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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our operations are conducted through various subsidiaries in a number of countries throughout the world. We have provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned. Income (loss) before income taxes is comprised of the following:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
United Kingdom | $ | (130) |  |  | $ | (16) |  |  | $ | (12) |
International | 438 |  |  | 390 |  |  | 126 |
Income before income taxes | $ | 308 |  |  | $ | 374 |  |  | $ | 114 |
The income tax (provision) benefit is summarized below:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
United Kingdom: |  |  |  |  |
Current | $ | — |  |  | $ | (1) |  |  | $ | (1) |
Deferred | — |  |  | — |  |  | (10) |
International: |  |  |  |  |
Current | (69) |  |  | (55) |  |  | (17) |
Deferred | 261 |  |  | (15) |  |  | 909 |
Income tax benefit (provision) | $ | 192 |  |  | $ | (71) |  |  | $ | 881 |
The following table reconciles the applicable statutory income tax rates to our effective income tax rates for “Income tax (provision) benefit” as reflected in the Consolidated Statements of Income.
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Statutory tax rate | 19 | % |  | 19 | % |  | 19 | %
Increases (decreases) resulting from: |  |  |  |  |
Tax rate differences | 9 |  |  | 7 |  |  | 10 |
Disallowable expenditures | 8 |  |  | 2 |  |  | 17 |
Valuation allowances | (100) |  |  | (27) |  |  | (849) |
Corporate reorganization | — |  |  | 17 |  |  | (96) |
Tax rate changes | (3) |  |  | 2 |  |  | (8) |
State and local taxes | 1 |  |  | 1 |  |  | 5 |
Prior year accruals | — |  |  | (2) |  |  | 131 |
Branch taxation | — |  |  | — |  |  | — |
Withholding taxes | 2 |  |  | 2 |  |  | — |
Tax credits | — |  |  | (2) |  |  | (2) |
Expiration of net operating loss | 2 |  |  | — |  |  | — |
Other, net | — |  |  | — |  |  | — |
Effective tax rate | (62) | % |  | 19 | % |  | (773) | %
Tronox Holdings plc is a U.K. public limited company and the parent company for the business group. The statutory tax rate in the U.K. at December 31, 2022, 2021 and 2020 was 19%. The effective tax rates in 2022, 2021 and 2020 are all influenced by a variety of factors, primarily income and losses in jurisdictions with valuation allowances, changes in tax rates, disallowable expenditures, prior year accruals, and rates different than the United Kingdom statutory rate. The valuation allowances in each year were impacted by items other than income and losses as follows: 2022 was impacted by the significant release of valuation allowances in Australia, 2021 was impacted by the release of a valuation allowance in Saudi Arabia and the liquidation of an inactive Dutch subsidiary with a valuation allowance against its worthless net operating losses, and 2020 was impacted by the release of valuation allowances in Brazil and the U.S. and the recording of valuation allowances in Saudi Arabia and the U.K. Additional factors of significance in the above table are as follows: 1) the disallowance expenditures amount for 2022 includes the Venator settlement, 2) the Corporate reorganization amount for 2021 includes the liquidation of the inactive Dutch subsidiary and the write-off of its net operating losses, 3) the Corporate reorganization amounts for 2021 and 2020 include the restructuring of our Australian entities, and 4) the Prior year accrual amount for 2020 includes the amendment of prior year Australian tax returns in resolution of a tax audit. Each of these additional factors were fully offset by valuation allowances. The Company reached an agreement with the Australian Tax Office ("ATO") during the year ended December 31, 2020 for the tax years 2016 through 2019 related to the companies operating in Australia acquired in the Cristal transaction, which were under examination by the ATO. Cash tax payments to be made pursuant to this agreement are not reflected in the above table due to the indemnification clause of the Cristal Transaction purchase contract. As part of the agreement, $79 million in deferred tax assets related to Australian NOLs were lost. The change to deferred taxes was fully offset by a valuation allowance and results in no impact to the consolidated provision. The NOL adjustment from the ATO agreement is reflected in the "Prior year accruals" line of the effective tax rate table. Changes in our state apportionment factors and state statutory rate changes caused our overall effective state tax rates to change. Due to the large deferred tax asset created by the Anadarko litigation settlement in 2014, these state rate changes have a material impact on deferred taxes for 2020. During 2020, tax law changes fully repealed the future Netherlands rate reduction, and this benefit is also reflected in the "Tax rate changes" line. Net deferred tax assets (liabilities) at December 31, 2022 and 2021 were comprised of the following:
| December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Net operating loss and other carryforwards | $ | 1,739 |  |  | $ | 1,720 |
Property, plant and equipment, net | 200 |  |  | 220 |
Reserves for environmental remediation and restoration | 47 |  |  | 43 |
Obligations for pension and other employee benefits | 46 |  |  | 58 |
Investments | 4 |  |  | 4 |
Grantor trusts | 621 |  |  | 636 |
