INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10 - 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 programs, management undertook a legal entity reorganization that was completed in 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 2022, Occidental recorded a tax benefit of $2.7 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. The legal entity reorganization transaction is currently under IRS review as part of the Company’s 2022 federal tax audit.

INFLATION REDUCTION ACT

In August 2022, Congress passed the IRA that contains, among other provisions, a corporate book minimum tax on financial statement income, an excise tax on stock buybacks, a methane emissions fee and certain tax incentives related to climate change and clean energy. Occidental is currently evaluating the guidance and proposed regulations released in 2023. The ultimate impact of the IRA to Occidental will depend on a number of factors including future commodity prices, interpretations and assumptions as well as additional regulatory guidance.

PILLAR TWO

Approximately 140 countries have agreed to a statement in support of the OECD Pillar Two initiative that proposes a 15% global minimum tax on a jurisdiction by jurisdiction basis. A number of countries, including European Union member states, the United Kingdom, and Canada have enacted or are expected to enact legislation to be effective as early as 2024, with widespread implementation of a global minimum tax expected by 2025. As the legislation becomes effective in countries in which Oxy operates, the company’s cash tax could increase and its effective tax rate could be negatively impacted. Occidental will continue to monitor proposed legislation and guidance issued by both the OECD as well as the jurisdictions in which it operates to assess the impact on the its tax position.

The following summarizes domestic and foreign components of income from continuing operations before domestic and foreign income taxes for the years ended December 31:

millions	2023		2022		2021
Domestic	$	4,246	$	11,314	$	1,966
Foreign	2,183		2,803		1,739
Total income from continuing operations before income taxes	$	6,429	$	14,117	$	3,705

The following summarizes components of income tax (expense) benefit on continuing operations for the years ended December 31:

millions	2023		2022		2021
Current
Federal	$	(871)	$	(1,272)	$	(173)
State and local	(92)		(105)		(36)
Foreign	(713)		(1,080)		(660)
Total current tax expense	$	(1,676)	$	(2,457)	$	(869)
Deferred
Federal	(37)		1,569		(191)
State and local	25		57		153
Foreign	(45)		18		(8)
Total deferred tax (expense) benefit	$	(57)	$	1,644	$	(46)
Total income tax expense	$	(1,733)	$	(813)	$	(915)

The following reconciliation of the U.S federal statutory income tax rate to Occidental’s worldwide effective tax rate on income from continuing operations for the years ended December 31 is stated as a percentage of income from continuing operations before income taxes:

	2023		2022		2021
U.S. federal statutory tax rate	21	%	21	%	21	%
Legal entity reorganization	—		(18)		—
Enhanced oil recovery credit and other general business credits	—		—		(3)
Capital loss	—		—		(2)
Tax impact from foreign operations	3		3		8
State income taxes, net of federal benefit	1		—		(2)
Uncertain tax positions	2		—		—
Other	—		—		3
Worldwide effective tax rate	27	%	6	%	25	%

In 2023, Occidental’s worldwide effective tax rate of 27% was higher than the U.S. statutory rate of 21% and primarily driven by Occidental's jurisdictional mix of income, where international income is subject to tax at statutory rates as high as 55%.

In 2022, Occidental’s worldwide effective tax rate was 6%, which was lower than the U.S. statutory rate of 21% and primarily driven by a tax benefit associated with Occidental's legal entity reorganization, as described above, partially offset by higher tax rates in the foreign jurisdictions in which Occidental operates.

In 2021, Occidental’s worldwide effective tax rate was 25%, which was higher than the U.S. statutory rate of 21% due to higher tax rates in the foreign jurisdictions in which Occidental operates, partially offset by the tax impact of business credits, state tax revaluations and other domestic tax benefits.

