INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 20: INCOME TAXES

This note provides details about income taxes applicable to our operations, including the following:

• earnings (loss) before income taxes,

• provision (benefit) for income taxes,

• effective income tax rate,

• deferred tax assets and liabilities and

• unrecognized tax benefits.

The “Income Taxes” section of Note 1: Summary of Significant Accounting Policies provides details about how we account for our income taxes.

EARNINGS (LOSS) BEFORE INCOME TAXES

Domestic and Foreign Earnings (Loss) Before Income Taxes

DOLLAR AMOUNTS IN MILLIONS
	2021		2020		2019
Domestic earnings (loss)	$	2,499	$	723	$	(268	)
Foreign earnings		817		259		55
Total earnings (loss) before income taxes	$	3,316	$	982	$	(213	)

PROVISION (BENEFIT) FOR INCOME TAXES

DOLLAR AMOUNTS IN MILLIONS
	2021			2020			2019
Current:
Federal	$	378		$	147		$	21
State		74			30			1
Foreign		243			64			10
Total current		695			241			32
Deferred:
Federal		27			(66	)		(137	)
State		(2	)		(1	)		(31	)
Foreign		(11	)		11			(1	)
Total deferred		14			(56	)		(169	)
Total income tax provision (benefit)	$	709		$	185		$	(137	)

EFFECTIVE INCOME TAX RATE

DOLLAR AMOUNTS IN MILLIONS
	2021			2020			2019
U.S. federal statutory income tax	$	696		$	207		$	(45	)
State income taxes, net of federal tax benefit		57			23			(31	)
REIT income not subject to federal income tax		(102	)		(51	)		(68	)
Return to provision adjustment		—			(3	)		4
Foreign taxes		62			19			(1	)
Other, net		(4	)		(10	)		4
Total income tax provision (benefit)	$	709		$	185		$	(137	)
Effective income tax rate	21.4%			18.8%			64.1%

DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets and liabilities reflect the future tax effect created by differences between the timing of when income or deductions are recognized for pretax financial book reporting purposes versus income tax purposes. Deferred tax assets represent a future tax benefit (or reduction to income taxes in a future period), while deferred tax liabilities represent a future tax obligation (or increase to income taxes in a future period).

Balance Sheet Classification of Deferred Income Tax Assets (Liabilities)

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2021			DECEMBER 31, 2020
Net noncurrent deferred tax asset	$	17		$	120
Net noncurrent deferred tax liability		(46	)		(24	)
Net deferred tax asset (liability)	$	(29	)	$	96

Items Included in Our Deferred Income Tax Assets (Liabilities)

DOLLAR AMOUNTS IN MILLIONS
	DECEMBER 31, 2021			DECEMBER 31, 2020
Deferred tax assets:
Pension and post-employment benefits		96		$	207
State tax credits		42			48
Depletion		13			14
Environmental Reserves		14			13
Incentive compensation		19			19
Intercompany land sales		15			15
Workers compensation		17			18
Other reserves		14			17
Other		70			78
Gross deferred tax assets		300			429
Valuation allowance		(50	)		(66	)
Net deferred tax assets		250			363
Deferred tax liabilities:
Property, plant and equipment		(258	)		(239	)
Other		(21	)		(28	)
Net deferred tax liabilities		(279	)		(267	)
Net deferred tax asset (liability)	$	(29	)	$	96

Net Operating Loss and Credit Carryforwards

Our gross federal, state and foreign net operating loss carryforwards as of December 31, 2021 totaled $527 million as follows:

• Federal - U.S. REIT - $379 million, which expire from 2034 through 2036;

• State - $148 million, which will begin to expire in 2028; and

• Foreign - none currently recorded.

Our gross state credit carryforwards as of December 31, 2021 totaled $53 million, which includes $5 million that expire from 2025 through 2035 and $48 million that do not expire. Our U.S. TRSs have $8 million in foreign tax credit carryforwards that expire from 2027 through 2031.

Valuation Allowances

With the exception of the valuation allowance discussed below, we believe it is more likely than not that we will have sufficient future taxable income to realize our deferred tax assets.

Our valuation allowance on our deferred tax assets was $50 million as of December 31, 2021, which related to state credits, state net operating losses and foreign tax credits.

Reinvestment of Undistributed Earnings

It is our practice and intention to permanently reinvest approximately 10 percent of the earnings of our Canadian subsidiary. Our assertion is based on the company’s global cash management and planned capital deployment. Accordingly, deferred taxes are provided primarily related to Canadian withholding taxes associated with any Canadian earnings not considered permanently reinvested. We have no other foreign subsidiaries with undistributed earnings.

UNRECOGNIZED TAX BENEFITS

Unrecognized tax benefits represent potential future obligations to taxing authorities if uncertain tax positions we have taken on previously filed tax returns are not sustained. In accordance with our accounting policy, we accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense (see Note 1: Summary of Significant Accounting Policies). The total gross amount of unrecognized tax benefits as of December 31, 2021 and 2020, as well as the activity during those years, were immaterial.

As of December 31, 2021, none of our U.S. federal income tax returns or foreign jurisdiction income tax returns are under examination. Our U.S. federal income tax returns are open to examination for years 2018 forward and foreign jurisdiction income tax returns are open to examination for years 2014 forward. We are undergoing examinations in state jurisdictions for tax years 2016 through 2018, with tax years 2009 forward open to examination. We do not expect that the outcome of any examination will have a material effect on our consolidated financial statements; however, audit outcomes and the timing of audit settlements are subject to significant uncertainty.