5. Income Taxes

The principal components of EOG's net deferred income tax liabilities at December 31, 2013 and 2012 were as follows (in thousands):

	2013			2012

Current Deferred Income Tax Assets (Liabilities)
Commodity Hedging Contracts	$	29,582		$	(57,754	)
Deferred Compensation Plans		42,296			35,715
Net Operating Loss		96,616			-
Alternative Minimum Tax Credit Carryforward		72,297			-
Timing Differences Associated with Different Year-ends in Foreign Jurisdictions		-			(2,762	)
Other		3,815			1,963
Total Net Current Deferred Income Tax Assets (Liabilities)	$	244,606		$	(22,838	)

Noncurrent Deferred Income Tax Assets (Liabilities)
Foreign Oil and Gas Exploration and Development Costs Deducted for Tax Over (Under) Book Depreciation, Depletion and Amortization	$	(112,346	)	$	25,592
Foreign Net Operating Loss		369,257			164,829
Foreign Other		4,179			1,607
Foreign Valuation Allowances		(183,122	)		(134,792	)
Total Net Noncurrent Deferred Income Tax Assets	$	77,968		$	57,236

Noncurrent Deferred Income Tax (Assets) Liabilities
Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization	$	6,287,541		$	5,300,115
Non-Producing Leasehold Costs		(50,581	)		(61,512	)
Seismic Costs Capitalized for Tax		(136,964	)		(125,026	)
Equity Awards		(122,665	)		(116,666	)
Capitalized Interest		101,006			102,677
Net Operating Loss		-			(308,154	)
Alternative Minimum Tax Credit Carryforward		(557,352	)		(476,505	)
Other		1,369			12,467
Total Net Noncurrent Deferred Income Tax Liabilities	$	5,522,354		$	4,327,396

Total Net Deferred Income Tax Liabilities	$	5,199,780		$	4,292,998

The components of Income Before Income Taxes for the years indicated below were as follows (in thousands):

	2013		2012			2011

United States	$	3,268,727	$	1,988,105		$	2,156,147
Foreign		168,159		(707,365	)		(246,348	)
Total	$	3,436,886	$	1,280,740		$	1,909,799

The principal components of EOG's Income Tax Provision for the years indicated below were as follows (in thousands):

	2013			2012			2011

Current:
Federal	$	207,777		$	242,674		$	94,244
State		22,856			22,573			1,083
Foreign		134,379			152,276			224,049
Total		365,012			417,523			319,376
Deferred:
Federal		915,994			454,173			608,181
State		26,305			632			40,321
Foreign		(67,534	)		(161,867	)		(149,202	)
Total		874,765			292,938			499,300
Income Tax Provision	$	1,239,777		$	710,461		$	818,676

The differences between taxes computed at the United States federal statutory tax rate and EOG's effective rate were as follows:

	2013	2012	2011

Statutory Federal Income Tax Rate	35.00%	35.00%	35.00%
State Income Tax, Net of Federal Benefit	0.93	1.18	1.41
Income Tax Provision Related to Foreign Operations	(0.20)	1.38	0.88
Income Tax Provision Related to Trinidad Operations	0.43	(0.27)	3.37
Canadian Valuation Allowances	-	10.57	-
Canadian Natural Gas Impairments	-	6.90	1.85
Other	(0.09)	0.71	0.36
Effective Income Tax Rate	36.07%	55.47%	42.87%

The difference in the effective tax rate and the United States federal statutory rate of 35% is attributable principally to state and foreign income taxes. The effective tax rate of 36% in 2013 was lower than the prior year rate of 55% primarily due to the absence of certain 2012 Canadian impairments and valuation allowances (26% statutory rate).

Deferred tax assets are recorded for certain tax benefits, including tax net operating losses (NOLs) and tax credit carryforwards, provided that management assesses the utilization of such assets to be "more likely than not." Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2013 and 2012, cumulative valuation allowances of $183 million and $158 million, respectively, have been recorded as EOG does not believe that certain foreign deferred tax assets are more likely than not to be realized. Once established, these valuation allowances are subsequently adjusted for current year taxable profits or losses and future taxable income estimates.

The balance of unrecognized tax benefits at December 31, 2013, was zero. The $33 million decrease from the prior year-end balance was the result of concluded income tax audits. However, there was no impact on the effective tax rate as the tax benefits were offset by a valuation allowance. When applicable, EOG records interest and penalties related to unrecognized tax benefits to its income tax provision. Currently, there are no amounts of interest or penalties recognized on the Consolidated Statements of Income and Comprehensive Income or on the Consolidated Balance Sheets. EOG does not anticipate that the amount of the unrecognized tax benefits will significantly change during the next twelve months. EOG and its subsidiaries file income tax returns in the United States and various state, local and foreign jurisdictions. EOG is generally no longer subject to income tax examinations by tax authorities in the United States (federal), Canada, the United Kingdom, Trinidad and China for taxable years before 2010, 2009, 2012, 2002 and 2008, respectively.

EOG's foreign subsidiaries' undistributed earnings of approximately $2.7 billion at December 31, 2013, are considered to be indefinitely invested outside the United States and, accordingly, no United States federal or state income taxes have been provided thereon. Upon distribution of those earnings, EOG may be subject to both foreign withholding taxes and United States income taxes, net of allowable foreign tax credits. The amount of such additional taxes would be dependent on several factors, including the size and timing of the distribution, the particular foreign jurisdiction from which the distribution is made, and the availability of foreign tax credits. As a result, the determination of the potential amount of unrecognized withholding and deferred income taxes is not practicable, although additional taxes resulting from a repatriation of foreign earnings could be significant.

In 2013, EOG utilized a United States federal tax NOL of $787 million. Remaining NOLs of $314 million are expected to be carried forward and applied against regular taxable income in future periods. To the extent not utilized, these NOL carryforwards will begin to expire in 2031. Additionally, as of December 31, 2013, EOG had state income tax NOLs of approximately $700 million, which, if unused, expire between 2015 and 2033. The Stock Compensation Topic of the ASC provides that when settlement of a stock award contributes to a NOL carryforward, neither the associated excess tax benefit nor the credit to Additional Paid in Capital (APIC) should be recorded until the stock award deduction reduces income taxes payable. Due to the current-year utilization of a portion of the available NOLs, a benefit of $15 million will be reflected in APIC. Future utilization of the remaining NOLs will result in an additional benefit of $16 million being reflected in APIC (related to 2011). In 2013, EOG paid alternative minimum tax (AMT) of $161 million. The AMT paid in 2013, along with AMT of $469 million paid in prior years, will be carried forward indefinitely as a credit available to offset regular income taxes in future periods.

The ability of EOG to utilize both the regular tax NOL carryforwards and the AMT credit carryforwards to reduce federal income taxes may become subject to various limitations under the Internal Revenue Code. Such limitations may arise if certain ownership changes (as defined for income tax purposes) were to occur. As of December 31, 2013, management does not believe that an ownership change has occurred which would limit either carryforward.

During 2013, EOG's United Kingdom subsidiary incurred a tax NOL of approximately $282 million which, along with prior years' NOLs of $267 million, will be carried forward indefinitely.

The American Taxpayer Relief Act of 2012 (ATRA) was enacted on January 2, 2013. Although ATRA principally affected individual taxpayers, the legislation included certain corporate tax incentives, notably the extension of bonus depreciation (additional depreciation expense of 50% for qualified domestic property additions), which had a favorable impact on EOG's tax position in 2013.