Income Taxes

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes:

The income tax rate for the nine and three months ended September 30, 2020 was 41.8% and (195.1)%, respectively, versus 74.1% and (22.3)% for the nine and three months ended September 30, 2019, respectively. The changes in the tax rates were due primarily to the following:

▪a full valuation allowance in 2019 attributable to the tax benefits associated with the impairment of JUUL equity securities;

partially offset by:

▪a full valuation allowance in 2020 attributable to the tax benefits associated with the impairment of JUUL equity securities;

▪tax benefits recorded in 2019 for the reversal of tax accruals no longer required;

▪net tax expense in 2020 related to Altria’s equity investment in Cronos, which included a valuation allowance release on a deferred tax asset; and

▪net tax benefit in 2019 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 September 30, 2020 was as follows:

(in millions)
Balance at beginning of year	$	2,324
Additions to valuation allowance charged to income tax expense	673
Reductions to valuation allowance credited to income tax benefit	(145)
Foreign currency translation	4
Balance at end of period	$	2,856

The current year addition to the valuation allowance was due primarily to valuation allowances recorded for deferred tax assets related to Altria’s equity investments in JUUL and 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 September 30, 2020, Altria’s total unrecognized tax benefits were $74 million. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at September 30, 2020 was $41 million, along with $33 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 $8 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.