Income Taxes

6 Months Ended

Jun. 30, 2020

Note K – Income Taxes

The Company’s effective income tax rate is calculated as the amount of income tax expense (benefit) divided by income from continuing operations before income taxes. For the three-month and six-month periods ended June 30, 2020 and 2019, the Company’s effective income tax rates were as follows:


	2020	2019
Three months ended June 30,	22.7%	8.4%
Six months ended June 30,	18.4%	14.1%

The effective tax rate for the three-month period ended June 30, 2020 is higher than the U.S. statutory tax rate of 21% principally due to a research and development tax credit in Canada, which has the impact of increasing the effective tax rate.

The effective tax rate for the three-month period ended June 30, 2019 was below the statutory tax rate primarily due to an enacted future change in the Alberta provincial corporate income tax rate in Canada that reduced the future deferred tax liability by $13 million and no tax applied to the pre-tax income of the noncontrolling interest in MP Gulf of Mexico, LLC (MP GOM).

The effective tax rate for the six-month period ended June 30, 2020 was below the U.S. statutory tax rate of 21% due to exploration expenses in certain foreign jurisdictions in which no income tax benefit is available, as well as no tax benefit available from the pre-tax loss of the noncontrolling interest in MP GOM. These items reduced the tax credit on a reported pre-tax net loss.

The effective tax rate for the six-month period ended June 30, 2019 was below the statutory tax rate of 21% due to an enacted future change in the Alberta provincial corporate income tax rate in Canada that reduced the future deferred tax liability $13 million and no tax applied to the pre-tax income of the noncontrolling interest in MP GOM.

The Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities. These audits often take multiple years to complete and settle. Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future years from resolution of outstanding unsettled matters. As of June 30, 2020, the earliest years remaining open for audit and/or settlement in our major taxing jurisdictions are as follows: United States – 2016; Canada – 2015; Malaysia – 2013; and United Kingdom – 2018. Following the divestment of Malaysia in the third quarter of

2019, the Company has retained certain possible liabilities and rights to income tax receivables relating to Malaysia for the years prior to 2019. The Company believes current recorded liabilities are adequate.