The tax effects of temporary differences resulting in deferred income taxes as of December 31:

millions	2023		2022
Deferred tax liabilities
Property, plant and equipment differences	$	(6,994)	$	(7,218)
Equity investments, partnerships and international subsidiaries	(709)		(441)
Gross long-term deferred tax liabilities	(7,703)		(7,659)
Deferred tax assets
Environmental reserves	223		229
Postretirement benefit accruals	229		235
Deferred compensation and benefits	237		207
Asset retirement obligations	722		799
Foreign tax credit carryforwards	2,759		3,622
Business credit carryforwards	43		30
Net operating loss carryforward	1,056		1,058
Interest expense carryforward	11		11
All other	586		771
Gross long-term deferred tax assets	5,866		6,962
Valuation allowance	(3,901)		(4,785)
Net long-term deferred tax assets	$	1,965	$	2,177
Total deferred income tax liability, net	$	(5,738)	$	(5,482)
Less: foreign deferred tax asset in long-term receivables and other assets, net	(26)		(30)
Total deferred income tax liability	$	(5,764)	$	(5,512)

Total deferred tax assets, after valuation allowances, were $2.0 billion and $2.2 billion as of December 31, 2023 and 2022, respectively. Occidental expects to realize the recorded deferred tax assets, net of any allowances, through future operating income and reversal of temporary differences. The total deferred tax liabilities were $7.7 billion as of December 31, 2023 and 2022.

As of December 31, 2023, Occidental had foreign tax credit carryforwards of $2.8 billion and state tax credit carryforwards of $33 million. Occidental had recorded a valuation allowance for $2.8 billion of the foreign tax credit carryforwards and $29 million of the state tax credit carryforwards.

As of December 31, 2023, Occidental had tax-effected foreign net operating loss carryforwards of $854 million, state net operating loss carryforwards of $199 million, and federal net operating loss carryforwards of $3 million. The carryforward balances have varying carryforward periods through 2043, excluding certain attributes for which there is an indefinite carryforward period. A valuation allowance was recorded for $801 million of the tax-effected foreign net operating loss carryforwards and $159 million of the tax-effected state net operating loss carryforwards. Occidental had an additional valuation allowance of $145 million against other foreign deferred tax assets.

Occidental had a tax-effected state interest expense carryforward of $11 million with a valuation allowance for $3 million of the state interest expense carryforward as of December 31, 2023.

A deferred tax liability had not been recognized for temporary differences related to unremitted earnings of certain consolidated international subsidiaries aggregating approximately $984 million as of December 31, 2023, as it is Occidental’s intention to reinvest such earnings indefinitely. If the earnings of these international subsidiaries were not indefinitely reinvested, an additional deferred tax liability of approximately $232 million would be required.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

millions	2023		2022		2021
Balance as of January 1	$	2,010	$	2,026	$	2,045
Increases related to prior-year positions	—		2		75
Settlements	—		—		(80)
Reductions for tax positions of prior years	(59)		(18)		(14)
Balance as of December 31	$	1,951	$	2,010	$	2,026

The December 31, 2023 balance of unrecognized tax benefits of $2.0 billion included potential benefits of $2.0 billion of which, if recognized, $1.5 billion would affect the effective tax rate on income. Also included were benefits of $45 million related to tax positions for which the ultimate deductibility is highly certain, but the timing of such deductibility is uncertain. Unrecognized tax benefits are included in deferred credits and other liabilities - other. Occidental records estimated potential interest and penalties related to liabilities for unrecognized tax benefits in the provisions for domestic and foreign income taxes. In 2023, Occidental recorded interest related to liabilities for unrecognized tax benefits of $159 million, for a cumulative accrued interest related to liabilities for unrecognized tax benefits of $576 million as of December 31, 2023. There were no penalties associated with liabilities for unrecognized tax benefits recorded for the years ended December 31, 2023 and 2022. Over the next 12 months, it is reasonably possible that the total amount of unrecognized tax benefits could decrease by an estimated $10 million due to settlements with taxing authorities or lapses in statutes of limitation.

Occidental recognized $79 million and $280 million in federal and state income tax receivables as of December 31, 2023 and 2022, respectively, which was recorded in other current assets. In addition, Occidental recognized $31 million and $33 million in 2023 and 2022, respectively, of long-term income tax receivables, which were recorded in long-term receivables and other assets, net.

Occidental is subject to audit by various tax authorities in varying periods. See Note 13 - Lawsuits, Claims, Commitments and Contingencies for a discussion of these matters.