Income Taxes (Notes)

12 Months Ended

Dec. 31, 2019

The principal components of EOG's total net deferred income tax liabilities at December 31, 2019 and 2018 were as follows (in thousands):



	2019			2018
Deferred Income Tax Assets (Liabilities)
Foreign Oil and Gas Exploration and Development Costs Deducted for Tax Under Book Depreciation, Depletion and Amortization	$	5,825		$	4,359
Foreign Net Operating Loss	66,675			55,175
Foreign Valuation Allowances	(70,455		)	(58,932		)
Foreign Other	318			175
Total Net Deferred Income Tax Assets	$	2,363		$	777
Deferred Income Tax (Assets) Liabilities
Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization	$	5,277,550		$	4,583,517		(1)
Commodity Hedging Contracts	(4,699		)	4,883
Deferred Compensation Plans	(47,650		)	(39,086		)
Accrued Expenses and Liabilities	(8,502		)	(19,097		)
Equity Awards	(108,324		)	(93,977		)
Alternative Minimum Tax Credit Carryforward	(31,904		)	—
Undistributed Foreign Earnings	15,746			22,945
Other	(46,116		)	(45,787		)
Total Net Deferred Income Tax Liabilities	$	5,046,101		$	4,413,398
Total Net Deferred Income Tax Liabilities	$	5,043,738		$	4,412,621


(1)	The 2018 presentation has been changed to conform with current year presentation.

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



	2019		2018		2017

United States	$	3,466,578	$	4,084,156	$	621,610
Foreign	78,689		156,842		39,572
Total	$	3,545,267	$	4,240,998	$	661,182

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



	2019			2018			2017
Current:
Federal	$	(152,258	)	$	(303,853	)	$	33,058
State	10,819			17,048			(2,502		)
Foreign	81,426			65,615			35,323
Total	(60,013		)	(221,190		)	65,879
Deferred:
Federal	626,901			862,075			(1,504,288		)
State	32,541			43,293			26,942
Foreign	(27,784		)	(11,212		)	3,474
Total	631,658			894,156			(1,473,872		)
Other Non-Current: ⁽¹⁾
Federal	245,125			148,992			(513,404		)
Foreign	(6,413		)	—			—
Total	238,712			148,992			(513,404		)

Income Tax Provision (Benefit)	$	810,357		$	821,958		$	(1,921,397	)


(1)	Includes changes in certain amounts that are expected to be paid or received beyond the next twelve months. The primary components are refundable alternative minimum tax (AMT) credits and the 2017 repatriation tax. See the following statutory-to-effective tax rate reconciliation for additional details.

The differences between taxes computed at the U.S. federal statutory tax rate and EOG's effective rate for the years indicated below were as follows:



	2019		2018			2017
Statutory Federal Income Tax Rate	21.00	%	21.00	%		35.00	%
State Income Tax, Net of Federal Benefit	0.97		1.12			3.38
Income Tax Provision Related to Foreign Operations	0.87		0.51			(0.30	)
Income Tax Provision Related to United Kingdom Operations	—		—			1.78
Income Tax Provision Related to Canadian Operations	—		—			2.30
TCJA ⁽¹⁾	—		(2.60	)	(2)	(328.10	)	(3)
Share-Based Compensation	0.02		(0.47	)		(4.63	)
Other	—		(0.18	)		(0.03	)
Effective Income Tax Rate	22.86	%	19.38	%		(290.60	)%

(1)

The enactment of the Tax Cuts and Jobs Act (TCJA) by the United States in 2017 made numerous changes to federal tax law. Several changes which had a significant impact on EOG include the corporate income tax rate reduction from 35% to 21%, the imposition of a one-time repatriation tax on undistributed foreign earnings and the repeal of the corporate AMT regime (AMT credit carryforwards became refundable over the following four years and were initially subject to a federal sequestration charge). In 2017, EOG revalued its federal deferred income tax assets and liabilities resulting in an earnings benefit of over $2 billion and a substantial reduction of the 2017 effective tax rate. The TCJA measurement-period adjustments were recorded in 2018.


(2)	Includes impact of utilizing certain tax net operating losses (NOLs) ((1.2)%), the reversal of sequestration ((1.0)%) and other tax reform impacts ((0.4)%).


(3)	Includes impact of the federal rate reduction ((327.8)%), federal repatriation tax ((6.6)%), sequestration ((6.4)%) and other tax reform impacts ((0.1)%).

The net effective tax rate of 23% in 2019 was higher than the prior year rate of 19% primarily due to the absence of tax benefits from certain tax reform measurement-period adjustments.

Deferred tax assets are recorded for certain tax benefits, including tax 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, EOG has recorded valuation allowances for the portion of certain foreign and state deferred tax assets that management does not believe are more likely than not to be realized.

The principal components of EOG's rollforward of valuation allowances for deferred income tax assets for the years indicated below were as follows (in thousands):



	2019			2018			2017

Beginning Balance	$	167,142		$	466,421		$	383,221
Increase ⁽¹⁾	30,673			23,062			67,333
Decrease ⁽²⁾	(75		)	(26,219		)	(13,687		)
Other ⁽³⁾	3,091			(296,122		)	29,554
Ending Balance	$	200,831		$	167,142		$	466,421


(1)	Increase in valuation allowance related to the generation of tax NOLs and other deferred tax assets.


(2)	Decrease in valuation allowance associated with adjustments to certain deferred tax assets and their related allowance.


(3)	Represents dispositions, revisions and/or foreign exchange rate variances and the effect of statutory income tax rate changes. The United Kingdom operations were sold in the fourth quarter of 2018.

As of December 31, 2019, EOG had state income tax NOLs of approximately $2.1 billion, which, if unused, expire between 2020 and 2038. EOG also has Canadian NOLs of $225 million, some of which can be carried forward up to 20 years. As described above, these NOLs and other less significant tax benefits have been evaluated for the likelihood of utilization, and valuation allowances have been established for the portion of these deferred income tax assets that do not meet the “more likely than not” threshold.

The total balance of unrecognized tax benefits for all jurisdictions at December 31, 2019, was $39 million, resulting from the tax treatment of research and experimental expenditures related to certain innovations in EOG's horizontal drilling and completion projects and tax treatment of certain compensation deductions, of which $25 million may potentially have an earnings impact. EOG records interest and penalties related to unrecognized tax benefits to its income tax provision. Cumulatively, $4 million of interest has been recognized in the Consolidated Statements of Income and Comprehensive Income. EOG does not anticipate that the amount of the unrecognized tax benefits will change materially during the next twelve months. EOG and its subsidiaries file income tax returns and are subject to tax audits in the U.S. and various state, local and foreign jurisdictions. EOG's earliest open tax years in its principal jurisdictions are as follows: U.S. federal (2016), Canada (2015), Trinidad (2013) and China (2009).

EOG's foreign subsidiaries' undistributed earnings are not considered to be permanently reinvested outside of the U.S. Accordingly, EOG may be required to accrue certain U.S. federal, state, and foreign deferred income taxes on these undistributed earnings as well as on any other outside basis differences related to its investments in these subsidiaries. As of December 31, 2019, EOG has cumulatively recorded $16 million of deferred foreign income taxes for withholdings on its undistributed foreign earnings. Additionally, for tax years beginning in 2018 and later, EOG's foreign earnings may be subject to the U.S. federal "global intangible low-taxed income" (GILTI) inclusion. EOG records any GILTI tax as a period expense.