Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note I – Income Taxes

The components of income (loss) from continuing operations before income taxes for each of the three years presented and income tax expense (benefit) attributable thereto were as follows.

(Thousands of dollars)	2022		2021		2020
Income (loss) from continuing operations before income taxes
United States	$	1,306,200	$	114,659	$	(1,407,598)
Foreign	144,061		(71,768)		(141,437)
Total	$	1,450,261	$	42,891	$	(1,549,035)
Income tax expense (benefit)
U.S. Federal – Current	$	—	$	—	$	(10,627)
– Deferred	234,749		(1,480)		(249,253)
Total U.S. Federal	234,749		(1,480)		(259,880)
State	9,010		3,303		(8,413)
Foreign – Current	18,134		(5,158)		(5,072)
– Deferred	47,571		(2,527)		(20,376)
Total Foreign	65,705		(7,685)		(25,448)
Total	$	309,464	$	(5,862)	$	(293,741)

The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense.

(Thousands of dollars)	2022		2021		2020
Income tax expense (benefit) based on the U.S. statutory tax rate	$	304,555	$	9,007	$	(325,299)
Foreign income (loss) subject to foreign tax rates different than the U.S. statutory rate	10,823		13,270		(3,791)
State income taxes, net of federal benefit	7,118		2,500		(6,646)
U.S. tax benefit on certain foreign upstream investments	—		(8,916)		—
Change in deferred tax asset valuation allowance related to other foreign exploration expenditures	24,748		4,814		7,707
Tax effect on income attributable to noncontrolling interest	(36,471)		(25,450)		23,712
Other, net	(1,309)		(1,087)		10,576
Total	$	309,464	$	(5,862)	$	(293,741)

An analysis of the Company’s deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 showing the tax effects of significant temporary differences follows.

(Thousands of dollars)	2022		2021
Deferred tax assets
Property and leasehold costs	$	242,467	$	241,833
Liabilities for dismantlements	31,017		37,728
Postretirement and other employee benefits	86,798		114,790
U. S. net operating loss	442,699		577,531
Investment in partnership	11,595		39,396
Other deferred tax assets	111,212		135,838
Total gross deferred tax assets	925,788		1,147,116
Less valuation allowance	(136,008)		(111,259)
Net deferred tax assets	789,780		1,035,857
Deferred tax liabilities
Deferred tax on undistributed foreign earnings	(5,000)		(5,000)
Accumulated depreciation, depletion and amortization	(796,510)		(786,846)
Other deferred tax liabilities	(85,284)		(41,387)
Total gross deferred tax liabilities	(886,794)		(833,233)
Net deferred tax (liabilities) assets	$	(97,014)	$	202,624

In management’s judgment, the net deferred tax assets in the preceding table are more likely than not to be realized based on the consideration of deferred tax liability reversals and future taxable income. The valuation allowance for deferred tax assets relates primarily to tax assets arising in foreign tax jurisdictions that in the judgment of management at the present time are more likely than not to be unrealized. The valuation allowance increased $24.7 million in 2022, related all to non-U.S. items. Subsequent reductions of the valuation allowance are expected to be reported as reductions of tax expense assuming no offsetting change in the deferred tax asset.

The Company has an U.S. net operating loss of $2.1 billion at year-end 2022 with a corresponding deferred tax asset of $442.7 million. The Company believes the U.S. net operating loss being carried forward will more likely than not be utilized in future periods prior to expirations in 2036 and 2037.

Other Information

Currently the Company considers $100 million of Canada’s past foreign earnings not permanently reinvested, with an accompanying $5 million liability. At December 31, 2021, $1.4 billion of past foreign earnings are considered permanently reinvested. The Company closely and routinely monitors these reinvestment positions considering underlying facts and circumstances pertinent to our business and the future operation of the Company.

Uncertain Income Tax Positions

The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon ultimate settlement. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. Liabilities associated with uncertain income tax positions are included in “Deferred credits and other liabilities” in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the three years presented is shown in the following table.

(Thousands of dollars)	2022		2021		2020
Balance at January 1	$	2,903	$	2,832	$	2,538
Additions for tax positions related to current year	77		71		3,042
Additions for tax positions related to prior year	948		—		—
Settlements with taxing authorities	—		—		(2,748)
Balance at December 31	$	3,928	$	2,903	$	2,832

All additions or settlements to the above liability affect the Company’s effective income tax rate in the respective period of change. The Company accounts for any applicable interest and penalties on uncertain tax positions as a component of income tax expense. The Company also had other recorded liabilities of $0.3 million as of December 31, 2022, 2021 and 2020, respectively, for interest and penalties associated with uncertain tax positions. Income tax expense for the years ended December 31, 2022, 2021 and 2020 included net benefits for interest and penalties of nil, nil and $0.1 million, respectively, associated with uncertain tax positions.

In 2023, the Company currently expects to add between $0.1 million and $1.0 million to the provision for uncertain tax positions. Although existing liabilities could be reduced by settlement with taxing authorities or lapse due to statute of limitations, the Company believes that the changes in its unrecognized tax benefits due to these events will not have a material impact on the Consolidated Statement of Operations during 2023.

The Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities. These audits often take 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. Additionally, the Company could be required to pay amounts into an escrow account as any matters are identified and appealed with the relevant taxing authorities. As of December 31, 2022, the earliest years remaining open for audit and/or settlement in the Company’s major taxing jurisdictions are as follows:  United States – 2016; Canada – 2016; and Malaysia – 2016. 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.

Coronavirus Aid, Relief, and Economic Security Act

In the fourth quarter of 2020, under the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Company received a refund of its remaining outstanding AMT credit balance of approximately $18.5 million.