Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

. Income Taxes

The following table presents Devon’s total income tax expense (benefit) and a reconciliation of its effective income tax rate to the U.S. statutory income tax rate.

	Three Months Ended March 31,
	2022		2021
Earnings (loss) before income taxes	$	1,262	$	(32	)
Current income tax expense (benefit)	$	103	$	(5	)
Deferred income tax expense (benefit)		164		(243	)
Total income tax expense (benefit)	$	267	$	(248	)

U.S. statutory income tax rate	21	%	21	%
State income taxes	1	%	(1	%)
Deferred tax asset valuation allowance	0	%	791	%
Other	(1	%)	(48	%)
Effective income tax rate	21	%	763	%

Prior to December 31, 2021, Devon maintained a valuation allowance against all U.S. federal deferred tax assets. Devon recognized approximately $250 million of deferred tax liabilities to account for the Merger. The recognition of these deferred tax liabilities caused a decrease to Devon’s net deferred tax assets and a corresponding decrease to the valuation allowance Devon had recognized on its U.S. federal deferred tax assets in the first quarter of 2021.

Due to significant increases in commodity pricing and projections of future income, in the fourth quarter of 2021, Devon reassessed its evaluation of the realizability of deferred tax assets in future years and determined that a U.S. federal valuation allowance was no longer necessary at December 31, 2021.

In the table above, the "other" effect for 2021 is composed primarily of permanent differences related to costs incurred in connection with the Merger. Such items represent $15 million of income tax expense in the first quarter of 2021.