Income Taxes:

The income tax rate of 29.4% for the three months ended September 30, 2017 decreased 7.3 percentage points from the three months ended September 30, 2016. This decrease was due primarily to the following:


▪	tax benefits of $232 million for the release of a valuation allowance related to deferred income tax assets for foreign tax credit carryforwards, which Altria Group, Inc. determined are more-likely-than-not to be fully utilized based upon new information received from AB InBev in the third quarter of 2017; and


▪	tax benefits of $36 million in 2017 for the reversal of tax accruals no longer required;

partially offset by:


▪	tax expense of $114 million in 2017 for tax reserves related to the calculation of certain foreign tax credits.

The income tax rate of 31.2% for the nine months ended September 30, 2017 decreased 4.2 percentage points from the nine months ended September 30, 2016. This decrease was due primarily to the items discussed above and tax benefits of $152 million related primarily to the effective settlement in June 2017 of the IRS audit of Altria Group, Inc. and its consolidated subsidiaries’ 2010-2013 tax years.

Altria Group, Inc. is subject to income taxation in many jurisdictions. Uncertain tax positions reflect the difference between tax positions taken or expected to be taken on income tax returns and the amounts recognized in the financial statements. Resolution of the related tax positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within the control of Altria Group, Inc. At September 30, 2017, Altria Group, Inc.’s total unrecognized tax benefits were $194 million. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at September 30, 2017 was $126 million, along with $68 million affecting deferred taxes. It is reasonably possible that within the next 12 months certain examinations will be resolved, which could result in a decrease in unrecognized tax benefits of approximately $7 million. At December 31, 2016, Altria Group, Inc.’s total unrecognized tax benefits were $169 million. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2016 was $67 million, along with $102 million affecting deferred taxes.