VARIABLE INTEREST ENTITIES (Note)

9 Months Ended

Sep. 30, 2022

Variable Interest Entities [Abstract]

Variable Interest Entities

As of September 30, 2022, the fair value of the Timber Notes and Extension Loans for the 2007 Financing Entities was $2.3 billion and $2.1 billion, respectively. The Timber Notes and Extension Loans are classified as Level 2 within the fair value hierarchy, which is further defined in Note 17 in the Company’s Annual Report.

The Timber Notes of $2.3 billion and the Extension Loans of $2.1 billion both mature in 2027 and are shown in Long-term nonrecourse financial assets of variable interest entities and Long-term nonrecourse financial liabilities of variable interest entities, respectively, on the accompanying balance sheet.

Activity between the Company and the 2007 Financing Entities was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
In millions	2022		2021		2022		2021
Revenue (a)	$	23	$	5	$	36	$	18
Expense (b)	18		6		34		18
Cash receipts (c)	8		1		11		4
Cash payments (d)	11		4		21		12

(a)The revenue is included in Interest expense, net in the accompanying statement of operations and includes approximately $5 million and $14 million for the three months and nine months ended September 30, 2022 and 2021, respectively, of accretion income for the amortization of the basis difference adjustment on the Financial assets of special purpose entities.

(b)The expense is included in Interest expense, net in the accompanying statement of operations and includes approximately $2 million and $5 million for the three months and nine months ended September 30, 2022 and 2021, respectively, of accretion expense for the amortization of the basis difference adjustment on the Nonrecourse financial liabilities of special purpose entities.

(c)The cash receipts are interest received on the Financial assets of special purpose entities.

(d)The cash payments are interest paid on Nonrecourse financial liabilities of special purpose entities.

In August 2021, the Timber Notes of $4.8 billion and the Extension Loans of $4.2 billion related to the 2015 Financing Entities both matured. We settled the Extension Loans at their maturity with the proceeds from the Timber Notes. This resulted in cash proceeds of approximately $630 million representing our equity in the variable interest entities. Maturity of the installment notes and termination of the monetization structure also resulted in a $72 million tax liability that was paid in the fourth quarter of 2021.

On September 2, 2022, the Company and the Internal Revenue Service agreed to settle the previously disclosed timber monetization restructuring tax matter. Under this agreement, the Company will fully resolve the matter and pay $252 million in U.S. federal income taxes. As a result, interest will also be charged upon closing of the audit. The amount of interest expense recognized through September 30, 2022 is $52 million. As of September 30, 2022, $89 million in U.S. federal income taxes and $28 million in interest expense have been paid as a result of the settlement agreement. The remaining $163 million U.S. federal income tax liability and $24 million accrued interest liability are recorded as current liabilities in the balance sheet. As part of the settlement with the Internal Revenue Service, the $72 million tax payment discussed in the preceding paragraph was applied to the 2022 U.S. federal estimated tax payments. The reversal of the Company’s remaining deferred tax liability associated with the 2015 Financing Entities of $604 million was recognized as a one-time tax benefit in the third quarter of 2022.

Activity between the Company and the 2015 Financing Entities for the three months and nine months ended September 30, 2021 was as follows:


In millions	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Revenue (a)	$	14	$	61
Expense (a)	8		34
Cash receipts (b)	48		95
Cash payments (c)	24		38

(a)The revenue and expense are included in Interest expense, net in the accompanying statement of operations.

(b)The cash receipts are interest received on the Financial assets of special purpose entities.

(c)The cash payments represent interest paid on Nonrecourse financial liabilities of special purpose entities.