Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the (provision) benefit for income taxes on continuing operations were:

	Year Ended December 31
Millions of dollars	2021		2020		2019
Current income taxes:
Federal	$	6	$	1	$	32
Foreign	(270)		(167)		(426)
State	(6)		—		(9)
Total current	(270)		(166)		(403)
Deferred income taxes:
Federal	533		372		383
Foreign	(47)		2		(36)
State	—		70		49
Total deferred	486		444		396
Income tax (provision) benefit	$	216	$	278	$	(7)

The United States and foreign components of income (loss) from continuing operations before income taxes were as follows:

	Year Ended December 31
Millions of dollars	2021		2020		2019
United States	$	283	$	(3,031)	$	(1,517)
Foreign	969		(189)		395
Total	$	1,252	$	(3,220)	$	(1,122)

Reconciliations between the actual (provision) benefit for income taxes on continuing operations and that computed by applying the United States statutory rate to income (loss) from continuing operations before income taxes were as follows:

	Year Ended December 31
	2021		2020		2019
United States statutory rate	21.0	%	21.0	%	21.0	%
Valuation allowance against tax assets	(44.5)		0.9		(10.7)
Impact of foreign income taxed at different rates	2.5		(1.1)		0.8
Adjustments of prior year taxes	1.3		0.7		13.0
State income taxes	0.1		—		(1.3)
Impact of impairments and other charges	—		(12.3)		(20.9)
Other items, net	2.4		(0.6)		(2.5)
Total effective tax rate on continuing operations	(17.2)	%	8.6	%	(0.6)	%

During the year ended December 31, 2021, we recorded a total income tax benefit of $216 million on pre-tax income of $1.3 billion, resulting in an effective tax rate of -17.2%. The effective tax rate for 2021 was primarily impacted by our geographic mix of earnings, tax adjustments related to the reassessment of prior year tax accruals, and valuation allowances on some of our deferred tax assets. The decrease in our valuation allowances results from increased future years’ forecasted taxable income before the expiration of foreign tax credits and net operating losses as a direct result of improved energy market conditions that led to the release of approximately $519 million valuation allowance on foreign tax credits.

The primary components of our deferred tax assets and liabilities were as follows:

	December 31
Millions of dollars	2021		2020
Gross deferred tax assets:
Foreign tax credit carryforwards	$	1,041	$	945
Intangible assets	924		—
Net operating loss carryforwards	736		1,691
Accrued liabilities	292		263
Research and development tax credit carryforwards	203		196
Employee compensation and benefits	166		237
Other	457		469
Total gross deferred tax assets	3,819		3,801
Gross deferred tax liabilities:
Operating lease right-of-use assets	160		86
Depreciation and amortization	131		7
Other	9		155
Total gross deferred tax liabilities	300		248
Valuation allowances	885		1,394
Net deferred income tax asset	$	2,634	$	2,159

At December 31, 2021, we had $795 million of domestic and foreign tax-effected net operating loss carryforwards, with approximately $59 million estimated to be utilized against our unrecognized tax benefits. In addition, we had approximately $1.2 billion of foreign tax credits carryforwards, the majority of which will begin expiring in tax years after 2024. The ultimate realization of these deferred tax assets depends on our ability to generate sufficient taxable income in the appropriate taxing jurisdiction. Our deferred tax assets from net operating losses, foreign tax credits, and research and development credits will expire as follows:

Millions of dollars	U.S. Net Operating Loss		Foreign Net Operating Loss		Foreign Tax Credits		Research and Development Credit		Total
2022-2026	$	2	$	133	$	668	$	—	$	803
2027-2031	8		73		510		—		591
2032-2041	52		108		—		203		363
Non-Expiring	9		410		—		—		419
	$	71	$	724	$	1,178	$	203	$	2,176

During the year ended December 31, 2021, our valuation allowance on deferred tax assets decreased by $509 million, primarily attributable to the release of $519 million associated with foreign tax credits as discussed above.

We have not provided incremental United States income taxes or foreign withholding taxes on undistributed foreign subsidiaries' earnings after December 31, 2017. We generally do not provide for taxes related to its undistributed earnings because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested.

The following table presents a rollforward of our unrecognized tax benefits and associated interest and penalties.

Millions of dollars		Unrecognized Tax Benefits			Interest and Penalties
Balance at January 1, 2019		$	417		$	67
Change in prior year tax positions		25			11
Change in current year tax positions		29			—
Cash settlements with taxing authorities		(4)			—
Lapse of statute of limitations		(42)			(8)
Balance at December 31, 2019		$	425		$	70
Change in prior year tax positions		(66)			6
Change in current year tax positions		16			—
Cash settlements with taxing authorities		(3)			—
Lapse of statute of limitations		(17)			(5)
Balance at December 31, 2020		$	355	(a)	$	71
Change in prior year tax positions		14			4
Change in current year tax positions		14			2
Cash settlements with taxing authorities		(10)			—
Lapse of statute of limitations		(21)			(5)
Balance at December 31, 2021		$	352	(a)(b)	$	72
(a)	Includes $20 million as of December 31, 2021 and $18 million as of December 31, 2020 in foreign unrecognized tax benefits that would give rise to a United States tax credit. As of December 31, 2021 and December 31, 2020, a net $272 million and $224 million without a net operating loss carryforward offset, respectively, of unrecognized tax benefits would positively impact the effective tax rate and be recognized as additional tax benefits in our statement of operations if resolved in our favor.
(b)	Includes $69 million that could be resolved within the next 12 months.

Our tax returns are subject to review by the taxing authorities in the jurisdictions where we file tax returns. In most cases we are no longer subject to examination by tax authorities for years before 2010. The only significant operating jurisdiction that has tax filings under review or subject to examination by the tax authorities is the United States. The United States federal income tax filings for tax years 2016 through 2020 are currently under review or remain open for review by the U.S. Internal Revenue Service.