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INCOME TAXES | 9 Months Ended
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Sep. 30, 2021
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES An income tax provision of $28 million and $91 million was recorded for the three and nine months ended September 30, 2021 and the reported effective income tax rate was 23.9% and 25.5%, respectively. An income tax provision of $12 million and $25 million was recorded for the three and nine months ended September 30, 2020 and the reported effective income tax rate was 18.5% and 18.8%, respectively. The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by International Paper do Brasil Ltda. (“IP Brasil”), a wholly-owned subsidiary of the Company. The Company received assessments for the tax years 2007-2015 totaling approximately $107 million in tax, and $351 million in interest, penalties and fees as of September 30, 2021 (adjusted for variation in currency exchange rates). After a previous favorable ruling challenging the basis for these assessments, we received other subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. The Company has appealed and intends to further appeal these and any future unfavorable administrative judgments to the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. The Company believes that it has appropriately evaluated the transaction underlying these assessments, and has concluded based on Brazilian tax law, that its tax position should be sustained. Pursuant to the terms of the tax matters agreement entered into between International Paper and Sylvamo, International Paper will pay 60%, and Sylvamo will pay 40% on up to $300 million of any assessment related to this matter, and International Paper will pay all amounts of the assessment over $300 million. The Brazilian government may enact a tax amnesty program that would allow Sylvamo do Brasil Ltda. to resolve this dispute for less than the assessed amount. In connection with this agreement with International Paper, all decisions concerning the conduct of the litigation related to this matter, including strategy settlement, pursuit and abandonment, will continue to be made by International Paper. The Company is vigorously defending its position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015.

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