Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income before income tax expense (benefit) from U.S. and international operations

Income before income tax expense (benefit) was as follows (in millions):

	Year Ended December 31,
	2019		2018		2017
U.S. operations	$	2,496	$	3,168	$	2,283
International operations	990		1,064		924
Income before income tax expense (benefit)	$	3,486	$	4,232	$	3,207

Reconciliation of income tax expense (benefit) related to continuing operations to income tax expense (benefit) at statutory rate

Statutory income tax rates applicable to the countries in which we operate were as follows:

	Year Ended December 31,
	2019		2018		2017
U.S.	21	%	21	%	35	%
Canada	15	%	15	%	15	%
U.K.	19	%	19	%	19	%
Ireland	13	%	13	%	13	%
Peru	30	%	30	%	n/a
Mexico	30	%	30	%	n/a

The following is a reconciliation of income tax expense (benefit) computed by applying statutory income tax rates as reflected in the preceding table to actual income tax expense (benefit) (in millions):

	U.S.					International					Total
	Amount			Percent		Amount			Percent		Amount			Percent
Year ended December 31, 2019
Income tax expense at statutory rates	$	524		21.0	%	$	147		14.8	%	$	671		19.2	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	16			0.7	%	88			8.9	%	104			3.0	%
Permanent differences	(36		)	(1.5	)%	10			1.0	%	(26		)	(0.7	)%
GILTI tax (a)	115			4.6	%	—			—		115			3.3	%
Foreign tax credits	(95		)	(3.8	)%	—			—		(95		)	(2.7	)%
Repatriation withholding tax	45			1.8	%	—			—		45			1.3	%
Tax effects of income associated with noncontrolling interests	(77		)	(3.1	)%	2			0.2	%	(75		)	(2.2	)%
Other, net	(36		)	(1.4	)%	(1		)	(0.1	)%	(37		)	(1.1	)%
Income tax expense	$	456		18.3	%	$	246		24.8	%	$	702		20.1	%

^{__________________________} 

(a) See note on page 112.

	U.S.					International				Total
	Amount			Percent		Amount		Percent		Amount			Percent
Year ended December 31, 2018
Income tax expense at statutory rates	$	665		21.0	%	$	163	15.3	%	$	828		19.6	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	44			1.4	%	80		7.5	%	124			2.9	%
Permanent differences	(9		)	(0.3	)%	—		—		(9		)	(0.2	)%
GILTI tax (a)	67			2.1	%	—		—		67			1.6	%
Foreign tax credits	(50		)	(1.6	)%	—		—		(50		)	(1.2	)%
Effects of Tax Reform (a)	(12		)	(0.4	)%	—		—		(12		)	(0.3	)%
Tax effects of income associated with noncontrolling interests	(49		)	(1.5	)%	—		—		(49		)	(1.2	)%
Other, net	(23		)	(0.7	)%	3		0.3	%	(20		)	(0.5	)%
Income tax expense	$	633		20.0	%	$	246	23.1	%	$	879		20.7	%
Year ended December 31, 2017
Income tax expense at statutory rates	$	799		35.0	%	$	158	17.1	%	$	957		29.8	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	37			1.6	%	46		5.0	%	83			2.6	%
Permanent differences:
Manufacturing deduction	(42		)	(1.8	)%	—		—		(42		)	(1.3	)%
Other	(9		)	(0.4	)%	—		—		(9		)	(0.3	)%
Change in tax law (a)	(1,862		)	(81.6	)%	—		—		(1,862		)	(58.1	)%
Tax effects of income associated with noncontrolling interests	(31		)	(1.4	)%	—		—		(31		)	(1.0	)%
Other, net	(52		)	(2.3	)%	7		0.8	%	(45		)	(1.4	)%
Income tax expense (benefit)	$	(1,160	)	(50.9	)%	$	211	22.9	%	$	(949	)	(29.7	)%

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(a)

See “Tax Reform” below for a discussion of the changes in tax law in the U.S. that were enacted in December 2017.

Components of income tax expense (benefit)

Components of income tax expense (benefit) were as follows (in millions):

	U.S.				International			Total
Year ended December 31, 2019
Current:
Country	$	145			$	186		$	331
U.S. state / Canadian provincial	37				100			137
Total current	182				286			468
Deferred:
Country	290				(28		)	262
U.S. state / Canadian provincial	(16		)		(12		)	(28		)
Total deferred	274				(40		)	234
Income tax expense	$	456			$	246		$	702
Year ended December 31, 2018
Current:
Country	$	432			$	141		$	573
U.S. state / Canadian provincial	37				66			103
Total current	469			(a)	207			676
Deferred:
Country	145				25			170
U.S. state / Canadian provincial	19				14			33
Total deferred	164			(b)	39			203
Income tax expense	$	633			$	246		$	879
Year ended December 31, 2017
Current:
Country	$	1,305			$	194		$	1,499
U.S. state / Canadian provincial	34				61			95
Total current	1,339			(a)	255			1,594
Deferred:
Country	(2,522		)		(29		)	(2,551		)
U.S. state / Canadian provincial	23				(15		)	8
Total deferred	(2,499		)	(b)	(44		)	(2,543		)
Income tax expense (benefit)	$	(1,160	)		$	211		$	(949	)

^{___________________________} 

(a) Current income tax expense includes a $21 million benefit and a $781 million expense related to our Tax Reform adjustment for the years ended December 31, 2018 and 2017, respectively, as described in “Tax Reform” below.