Inventories, net | 6 |  |  | 8 |
Interest | 190 |  |  | 214 |
Lease liabilities | 48 |  |  | 23 |
Other accrued liabilities | 2 |  |  | 3 |
Foreign exchange | 1 |  |  | 9 |
Other | 5 |  |  | 7 |
Total deferred tax assets | 2,909 |  |  | 2,945 |
Valuation allowance associated with deferred tax assets | (1,527) |  |  | (1,841) |
Net deferred tax assets | 1,382 |  |  | 1,104 |
Deferred tax liabilities: |  |  |
Inventories, net | (3) |  |  | (5) |
Property, plant and equipment, net | (228) |  |  | (216) |
Intangible assets, net | (15) |  |  | (22) |
Lease assets | (38) |  |  | (24) |
Foreign exchange | (4) |  |  | (1) |
Other | (14) |  |  | (8) |
Total deferred tax liabilities | (302) |  |  | (276) |
Net deferred tax asset | $ | 1,080 |  |  | $ | 828 |
Balance sheet classifications: |  |  |
Deferred tax assets — long-term | $ | 1,233 |  |  | $ | 985 |
Deferred tax liabilities — long-term | $ | (153) |  |  | $ | (157) |
Net deferred tax asset | $ | 1,080 |  |  | $ | 828 |
The net deferred tax assets reflected in the above table include deferred tax assets related to grantor trusts, which were established as Tronox Incorporated emerged from bankruptcy during 2011. The balances relate to the assets contributed to such grantor trusts by Tronox Incorporated and the proceeds from the resolution of previous litigation of $5.2 billion during 2014, which resulted in additional deferred tax assets of $2.0 billion. As the grantor trusts continue to spend funds received from the litigation and earn income from the investment of those funds, the U.S. net operating loss will increase or decrease. The 2021 amounts included within the Property, plant and equipment, net and Valuation allowance associated with deferred tax asset captions in the table above have each been corrected for an increase of $113 million to gross up historical amounts. There was a decrease to our valuation allowance of $314 million during 2022 and a decrease of $98 million in 2021. The table below sets forth the changes, by jurisdiction:
| December 31,
| 2022 |  | 2021
United Kingdom | $ | 13 |  |  | $ | (1) |
United States | (5) |  |  | (19) |
Australia | (314) |  |  | (43) |
The Netherlands | — |  |  | (24) |
Saudi Arabia | — |  |  | (11) |
Brazil | — |  |  | — |
Switzerland | (8) |  |  | — |
Belgium | — |  |  | — |
Total (decrease) increase in valuation allowances | $ | (314) |  |  | $ | (98) |
During the year ended December 31, 2022, we determined that sufficient positive evidence existed to reverse a portion of the valuation allowance attributable to the Australian deferred tax assets which we now believe the Company will be able to utilize in future years. This reversal resulted in a non-cash deferred tax benefit of $300 million. Our analysis considered all positive and negative evidence, including (i) three years of cumulative income of our Australian subsidiaries, (ii) our continuing and improved profitability over the last twelve months, (iii) estimates of continued profitability based on updated to our latest forecasts, (iv) changes in the factors that drove losses in the past, and (v) an evaluation of specific deferred tax assets for limitations under certain Australian tax provisions. Based on this analysis, we concluded that it is more likely than not that our Australian subsidiaries will be able to utilize all of their deferred tax assets except for those which are classified as Capital Gains Tax (CGT) assets. These CGT assets represent losses which can only be utilized against CGT gains, and because the Company has no foreseeable source of CGT gains, we will continue to carry an Australian valuation allowance with a current estimated value of $471 million. During the year ended December 31, 2021, the Company liquidated an inactive Dutch subsidiary with a valuation allowance against its worthless net operating losses, and because of improved operations, the Company reversed the valuation allowance in Saudi Arabia which had been established during the year December 31, 2020. During the year ended December 31, 2020, we determined sufficient positive evidence existed to reverse a portion of the valuation allowance attributable to the deferred tax assets associated with our operations in the U.S. This reversal resulted in a non-cash deferred tax benefit of $909 million. Our analysis considered all positive and negative evidence and concluded that it was more likely than not that our U.S. subsidiaries will be able to utilize all of their deferred tax assets with an indefinite life. A portion of the U.S. deferred tax assets are attributable to NOLs incurred in prior years which are subject to expiration in future years. Our analysis did not support that these limited-life NOLs would be utilized before their expiration, and it is against these deferred tax assets in the U.S. that the Company continues to carry a valuation allowance with a current estimated value of $1,021 million. During the year ended December 31, 2020, we also determined sufficient positive evidence existed to reverse the valuation allowance attributable to the deferred tax assets associated with our operations in Brazil. This reversal resulted in a non-cash deferred tax benefit of $8 million. Our analysis considered all positive and negative evidence, the most significant of which was the continuing and improved profitability of the Brazilian