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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Geographic sources of income before income taxes and equity in affiliated companies’ net earnings for the years ended December 31 consist of the following:
 202320222021
U.S.$68 $840 $1,861 
Foreign5,938 5,875 5,798 
Total$6,006 $6,715 $7,659 

Income taxes are provided on the earnings of FCX’s material foreign subsidiaries under the assumption that these earnings will be distributed. FCX has not provided deferred income taxes for other differences between the book and tax carrying amounts of its investments in material foreign subsidiaries as FCX considers its ownership positions to be permanent in duration, and quantification of the related deferred tax liability is not practicable. 
FCX’s provision for income taxes for the years ended December 31 consists of the following:
 202320222021
Current income taxes:   
Federal$5 $— $— 
State(6)1 (11)
Foreign(2,087)(2,232)(2,460)
Total current(2,088)(2,231)(2,471)
Deferred income taxes:   
Federal(50)(149)(184)
State(3)(6)(4)
Foreign(320)(144)(23)
Total deferred(373)(299)(211)
Adjustments6 1 193 
a
Operating loss carryforwards185 262 190 
Provision for income taxes$(2,270)$(2,267)$(2,299)
a.Primarily reflects the release of valuation allowances on net operating losses at PT Rio Tinto Indonesia (see below).

A reconciliation of the U.S. federal statutory tax rate to FCX’s effective income tax rate for the years ended December 31 follows:
 202320222021
 Amount%Amount%Amount%
U.S. federal statutory tax rate$(1,261)(21)%$(1,410)(21)%$(1,608)(21)%
Withholding and other impacts on
foreign earnings(615)(10)(673)(10)(678)(9)
Effect of foreign rates different than the U.S.
federal statutory rate(313)(5)(314)(5)(328)(4)
Foreign tax credit limitation(289)(5)(50)(1)(116)(1)
Percentage depletion183 3 189 3 221 3 
Valuation allowancea
128 2 28 — 326 4 
Non-deductible permanent differences(68)(1)(29)— (21)— 
Uncertain tax positions(28)(1)(17)— 13 — 
State income taxes(6)— (4)— (14)— 
PT-FI historical tax disputesb
— — (8)— (193)(3)
PT Rio Tinto Indonesia valuation allowance— — — — 189 2 
Other items, net(1)— 21 — (90)(1)
Provision for income taxes$(2,270)(38)%$(2,267)(34)%$(2,299)(30)%
a.Refer to “Valuation Allowances” below.
b.Refer to “Indonesia Tax Matters” below.

FCX paid federal, state and foreign income taxes totaling $2.1 billion in 2023, $3.1 billion in 2022 and $1.3 billion in 2021. FCX received refunds of federal, state and foreign income taxes totaling less than $1 million in 2023, $46 million in 2022 and $109 million in 2021.
The components of deferred taxes follow:
 December 31,
 20232022
Deferred tax assets:  
Foreign tax credits$1,228 $1,514 
Net operating losses1,761 1,923 
Accrued expenses1,390 1,303 
Employee benefit plans78 99 
Other215 230 
Deferred tax assets4,672 5,069 
Valuation allowances(3,894)(3,985)
Net deferred tax assets778 1,084 
Deferred tax liabilities:  
Property, plant, equipment and mine development costs(4,118)(4,330)
Undistributed earnings(911)(810)
Other(195)(211)
Total deferred tax liabilities(5,224)(5,351)
Net deferred tax liabilities$(4,446)$(4,267)

Tax Attributes. At December 31, 2023, FCX had (i) U.S. foreign tax credits of $1.2 billion that will expire between 2024 and 2027, (ii) U.S. federal net operating losses (NOLs) of $5.4 billion that primarily expire between 2036 and 2037, of which $0.4 billion can be carried forward indefinitely, (iii) U.S. state NOLs of $10.4 billion that primarily expire between 2024 and 2043 and (iv) Atlantic Copper NOLs of $0.5 billion that can be carried forward indefinitely.

Valuation Allowances. On the basis of available information at December 31, 2023, including positive and negative evidence, FCX has provided valuation allowances for certain of its deferred tax assets where it believes it is more-likely-than-not that some portion or all of such assets will not be realized. Valuation allowances totaled $3.9 billion at December 31, 2023, and covered all of FCX’s U.S. foreign tax credits and U.S. federal NOLs, substantially all of its U.S. state and foreign NOLs, as well as a portion of its U.S. federal, state and foreign deferred tax assets.