(b) Deferred income tax expense (benefit) includes a $9 million expense and a $2.6 billion benefit related to our Tax Reform adjustment for the years ended December 31, 2018 and 2017, respectively, as described in “Tax Reform” below.

The following table summarizes the components of our adjustment (in millions) to reflect the effects of Tax Reform for the years ended December 31, 2018 and 2017, including whether such amounts were complete, provisional, or incomplete. The amounts presented for 2018 were completed during the fourth quarter of 2018.

	Year Ended December 31,								Cumulative Tax Reform Adjustment
	2017				2018
	Accounting Status	Amount			Accounting Status	Amount
Income tax benefit from the remeasurement of U.S. deferred income tax assets and liabilities	Complete	$	(2,643	)	Complete	$	—		$	(2,643	)
Tax on the deemed repatriation of the accumulated earnings and profits of our international subsidiaries	Provisional	734			Complete	6			740
Recognition of foreign withholding tax, net of U.S. federal tax benefit	Complete	47			Complete	—			47
Deductibility of certain executive compensation expense	Incomplete	—			Complete	5			5
Income tax expense associated with the statutory income tax rate differential on accrual to return adjustments that were identified upon completion of our U.S. federal income tax return in 2018	Incomplete	—			Complete	9			9
Foreign tax credit available to offset the tax on deemed repatriation of the accumulated earnings and profits of our international subsidiaries	Incomplete	—			Complete	(32		)	(32		)
Tax Reform benefit		$	(1,862	)		$	(12	)	$	(1,874	)

Schedule of income taxes paid (refunded), net

Income taxes paid to (received from) U.S. and international taxing authorities were as follows (in millions):

	Year Ended December 31,
	2019				2018		2017
U.S.	$	(298	)	(a)	$	1,016	$	239
International	182				345		171
Income taxes paid (refunded), net	$	(116	)		$	1,361	$	410

^{__________________________} 

(a)

This amount includes a refund of $348 million, including interest, that we received related to the settlement of the combined audit of our U.S. federal income tax returns for 2010 and 2011. See “Tax Returns Under Audit – U.S. Federal” below.

Deferred income tax assets and liabilities

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):

	December 31,
	2019			2018
Deferred income tax assets:
Tax credit carryforwards	$	683		$	644
Net operating losses (NOLs)	582			523
Inventories	141			101
Compensation and employee benefit liabilities	213			175
Environmental liabilities	69			71
Other	156			141
Total deferred income tax assets	1,844			1,655
Valuation allowance	(1,200		)	(1,111		)
Net deferred income tax assets	644			544
Deferred income tax liabilities:
Property, plant, and equipment	4,924			4,589
Deferred turnaround costs	331			316
Inventories	217			287
Investments	122			142
Other	153			172
Total deferred income tax liabilities	5,747			5,506
Net deferred income tax liabilities	$	5,103		$	4,962

Income tax credit and loss carryforwards

We had the following income tax credit and loss carryforwards as of December 31, 2019 (in millions):

	Amount		Expiration
U.S. state income tax credits (gross amount)	$	89	2020 through 2033
U.S. state income tax credits (gross amount)	17		Unlimited
U.S. foreign tax credits	598		2027
U.S. state NOLs (gross amount)	10,913		2020 through 2039

Reconciliation of the change in unrecognized tax benefits

The following is a reconciliation of the change in unrecognized tax benefits, excluding related interest and penalties, (in millions):

	Year Ended December 31,
	2019			2018			2017
Balance as of beginning of year	$	970		$	941		$	936
Additions for tax positions related to the current year	19			23			33
Additions for tax positions related to prior years	30			28			15
Reductions for tax positions related to prior years	(101		)	(19		)	(42		)
Reductions for tax positions related to the lapse of applicable statute of limitations	(14		)	(1		)	(1		)
Settlements	(7		)	(2		)	—
Balance as of end of year	$	897		$	970		$	941

Summary of income tax contingencies

The following is a reconciliation of unrecognized tax benefits to our liability for unrecognized tax benefits presented in our balance sheets (in millions).

	December 31,
	2019			2018
Unrecognized tax benefits	$	897		$	970
Tax refund claims not yet filed but that we intend to file	(29		)	(277		)
Interest and penalties	100			88
Liability for unrecognized tax benefits presented in our balance sheets	$	968		$	781

Our liability for unrecognized tax benefits is reflected in the following balance sheet line items (in millions):

	December 31,
	2019		2018
Income taxes payable	$	—	$	42
Other long-term liabilities	954		721
Deferred tax liabilities	14		18
Liability for unrecognized tax benefits presented in our balance sheets	$	968	$	781