company subsequent to its acquisition in 2019 and estimates of continued profitability based on updates to our latest forecasts. Based on this analysis, we concluded that it is more likely than not that our Brazilian subsidiary will be able to utilize all of its deferred tax assets. During the year ended December 31, 2020, we established a valuation allowance against the net deferred tax assets in the United Kingdom. The addition of this valuation allowance resulted in a non-cash deferred tax provision of $10 million. Forecasted changes to intercompany interest is recent negative evidence now impacting our analysis. At December 31, 2022, the table above reflects full valuation allowances related to the total net deferred tax assets in Switzerland and the United Kingdom, as we cannot objectively assert that these deferred tax assets are more likely than not to be realized. Future provisions for income taxes will include no tax benefits with respect to losses incurred and tax expense only to the extent of current tax payments until the valuation allowances are eliminated. Additionally, we have valuation allowances against specific tax assets in Australia, South Africa and the U.S. These conclusions were reached by the application of ASC 740, Income Taxes, and require that all available positive and negative evidence be weighted to determine whether a valuation allowance should be recorded. The more significant evidential matter in Switzerland and the United Kingdom relates to cumulative book losses. The most significant evidential matter for Australia and South Africa relates to capital losses and assets that cannot be depleted or depreciated for tax purposes. The deferred tax assets generated by tax loss carryforwards in Switzerland and the United Kingdom have been fully offset by valuation allowances. In the United States, the deferred tax assets generated by tax loss carryforwards are partially offset by a valuation allowance to the extent they are subject to expiration. The expiration of these carryforwards at December 31, 2022 is shown below. The Australian, Saudi Arabian, French, Brazilian and United Kingdom tax loss carryforwards do not expire.
| 2023 |  | 2024 |  | 2025 |  | 2026 |  | 2027 |  | 2028 - 2040 |  | Unlimited |  | Total Tax Loss Carryforwards
United Kingdom | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (97) |  |  | $ | (97) |
Australia | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (436) |  |  | (436) |
The Netherlands | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (83) |  |  | (83) |
France | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (180) |  |  | (180) |
Saudi Arabia | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6) |  |  | (6) |
Switzerland | (80) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (80) |
China | — |  |  | — |  |  | — |  |  | — |  |  | (5) |  |  | — |  |  | — |  |  | (5) |
Brazil | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (10) |  |  | (10) |
U.S. Federal | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,959) |  |  | (334) |  |  | (4,293) |
U.S. State | (14) |  |  | (12) |  |  | (40) |  |  | (75) |  |  | (27) |  |  | (4,060) |  |  | (19) |  |  | (4,247) |
Total tax loss carryforwards | $ | (94) |  |  | $ | (12) |  |  | $ | (40) |  |  | $ | (75) |  |  | $ | (32) |  |  | $ | (8,019) |  |  | $ | (1,165) |  |  | $ | (9,437) |
At December 31, 2022, Tronox Holdings plc had foreign subsidiaries with undistributed earnings. Although we would not be subject to income tax on these earnings, amounts totaling $454 million are in specific jurisdictions which we assert are indefinitely reinvested outside of the parents' taxing jurisdictions. These amounts could be subject to withholding tax if distributed, but the Company has made no provision for tax related to these undistributed earnings. The Company has removed its assertion that earnings in China are indefinitely reinvested, and the withholding tax accruals for potential repatriations from that jurisdiction are now reflected in the effective tax rate reconciliation above. The noncurrent liabilities section of our Consolidated Balance Sheet does not reflect any reserves for uncertain tax positions for either 2022 or 2021. Our Chinese returns are closed through 2018. Our U.K. and Brazilian returns are closed through 2016. Our Australian, South African, and U.S. returns are closed through 2018. Our Netherlands and French returns are closed through 2019. We believe that we have made adequate provision for income taxes that may be payable with respect to years open for examination; however, the ultimate outcome is not presently known and, accordingly, additional provisions may be necessary and/or reclassifications of noncurrent tax liabilities to current may occur in the future.

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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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://asc.fasb.org/extlink&oid=122134291&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 https://asc.fasb.org/extlink&oid=121826272&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 https://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 https://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 https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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