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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of the Company’s income (loss) before income taxes by taxing jurisdiction were as follows:
In millions
202120202019
U.S.
$80 $10 $145 
Non-U.S.
380 188 357 
Income (loss) before income taxes
$460 $198 $502 
Income tax provision (benefit) by taxing jurisdictions was as follows:
In millions
202120202019
Current tax provision (benefit)
U.S. federal
$26 $(4)$36 
U.S. state and local
5 2 8 
Non-U.S.
104 77 88 
$135 $75 $132 
Deferred tax provision (benefit)
U.S. federal
$(3)$(4)$(4)
U.S. state and local
(1)(1)(2)
Non-U.S.
(2)(42)(1)
$(6)$(47)$(7)
Income tax provision (benefit)
$129 $28 $125 
A reconciliation of income taxes using the statutory U.S. income tax rate of 21% compared to the reported income tax provision (benefit) is summarized as follows:
In millions
202120202019
Income (loss) before income taxes
$460 $198 $502 
Statutory U.S. income tax rate
21 %21 %21 %
Income taxes using the statutory U.S. income tax rate
96 42 105 
State and local income taxes
5 1 5 
Impact of rate differential on non-U.S. permanent differences and earnings
28 (5)12 
Tax audits
— (10)— 
US tax on non-U.S. earnings (GILTI and Subpart F)
— 1 4 
Other, net
— (1)(1)
Income tax provision (benefit)
$129 $28 $125 
Effective income tax rate
28 %14 %25 %
The components of deferred income tax assets and liabilities are as follows:
In millions
20212020
Deferred income tax assets:
Net operating and capital loss carryforwards
$22 $27 
Accrued payroll and benefits
25 9 
Lease liabilities
6 10 
Tax credits
4 35 
Other
40 64 
Gross deferred income tax assets
$97 $145 
Less: valuation allowance
(9)(35)
Net deferred income tax asset
$88 $110 
Deferred income tax liabilities:
Intangibles
$(37)$(45)
Right of use assets
(6)(10)
Deferred foreign income
(40)(35)
Plants, properties and equipment
(92)(106)
Forestlands
(45)(49)
Gross deferred income tax liabilities
$(220)$(245)
Net deferred income tax liability
$(132)$(135)

The Company recognizes deferred income tax assets for deductible temporary differences and carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized based on estimates of future taxable income. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. Based on this evaluation, as of December 31, 2021, a valuation allowance of $9 million has been recorded to reduce the deferred tax asset to the amount that is more likely than not to be realized. The valuation allowance in 2021 is primarily attributable to French deferred assets that cannot be realized, while the valuation allowance in 2020 is primarily attributable to unrealizable state tax credits which were recognized under the separate return method but which remained with the Parent at spin-off.

The Company made income tax payments, net of refunds, of $10 million during the fourth quarter of 2021. Prior to the spin-off, all income tax payments and refunds were paid and received by International Paper on our behalf.
The reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
In millions
202120202019
Balance at January 1
$(18)$(28)$(29)
(Additions) reductions for tax positions related to current year
(2)(1)— 
Reductions for tax positions related to prior years— 11 — 
Transfer of tax positions related to prior years to Parent
17 — — 
Expiration of statutes of limitations
— — 1 
Balance at December 31
$(3)$(18)$(28)

Included in the balance of unrecognized tax benefits as of December 31, 2021, December 31, 2020 and December 31, 2019 are $3 million, $18 million and $28 million, respectively, of tax benefits that if recognized would affect the effective tax rate. The Company accrues interest on unrecognized tax benefits as a component of interest expense. Penalties, if incurred, are recognized as a component of income tax expense. During 2021, we accrued interest of $1 million, and as of December 31, 2021, recognized a liability for interest of $2 million. During 2020, we did not accrue any interest, and as of December 31, 2020, recognized a liability related to the unrecognized tax benefits noted above for interest of $2 million. During 2019, we accrued interest of $200,000, and as of December 31, 2019, recognized a liability for interest of $3 million.

The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by International Paper do Brasil Ltda., a wholly-owned subsidiary of the Company now named Sylvamo do Brasil Ltda. (“Sylvamo Brasil”). Sylvamo Brasil received assessments for the tax years 2007-2015 totaling approximately $106 million in tax and $351 million in interest, penalties and fees as of December 31, 2021 (adjusted for variation in currency exchange rates). International Paper challenged and is managing the litigation of this matter pursuant to the Tax Matters Agreement between us and International Paper. After a previous favorable ruling challenging the basis for these assessments, there were subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. On behalf of Sylvamo Brasil, International Paper has appealed and at present, has advised us that it intends to further appeal these and any future unfavorable administrative judgments to the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. The Company believes that the transaction underlying these assessments was appropriately evaluated, and that the Company’s tax position would be sustained, based on Brazilian tax law.

Pursuant to the terms of the Tax Matters Agreement, International Paper will pay 60%, and Sylvamo will pay 40% on up to $300 million of any assessment related to this matter, and International Paper will pay all amounts of the assessment over $300 million. Also in connection with this agreement, all decisions concerning the conduct of the litigation related to this matter, including strategy settlement, pursuit and abandonment, will continue to be made by International Paper, which is vigorously defending Sylvamo Brasil’s historic tax position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015.
The following details the scheduled expiration dates of the Company’s December 31, 2021 net operating loss and income tax credit carryforwards:
In millions
Indefinite
Total
Non-U.S. NOLs
$22 $22 
Less: valuation allowance
(6)(6)
Total, net
$16 $16