INCOME TAXES

12 Months Ended

Dec. 31, 2023

ACCOUNTING POLICY

Income tax expense includes both current and deferred taxes. We recognize income tax expense in net income unless it relates to an item recognized directly in equity or other comprehensive income. We provide for income taxes based on all of the information that is currently available.

Current tax expense is tax we expect to pay or receive based on our taxable income or loss during the year. We calculate the current tax expense using tax rates enacted or substantively enacted as at the reporting date, including any adjustment to taxes payable or receivable related to previous years.

Deferred tax assets and liabilities arise from temporary differences between the carrying amounts of the assets and liabilities we recognize on our Consolidated Statements of Financial Position and their respective tax bases. We calculate deferred tax assets and liabilities using enacted or substantively enacted tax rates that will apply in the years in which the temporary differences are expected to reverse.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied by the same authority on:

•the same taxable entity; or

•different taxable entities where these entities intend to settle current tax assets and liabilities on a net basis or the tax assets and liabilities will be realized and settled simultaneously.

We recognize a deferred tax asset for unused losses, tax credits, and deductible temporary differences to the extent it is probable that future taxable income will be available to use the asset.

JUDGMENTS

We make significant judgments in interpreting tax rules and regulations when we calculate income tax expense. We make judgments to evaluate whether we can recover a deferred tax asset based on our assessment of existing tax laws, estimates of future profitability, and tax planning strategies.

INCOME TAX EXPENSE


	Years ended December 31
(In millions of dollars)	2023	2022

Current tax expense:
Current taxes	327	325


Total current tax expense	327	325

Deferred tax expense:
Origination of temporary differences	138	284
Change in tax rate	52	—



Total deferred tax expense	190	284

Total income tax expense	517	609

Below is a summary of the difference between income tax expense computed by applying the statutory income tax rate to income before income tax expense and the actual income tax expense for the year.


	Years ended December 31
(In millions of dollars, except tax rates)	2023		2022

Statutory income tax rate	26.2	%	26.5	%
Income before income tax expense	1,366		2,289

Computed income tax expense	358		607
Increase (decrease) in income tax expense resulting from:
Non-deductible stock-based compensation	9		10
Non-deductible (taxable) portion of equity losses (income)	(1)		9
Revaluation of deferred tax balances due to corporate reorganization-driven change in income tax rate	52		—

Non-taxable portion of capital gains	(1)		(5)
Non-taxable income from security investments	(16)		(12)
Non-deductible loss on joint venture's non-controlling interest purchase obligation	111		—
Other	5		—

Total income tax expense	517		609
Effective income tax rate	37.8	%	26.6	%

DEFERRED TAX ASSETS AND LIABILITIES

Below is a summary of the movement of net deferred tax assets and liabilities during 2023 and 2022.


Deferred tax assets (liabilities) (In millions of dollars)	Property, plant and equipment and inventory	Goodwill and other intangibles	Investments	Lease liabilities	Contract and deferred commission cost assets	Other	Total

December 31, 2022	(2,149)	(1,754)	(89)	458	(87)	(31)	(3,652)
(Expense) recovery in net income	(95)	(89)	35	14	(36)	(19)	(190)
Recovery in other comprehensive income	—	—	52	—	—	115	167

Acquisitions	(1,265)	(1,473)	—	82	—	(48)	(2,704)

December 31, 2023	(3,509)	(3,316)	(2)	554	(123)	17	(6,379)


Deferred tax assets (liabilities) (In millions of dollars)	Property, plant and equipment and inventory	Goodwill and other intangibles	Investments	Lease liabilities	Contract and deferred commission cost assets	Other	Total

December 31, 2021	(2,025)	(1,578)	(135)	449	(124)	(26)	(3,439)

(Expense) recovery in net income	(124)	(175)	(1)	9	37	(30)	(284)
Recovery in other comprehensive income	—	—	47	—	—	24	71
Acquisitions	—	(1)	—	—	—	1	—

December 31, 2022	(2,149)	(1,754)	(89)	458	(87)	(31)	(3,652)

We have not recognized deferred tax assets for the following items:


	As at December 31
(In millions of dollars)	2023	2022

Realized capital losses in Canada that can be applied against future capital gains	73	73
Unrealized capital losses on debt and derivative instruments	926	282
Tax losses in foreign jurisdictions 1	71	73
Deductible temporary differences in foreign jurisdictions	41	13

Total unrecognized temporary differences	1,111	441

1 $42 million of the tax losses in foreign jurisdictions expire between 2024 and 2037, the remaining $29 million can be carried forward indefinitely.

There are taxable temporary differences associated with our investments in Canadian domestic subsidiaries. We do not recognize deferred tax liabilities for these temporary differences because we are able to control the timing of the reversal and the reversal is not probable in the foreseeable future. Reversing these taxable temporary differences is not expected to result in any significant tax implications.