Income Taxes

6 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes:

The income tax rate of 25.4% for the six months ended June 30, 2020 increased 1.1 percentage points from the six months ended June 30, 2019. This increase was due primarily to the following:

▪ tax expense resulting from lower earnings on Altria’s equity investment in Cronos, which is taxed at a lower foreign tax rate; and

▪ net tax expense for adjustments resulting from amended returns and audit adjustments related to prior years.

The income tax rate of 24.4% for the three months ended June 30, 2020 increased 1.2 percentage points from the three months ended June 30, 2019. This increase was due primarily to the following:

▪ tax expense resulting from lower earnings on Altria’s equity investment in Cronos, which is taxed at a lower foreign tax rate; and

• net tax expense for adjustments resulting from amended returns and audit adjustments related to prior years;

partially offset by:

• net tax benefits related to Altria’s equity investment in Cronos, which included a valuation allowance release on a deferred tax asset.

A reconciliation of the beginning and ending valuation allowances for the period ended June 30, 2020 was as follows:

(in millions)	2020
Balance at beginning of year	$	2,324
Additions to valuation allowance charged to income tax expense	32
Reductions to valuation allowance credited to income tax benefit	(141		)
Foreign currency translation	5
Balance at end of year	$	2,220

The current year addition to the valuation allowance was due primarily to a valuation allowance recorded for a deferred tax asset related to Altria’s equity investment in Cronos. The current year reduction to the valuation allowance was due primarily to the write-off of a deferred tax asset related to Altria’s equity investment in Cronos for which a valuation allowance had previously been established.

Altria is subject to income taxation in many jurisdictions. Unrecognized tax benefits 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. At June 30, 2020, Altria’s total unrecognized tax benefits were $66 million. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at June 30, 2020 was $40 million, along with $26 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 $3 million. At December 31, 2019, Altria’s total unrecognized tax benefits were $64 million. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2019 was $40 million, along with $24 million affecting deferred taxes.