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Income Taxes

12 Months Ended

Dec. 31, 2020

15. Income Taxes

The difference between the book basis and the tax basis of our net assets, not directly subject to income taxes, is as follows:


	Icahn Enterprises				Icahn Enterprises Holdings
	December 31,				December 31,
	2020		2019		2020		2019

		(in millions)				(in millions)
Book basis of net assets	$	3,382	$	5,456	$	3,380	$	5,453
Book/tax basis difference		(774)		(1,397)		(774)		(1,397)
Tax basis of net assets	$	2,608	$	4,059	$	2,606	$	4,056

Income (loss) from continuing operations before income tax benefit (expense) is as follows:


	Year Ended December 31,
	2020		2019		2018

	(in millions)
Domestic	$	(2,586)	$	(1,765)	$	235
International		2		26		(12)
	$	(2,584)	$	(1,739)	$	223

Income tax benefit (expense) attributable to continuing operations is as follows:


	Year Ended December 31,
	2020		2019		2018

	(in millions)
Current:
Domestic	$	69	$	(106)	$	(11)
International		(2)		(3)		(4)
Total current		67		(109)		(15)
Deferred:
Domestic		51		87		30
International		(2)		2		(1)
Total deferred		49		89		29
	$	116	$	(20)	$	14

A reconciliation of the income tax benefit (expense) calculated at the federal statutory rate to income tax benefit (expense) on continuing operations as shown in the consolidated statements of operations is as follows:


	Year Ended December 31,
	2020		2019		2018

	(in millions)
Income tax benefit (expense) at U.S. statutory rate	$	543	$	365	$	(47)
Tax effect from:
Valuation allowance		(243)		(63)		(4)
Non-controlling interest		(6)		(4)		26
Goodwill impairment		—		—		(18)
Stock dispositions		—		—		69
Income not subject to taxation		(287)		(314)		14
State taxes		103		—		—
Other		6		(4)		(26)
Income tax benefit (expense)	$	116	$	(20)	$	14

The tax effect of significant differences representing deferred tax assets (liabilities) (the difference between financial statement carrying value and the tax basis of assets and liabilities) is as follows:


	December 31,
	2020		2019

	(in millions)
Deferred tax assets:
Property, plant and equipment	$	17	$	17
Net operating loss		996		791
Tax credits		60		29
Capital loss		358		155
Leases		141		133
Other		119		71
Total deferred tax assets		1,691		1,196
Less: Valuation allowance		(1,026)		(619)
Net deferred tax assets	$	665	$	577

Deferred tax liabilities:
Property, plant and equipment	$	(121)	$	(125)
Intangible assets		(84)		(37)
Investment in partnerships		(657)		(652)
Investment in U.S. subsidiaries		(184)		(184)
Leases		(135)		(125)
Other		(46)		(61)
Total deferred tax liabilities		(1,227)		(1,184)
	$	(562)	$	(607)

We recorded deferred tax assets and deferred tax liabilities of $7 million and $569 million, respectively, as of December 31, 2020 and $32 million and $639 million, respectively, as of December 31, 2019. Deferred tax assets are included in other assets in our consolidated balance sheets.

We analyze all positive and negative evidence to consider whether it is more likely than not that all of the deferred tax assets will be realized. Projected future income, tax planning strategies and the expected reversal of deferred tax liabilities are considered in making this assessment. As of December 31, 2020 we had a valuation allowance of approximately $1,026 million primarily related to tax loss and credit carryforwards and other deferred tax assets. The current and future provisions for income taxes may be significantly impacted by changes to valuation allowances. These

allowances will be maintained until it is more likely than not that the deferred tax assets will be realized. For the year ended December 31, 2020, the valuation allowance on deferred tax assets increased by $407 million. The increase was primarily attributable to capital loss and state net operating loss carryforwards and the acquisition of Vivus, which has a full valuation allowance on its deferred tax assets.

On December 11, 2020, we acquired all of the outstanding stock of Vivus upon its emergence from bankruptcy. As of December 31, 2020, Vivus had an estimated federal net operating loss carryforward of approximately $656 million and federal and state tax credits of approximately $17 million.

