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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Income Tax Provision (Benefit) Net (loss) income before income taxes, for all periods presented, was generated from domestic operations. We did not record a significant income tax provision (benefit) in any of the periods presented, due to our valuation allowance. Total income tax provision (benefit) differs from the amounts computed by applying the U.S. federal income tax rate to pre-tax income (loss) as follows:
| Successor |  |  | Predecessor
| November 1, 2020 - December 31, 2020 |  |  | January 1, 2020 - October 31, 2020 |  | Years ended December 31,
|  |  |  | 2019 |  | 2018
U.S. federal statutory tax rate | (21) | % |  |  | 21 | % |  | 21 | % |  | 21 | %
State income taxes, net | (7) |  |  |  | 7 |  |  | 7 |  |  | 6 |
Exclusion of income attributable to noncontrolling interests, net | — |  |  |  | (1) |  |  | (35) |  |  | (5) |
Debt restructuring, net | — |  |  |  | (8) |  |  | — |  |  | — |
Changes in tax attributes, net | — |  |  |  | 7 |  |  | (9) |  |  | (6) |
Nondeductible compensation, net | — |  |  |  | — |  |  | 3 |  |  | — |
Change in valuation allowance, net | 27 |  |  |  | (27) |  |  | 14 |  |  | (17) |
Other, net | 1 |  |  |  | 1 |  |  | — |  |  | 1 |
Effective tax rate | — | % |  |  | — | % |  | 1 | % |  | — | %
Our effective tax rate is primarily affected by state taxes, income included in our consolidated results which is taxed to noncontrolling interests, and the benefit of tax credits, when available. Further, as a result of our emergence from bankruptcy, we wrote-off deferred tax assets because of the limitation on the realizability of our net operating loss and tax carryforwards as described further below. Given our income tax position, any item affecting our effective tax rate is generally offset by an equal change in the valuation allowance. In connection with our emergence from bankruptcy and cancellation of claims, which were included in liabilities subject to compromise as of our emergence date, we generated cancellation of debt income for tax purposes which was excluded from taxable income under rules related to bankruptcy proceedings. In exchange for this exclusion, for federal purposes, we were required to reduce our net operating loss (NOL) and tax credit carryforwards and the tax basis of our assets, primarily property, plant and equipment. The primary driver of the income tax benefit related to the cancellation of our debt is due to the mechanics of attribute reduction for state combined income tax reporting purposes. Our ability to utilize our remaining NOL, tax credit and interest expense carryforwards may be limited since we experienced an “ownership change” in connection with the restructuring process. Absent an applicable exception, if a corporation undergoes an ownership change, the amount of its NOLs and other carryforwards that may be used to reduce U.S. federal and state income tax obligations is subject to an annual limitation. Although an exception to the imposition of an annual limitation applies in Chapter 11 Cases under Section 382(l)(5) of the Internal Revenue Code of 1986, as amended, it is currently not likely if we will apply such section because if we experience a subsequent ownership change within two years of the Effective Date, any remaining net operating losses and certain other tax attributes, including interest expense carryforwards, may be subject to further and more severe limitations. Accordingly, the write-off of the benefit for our remaining NOLs and other carryforwards had the effect of increasing our effective tax rate in the Predecessor period. Deferred Tax Assets and Liabilities The tax effects of temporary differences resulting in deferred income tax assets and liabilities at December 31, 2020 and 2019 were as follows:
| Successor |  |  | Predecessor
| 2020 |  |  | 2019
(in millions) | Deferred Tax Assets |  | Deferred Tax Liabilities |  |  | Deferred Tax Assets |  | Deferred Tax Liabilities
Debt | $ | 3 |  |  | $ | — |  |  |  | $ | 176 |  |  | $ | — |
Property, plant and equipment | 209 |  |  | (113) |  |  |  | — |  |  | (517) |
Postretirement benefit accruals | 43 |  |  | — |  |  |  | 40 |  |  | — |
Deferred compensation and benefits | 23 |  |  | — |  |  |  | 55 |  |  | — |
Asset retirement obligations | 178 |  |  | — |  |  |  | 155 |  |  | — |
Net operating loss and tax credit carryforwards | 12 |  |  | — |  |  |  | 457 |  |  | — |
Business interest expense carryforward | 180 |  |  | — |  |  |  | 194 |  |  | — |
Investment in partnerships | — |  |  | — |  |  |  | 110 |  |  | — |
Other | 34 |  |  | (20) |  |  |  | 36 |  |  | (60) |
Subtotal | 682 |  |  | (133) |  |  |  | 1,223 |  |  | (577) |
Valuation allowance | (549) |  |  | — |  |  |  | (646) |  |  | — |
Total deferred taxes | $ | 133 |  |  | $ | (133) |  |  |  | $ | 577 |  |  | $ | (577) |
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing deferred tax assets. A significant piece of evidence evaluated is a history of operating losses. Such evidence limits our ability to consider other evidence such as projections for growth. As of December 31, 2020, we concluded that we could not realize, on a more-likely-than-not basis, any of our deferred tax assets and there is not sufficient evidence to support the reversal of all or any portion of this allowance. Given our recent and anticipated future earnings trends, we do not believe any significant amount of the valuation allowance as of December 31, 2020 will be released within the next 12 months. Changes in assumptions could materially affect the recognized amounts of valuation allowance. Other As of December 31, 2020, we had U.S. federal net operating loss carryforwards of $17 million, which begin to expire in 2039. Our carryforward for business interest expense of $855 million does not expire. As of December 31, 2020, we had California net operating loss carryforwards of approximately $2 billion, which begin to expire in 2026, and an insignificant amount of tax credit carryforwards. Unrecognized Tax Benefits We did not record a liability for unrecognized tax benefits in the Successor period. The following is a reconciliation of unrecognized tax benefits in the Predecessor period:
|  |  |  | Predecessor
|  |  |  | January 1, 2020 - October 31, 2020 |  | Years ended December 31,
(in millions) |  |  |  | 2019 |  | 2018
Unrecognized tax benefits – beginning balance |  |  |  | $ | 101 |  |  | $ | 25 |  |  | $ | 25 |
Gross (decreases) increases – tax positions in prior year |  |  |  | (101) |  |  | 44 |  |  | — |
Gross increases – tax positions in current year |  |  |  | — |  |  | 32 |  |  | — |
Unrecognized tax benefits – ending balance |  |  |  | $ | — |  |  | $ | 101 |  |  | $ | 25 |
On July 28, 2020 the Internal Revenue Service (IRS) issued final regulations which clarified the calculation of the limitation on the deduction of business interest expense. Based on our evaluation of these final regulations, we determined that our income tax returns were filed at least on a more-likely-than-not basis and accordingly we reversed a $76 million liability for uncertain tax positions. Further, we re-evaluated a tax return filing position taken in prior periods and reversed a $25 million liability for uncertain tax positions.

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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=84230637&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=116825942&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=84230637&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=116825942&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=84230637&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 + Details
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