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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note H – 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)
202320222021
Income (loss) from continuing operations before income taxes
United States$901,761 $1,306,200 $114,659 
Foreign19,308 144,061 (71,768)
Total$921,069 $1,450,261 $42,891 
Income tax expense (benefit)
U.S. Federal – Current$– $– $– 
      – Deferred170,115 234,749 (1,480)
Total U.S. Federal170,115 234,749 (1,480)
State6,622 9,010 3,303 
Foreign – Current13,182 18,134 (5,158)
   – Deferred6,002 47,571 (2,527)
Total Foreign19,184 65,705 (7,685)
Total$195,921 $309,464 $(5,862)
The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense for each of the three years presented.
(Thousands of dollars)
202320222021
Income tax expense (benefit) based on the U.S. statutory tax rate$193,424 $304,555 $9,007 
Foreign income (loss) subject to foreign tax rates different than the U.S. statutory rate7,597 10,823 13,270 
State income taxes, net of federal benefit4,725 7,118 2,500 
U.S. tax benefit on certain foreign upstream investments– – (8,916)
Change in deferred tax asset valuation allowance related to other foreign exploration expenditures10,853 24,748 4,814 
Tax effect on income attributable to noncontrolling interest(13,046)(36,471)(25,450)
Other, net(7,632)(1,309)(1,087)
Total$195,921 $309,464 $(5,862)
An analysis of the Company’s deferred tax assets and deferred tax liabilities for the respective periods presented showing the tax effects of significant temporary differences follows.
(Thousands of dollars)
20232022
Deferred tax assets
Property and leasehold costs$240,065 $242,467 
Liabilities for dismantlements34,258 31,017 
Postretirement and other employee benefits82,437 86,798 
U. S. net operating loss357,490 442,699 
Investment in partnership14,655 11,595 
Other deferred tax assets48,778 111,212 
Total gross deferred tax assets777,683 925,788 
Less valuation allowance(146,861)(136,008)
Net deferred tax assets630,822 789,780 
Deferred tax liabilities
Deferred tax on undistributed foreign earnings(5,000)(5,000)
Accumulated depreciation, depletion and amortization(847,981)(796,510)
Other deferred tax liabilities(54,052)(85,284)
Total gross deferred tax liabilities(907,033)(886,794)
Net deferred tax (liabilities) assets$(276,211)$(97,014)
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 $10.9 million in 2023, 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 a U.S. net operating loss carryforward of $1.7 billion at year-end 2023 with a corresponding deferred tax asset of $357.5 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, 2023, $1.5 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 “Other taxes payable” and “Deferred credits and other liabilities” in the Consolidated Balance Sheets for current and long-term portions, respectively. 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)
202320222021
Balance at January 1$3,928 $2,903 $2,832 
Additions for tax positions related to current year– 77 71 
Additions for tax positions related to prior year2,456 948 – 
Balance at December 31$6,384 $3,928 $2,903 
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, 2023, 2022 and 2021, respectively, for interest and penalties associated with uncertain tax positions. There were no interest or penalties associated with uncertain tax positions included in income tax expense for any period presented.
In 2024, the Company currently does not expect to add to the provision for uncertain tax positions. Although existing liabilities could be reduced by settlement with taxing authorities or due to statute of limitations closing, 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 2024.
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, 2023, 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 – 2017. The Company has retained certain possible liabilities and rights to income tax receivables relating to Malaysia for the years prior to 2019.