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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
Note 17. Income Taxes
(Loss) income before income taxes by taxing jurisdiction for the years ended December 31, 2021, 2020 and 2019, was as follows:
(In millions)202120202019
U.S.$(229)$(126)$(205)
Foreign733 187 216 
 $504 $61 $11 
The income tax provision for the years ended December 31, 2021, 2020 and 2019, was comprised of the following:
(In millions)202120202019
U.S. Federal and State:
Current$(3)$— $— 
Deferred— — — 
 (3)— — 
Foreign:
Current— — — 
Deferred(192)(51)(58)
 (192)(51)(58)
Total:
Current(3)— — 
Deferred(192)(51)(58)
 $(195)$(51)$(58)
Effective income tax rate reconciliation
The income tax provision attributable to income before income taxes differs from the amounts computed by applying the U.S. federal statutory income tax rate of 21% for the years ended December 31, 2021, 2020 and 2019, as a result of the following:
(In millions)202120202019
Income before income taxes
$504 $61 $11 
Income tax provision:
Expected income tax provision(106)(13)(2)
Changes resulting from:
Valuation allowance (1)
54 (11)(43)
Foreign exchange
(3)(6)2 
U.S. tax on non-U.S. earnings
(115)(23)(7)
State income taxes, net of federal income tax benefit
10 6 7 
Foreign tax rate differences
(38)(10)(11)
Other, net (2)
3 6 (4)
 $(195)$(51)$(58)
(1)During 2021, we used $54 million of deferred income tax assets that were fully reserved to offset the tax implications relating to the GILTI inclusion, which is based on the U.S. system of taxation for non-U.S. earnings, whereby foreign earnings less a qualified deduction for foreign assets are included in U.S. taxable income, in excess of current year U.S. operating losses.
During 2020 and 2019, we recorded an increase to our valuation allowance of $11 million and $43 million, respectively, related to our U.S. operations.
(2)During 2020, we recorded a $4 million adjustment related to the settlement of an insurance claim in connection with our acquisition of Atlas.
Deferred income taxes
At each reporting period, we assess whether it is more likely than not that the deferred income tax assets will be realized, based on the review of all available positive and negative evidence, including future reversals of existing taxable temporary differences, estimates of future taxable income, past operating results, and prudent and feasible tax planning strategies. In our evaluation process, we give the most weight to historical income or losses. The carrying value of our deferred income tax assets reflects our expected ability to generate sufficient future taxable income in certain tax jurisdictions to utilize these deferred income tax assets.
In assessing our ability to realize the deferred income tax assets of our U.S. operations, we reviewed all available evidence, including historical U.S. operating losses, the GILTI inclusion and estimates of future taxable income. Following our assessment, we concluded that the existing negative evidence outweighed the positive evidence. As a result, we recognized a full valuation allowance against our net U.S. deferred income tax assets. A valuation allowance does not reduce our underlying tax attributes, nor hinders our ability to use them in the future.
The rapidly changing dynamics in the wood products segment resulted in a significant GILTI inclusion for the year, creating U.S. taxable income. This taxable income is entirely offset by existing U.S. tax attributes included in deferred income tax assets that have been fully reserved. If current market dynamics are sustained, we could release our valuation allowance in future periods, in full or in part. This may affect our consolidated financial position and results of operations.
For Canadian operations, the positive evidence, which included a review of historical and forecasted earnings, resulted in the conclusion that no significant valuation allowances were required for our deferred income tax assets, as they were determined to be more likely than not to be realized. We continue to maintain a valuation allowance on net capital loss carryforwards of $37 million.
Net deferred income tax assets as of December 31, 2021 and 2020, were comprised of the following:
(In millions)20212020
Fixed assets$(33)$(57)
Operating lease right-of-use assets(14)(15)
Investment in partnership(26)(20)
Other(8)(5)
Deferred income tax liabilities(81)(97)
Fixed assets178 297 
Pension and OPEB plans300 408 
Net operating loss carryforwards and deduction limitation572 660 
Net capital loss carryforwards41 41 
Undeducted research and development expenditures145 195 
Tax credit carryforwards99 98 
Operating lease liabilities14 15 
Goodwill27 28 
Other69 44 
Deferred income tax assets1,445 1,786 
Valuation allowance(711)(774)
Net deferred income tax assets$653 $915 
Amounts recognized in our Consolidated Balance Sheets consisted of:
Deferred income tax assets$653 $915 
The balance of tax attributes and their dates of expiration as of December 31, 2021, were as follows:
(In millions)Related
Deferred
Income Tax
Asset		Year of
Expiration
Net operating loss and deduction limitation carryforwards:
U.S. federal: $1,618
$340 (1)2029 – 2037
U.S. federal and deduction limitation: $506
106 (1)Indefinite
U.S. state: $2,109
107 (1)2022 – 2041
U.S. state and deduction limitation: $253
8 (1)Indefinite
Canadian federal and provincial (excluding Quebec): $24
4 2038
Quebec: $61
6 2028 – 2039
Other1 Indefinite
$572 
Net capital loss carryforwards:
U.S. federal and state: $23
$5 (1)2025
Canadian federal and provincial (excluding Quebec): $118
31 Indefinite
Quebec: $54
5 Indefinite
$41 
Undeducted research and development expenditures:
Canadian federal and provincial (excluding Quebec): $400
$69 Indefinite
Quebec: $843
76 Indefinite
$145 
Tax credit carryforwards:
Canadian research and development, and other$80 2022 – 2041
U.S. state and other19 (1)2022 – 2036
$99 
(1)As of December 31, 2021, we had a full valuation allowance against our U.S. operations net deferred income tax assets.
Our U.S. federal net operating loss carryforwards are subject to annual limitations under § 382 of the U.S. Internal Revenue Code of 1986, as amended, (or, “IRC § 382”), resulting from a previous ownership change. We do not expect that IRC § 382 would limit the utilization of our available U.S. federal net operating loss carryforwards prior to their expiration.
We consider our foreign earnings to be permanently invested. Accordingly, we do not provide for the additional U.S. and foreign income taxes that could become payable upon remittance of undistributed earnings of our foreign subsidiaries. It is not practicable to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.
Unrecognized tax benefits
The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended December 31, 2021 and 2020:
(In millions)20212020
Beginning of year$28 $29 
(Decrease) increase resulting from:
Settlements with taxing authorities(2)(2)
Positions taken in the prior period— 1 
End of year$26 $28 
There are no unrecognized tax benefits that would affect the effective tax rate as of December 31, 2021.
In the normal course of business, we are subject to audits from federal, state, provincial and other tax authorities. U.S. federal tax returns for 2017 and subsequent years, as well as Canadian tax returns for 2016 and subsequent years, remain subject to examination by tax authorities.
We do not expect a significant change to the amount of unrecognized tax benefits over the next 12 months. However, any adjustments arising from certain ongoing examinations by tax authorities could alter the timing or amount of taxable income or deductions, or the allocation of income among tax jurisdictions, and these adjustments could differ from the amount accrued. We believe that taxes accrued in our Consolidated Balance Sheets fairly represent the amount of income taxes to be settled or realized in the future.