At December 31, 2020, American Entertainment Properties Corp. (“AEPC”), a wholly-owned corporate subsidiary of Icahn Enterprises and Icahn Enterprises Holdings, which includes all or parts of our Automotive, Food Packaging, Metals, Home Fashion and Real Estate segments had U.S federal net operating loss carryforwards of approximately $2.1 billion with expiration dates from 2024 through 2037. Additionally, AEPC and its corporate subsidiaries had foreign net operating loss carryforwards of $29 million with an unlimited carryforward period and $11 million with a 5-year carryforward period.

At December 31, 2020, CVR Energy had state income tax credits of $30 million, which are available to reduce future state income taxes. These credits can be carried forward indefinitely.

On October 9, 2020, Viskase completed an equity private placement whereby AEPC ownership increased from approximately 79% to 89%. As a result of greater than 80% ownership, Viskase became a member of the consolidated federal tax group of AEPC and party to a tax allocation agreement with AEPC. The tax allocation agreement provides, among other things, that AEPC will pay all consolidated federal income taxes on behalf of the consolidated tax group and Viskase is required to make payments to AEPC in an amount equal to the tax liability, if any, that it would have paid if it were to file a separate company return.

On August 1, 2018, CVR Energy completed an exchange offer whereby CVR Refining’s public unitholders tendered a total of 21,625,106 common units of CVR Refining in exchange for 13,699,549 shares of CVR Energy common stock. As a result of the exchange offer, AEPC owned less than 80% of the common stock of CVR Energy and CVR Energy deconsolidated from the AEPC consolidated federal income tax group. Beginning with the tax period after the exchange, CVR Energy became the parent of a new consolidated group for U.S. federal income tax purposes and will file and pay its federal income tax obligations directly to the Internal Revenue Service (“IRS”).

As of December 31, 2020, we have not provided taxes on approximately $66 million of undistributed earnings in foreign subsidiaries which are deemed to be indefinitely reinvested. If at some future date these earnings cease to be permanently reinvested, we may be subject to foreign income and withholding taxes upon repatriation of such amounts. An estimate of the tax liability that would be incurred upon repatriation of foreign earnings is not practicable to determine.

Enactment of U.S. Tax Legislation

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of The Tax Legislation. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. We report additional tax from the GILTI inclusion as incurred and currently estimate additional tax due in 2020 of less than $1 million.

Under the Tax Legislation, an entity must pay a Base Erosion Anti-Abuse Tax (“BEAT”) if the BEAT is greater than its regular tax liability. We currently estimate no additional tax due in 2020 pursuant to the BEAT provisions.

Accounting for Uncertainty in Income Taxes

A summary of the changes in the gross amounts of unrecognized tax benefits for the years ended December 31, 2020, 2019 and 2018 are as follows:


	Year Ended December 31,
	2020		2019		2018

	(in millions)
Balance at January 1	$	33	$	34	$	34
Addition based on tax positions related to the current year		1		2		—
Increase for tax positions of prior years		6		—		6
Decrease for tax positions of prior years		(2)		—		—
Decrease for statute of limitation expiration		(3)		(3)		(6)
Balance at December 31	$	35	$	33	$	34

At December 31, 2020, 2019 and 2018, we had unrecognized tax benefits of $35 million, $33 million and $34 million, respectively. Of these totals, $31 million, $27 million and $30 million represent the amount of unrecognized tax benefits that if recognized, would affect the annual effective tax rate in the respective periods. The total unrecognized tax benefits differ from the amount which would affect the effective tax rate primarily due to the impact of valuation allowances.

During the next 12 months, we believe that it is reasonably possible that unrecognized tax benefits may decrease by approximately $2 million due to statute expirations.

We recognize interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense. We recorded $3 million, $1 million and $1 million as of December 31, 2020, 2019 and 2018, respectively, in liabilities for tax related net interest and penalties in our consolidated balance sheets. Income tax expense (benefit) related to interest and penalties were $2 million, $0 million and $(1) million for the years December 31, 2020, 2019 and 2018, respectively. We or certain of our subsidiaries file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various non-U.S. jurisdictions. We and our subsidiaries are no longer subject to U.S. federal tax examinations for years before 2016 or state and local examinations for years before 2014, with limited exceptions. The AEPC group’s income tax returns are currently under examination by the IRS for the years ended December 31, 2018 and 2017. As of December 31, 2020, AEPC has not been notified of any issues pursuant to the examination.