Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 7 - INCOME TAXES

LEGAL ENTITY REORGANIZATION

To align Occidental’s legal entity structure with the nature of its business activities after completing the acquisition of Anadarko and subsequent large scale post-acquisition divestiture program, management undertook a legal entity reorganization that was completed in the first quarter of 2022.

As a result of this legal entity reorganization, management made an adjustment to the tax basis in a portion of its operating assets, thus reducing Occidental’s deferred tax liabilities. Accordingly, in the first quarter of 2022, Occidental recorded an estimated non-cash tax benefit of $2.6 billion in connection with this reorganization. The timing of any reduction in Occidental’s future cash taxes as a result of this legal entity reorganization will be dependent on a number of factors, including prevailing commodity prices, capital activity level and production mix. Further refinement of the non-cash tax benefit may be necessary as Occidental finalizes its tax basis calculations, its 2022 tax returns and other information.

INFLATION REDUCTION ACT

In August 2022, Congress passed the Inflation Reduction Act which contains, among other provisions, a corporate book minimum tax on financial statement income, an excise tax on stock buybacks and certain tax incentives related to climate change and clean energy. Occidental is currently evaluating the provisions of this act. The ultimate impact of the Inflation Reduction Act to Occidental will depend on a number of factors including future commodity prices, interpretations and assumptions as well as additional regulatory guidance.

The following summarizes components of income tax expense on continuing operations for the three and nine months ended September 30, 2022 and 2021:

	Three months ended September 30,						Nine months ended September 30,
millions	2022			2021			2022			2021
Income from continuing operations before income taxes	$	3,648		$	1,217		$	11,717		$	1,675
Current
Federal	$	(297)		$	(170)		$	(1,152)		$	(170)
State and Local	(43)			(23)			(127)			(12)
Foreign	(290)			(174)			(826)			(456)
Total current tax expense	$	(630)		$	(367)		$	(2,105)		$	(638)
Deferred
Federal	(264)			19			1,718			35
State and Local	5			23			83			106
Foreign	(13)			(62)			(36)			51
Total deferred tax benefit (expense)	$	(272)		$	(20)		$	1,765		$	192
Total income tax expense	$	(902)		$	(387)		$	(340)		$	(446)
Income from continuing operations	$	2,746		$	830		$	11,377		$	1,229
Worldwide effective tax rate	25		%	32		%	3		%	27		%

The 25% and 32% worldwide effective tax rates for the three months ended September 30, 2022 and 2021, respectively, and 27% for the nine months ended September 30, 2021, were primarily driven by Occidental's jurisdictional mix of income. U.S. income is taxed at a U.S. federal statutory rate of 21%, while international income is subject to tax at statutory rates as high as 55%. These effective rates differ from the 3% tax rate for income from continuing operations for the nine months ended September 30, 2022, which was impacted by a non-cash tax benefit associated with Occidental's legal entity reorganization as described above.