024, Occidental recorded interest related to liabilities for unrecognized tax benefits of $186 million, for a cumulative accrued interest related to liabilities for unrecognized tax benefits of $763 million as of December 31, 2024. There were no penalties associated with liabilities for unrecognized tax benefits recorded for the years ended December 31, 2024 and 2023. Over the next 12 months, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an estimated $9 million due to settlements with taxing authorities or lapses in statutes of limitation. Occidental recognized $30 million and $79 million in federal and state income tax receivables as of December 31, 2024 and 2023, respectively, which were recorded in other current assets. In addition, Occidental recognized $247 million and $31 million in 2024 and 2023, respectively, of long-term income tax receivables, which were recorded in long-term receivables and other assets, net. Occidental is subject to audit by various tax authorities in varying periods. See Note 13 - Lawsuits, Claims, Commitments and Contingencies for a discussion of these matters.

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