6. Income Taxes

The following table presents Devon’s total income tax expense (benefit) and a reconciliation of its effective income tax rate to the U.S. statutory income tax rate.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014

Total income tax expense (benefit) (millions)	$	(1,714)	$	613	$	(5,435)	$	1,698

U.S. statutory income tax rate		(35%)		35%		(35%)		35%
Non-deductible goodwill and intangible impairment		5%		0%		2%		0%
Taxation on Canadian operations		0%		0%		1%		1%
State income taxes		(1%)		2%		(2%)		1%
Repatriations		0%		0%		0%		7%
Other		1%		0%		(1%)		1%
Effective income tax rate		(30%)		37%		(35%)		45%

Devon estimates its annual effective income tax rate in recording its quarterly provision for income taxes in the various jurisdictions in which it operates. Statutory tax rate changes and other significant or unusual items are recognized as discrete items in the quarter in which they occur.

In the third quarter of 2015, EnLink recorded goodwill and intangibles impairments of approximately $799 million. These impairments are not deductible for purposes of calculating income tax and therefore have an impact on the effective tax rate.

In the second quarter of 2015, Devon recognized $57 million of income tax benefits in conjunction with favorable tax settlements. In addition, changes in statutory tax rates in Texas and the province of Alberta, Canada resulted in a net increase to deferred tax expense of $44 million.

Devon and its subsidiaries are subject to U.S. federal income tax as well as income or capital taxes in various state and foreign jurisdictions. Devon’s tax reserves are related to tax years that may be subject to examination by the relevant taxing authority. Devon is under audit in the U.S. and various foreign jurisdictions as part of its normal course of business.

In the third quarter of 2014, Devon completed its U.S. asset divestiture program. In conjunction with the divestiture closing, Devon recognized $543 million of current income tax expense. The current tax expense was entirely offset by the recognition of deferred tax benefits.

In the second quarter of 2014, Devon recognized $247 million of additional income tax expense related to the $2.8 billion of repatriations to the U.S. Prior to the repatriation, Devon had recognized a $143 million deferred income tax liability associated with the planned repatriation. When the repatriation was made, Devon retained a larger property basis in Canada than was previously estimated, resulting in the incremental tax in the second quarter.