The valuation allowance related to FCX’s U.S. foreign tax credits totaled $1.2 billion at December 31, 2023. FCX has operations in tax jurisdictions where statutory income taxes and withholding taxes are in excess of the U.S. federal income tax rate. Valuation allowances are recognized on foreign tax credits for which no benefit is expected to be realized.

The valuation allowance related to FCX’s U.S. federal, state and foreign NOLs totaled $1.8 billion and other deferred tax assets totaled $0.9 billion at December 31, 2023. NOLs and deferred tax assets represent future deductions for which a benefit will only be realized to the extent these deductions offset future income. FCX develops an estimate of which future tax deductions will be realized and recognizes a valuation allowance to the extent these deductions are not expected to be realized in future periods.

Valuation allowances will continue to be carried on U.S. foreign tax credits, U.S. federal, state and foreign NOLs and U.S. federal, state and foreign deferred tax assets, until such time that (i) FCX generates taxable income against which any of the assets, credits or NOLs can be used, (ii) forecasts of future income provide sufficient positive evidence to support reversal of the valuation allowances or (iii) FCX identifies a prudent and feasible means of securing the benefit of the assets, credits or NOLs that can be implemented.

The $91 million net decrease in the valuation allowances during 2023 is primarily related to $32 million of U.S. federal NOLs utilized during 2023, and a $292 million decrease related to expirations of U.S. foreign tax credits, partially offset by an increase of $188 million, primarily associated with current year changes in U.S. federal temporary differences and a $22 million increase in valuation allowances against Section 163(j) deferred tax assets related to current year activity.
U.S. Inflation Reduction Act of 2022. The provisions of the U.S. Inflation Reduction Act of 2022 (the Act) became applicable to FCX on January 1, 2023. The Act includes, among other provisions, a new Corporate Alternative Minimum Tax (CAMT) of 15% on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.0 billion over a three-year period. FCX has made interpretations of certain provisions of the Act, and based on these interpretations, determined that the provisions of the Act did not materially impact FCX’s financial results in 2023.

Although the U.S. Department of the Treasury (Treasury) published guidance in 2023 that provided some additional clarity on these rules, uncertainty remains regarding the application of the CAMT. Future guidance released by the Treasury may differ from FCX’s interpretations of the Act, which could be material and may further limit FCX’s ability to realize future benefits from its U.S. NOLs.

Indonesia Tax Matters. In 2018, PT-FI received unfavorable Indonesia Tax Court decisions with respect to its appeal of capitalized mine development costs on its 2012 and 2014 corporate income tax returns. PT-FI appealed those decisions to the Indonesia Supreme Court. In 2019, the Indonesia Supreme Court communicated an unfavorable ruling regarding the treatment of mine development costs on PT-FI’s 2014 tax return. During fourth-quarter 2019, PT-FI met with the Indonesia Tax Office and developed a framework for resolution of the disputed matters as they relate to the audits for years 2012 through 2016.

In 2021, PT-FI participated in discussions with the Indonesia Tax Office regarding progress on the framework for resolution. As a result of these discussions and the revised positions taken by both the Indonesia Tax Office and PT-FI, FCX could no longer conclude a resolution of all of the disputed tax items at a more-likely-than-not threshold and PT-FI recorded net charges of $384 million, including $155 million for non-deductible penalties recorded to other income (expense), net, $43 million for non-deductible interest recorded to interest expense, net, and $186 million to provision for income tax expense.

During 2022, in conjunction with the framework for resolution of disputed matters and the closure of the 2018 corporate income tax audit, PT-FI recorded net charges of $13 million, including $5 million for non-deductible interest recorded to interest expense, net, and $8 million to provision for income taxes. PT-FI continues to engage with the Indonesia Tax Office in pursuit of clarification on certain aspects of the original framework for resolution of the disputed matters.

In 2022, in conjunction with the issuance of Government Regulation Number 50 of 2022, which stipulates that objection, tax court, and judicial review verdicts issued after the issuance of the harmonization law qualify for reduced penalties, PT-FI recorded net credits totaling $69 million, including a credit of $76 million recorded to other income (expense), net and a charge of $7 million to provision for income taxes.

Peru Tax Matters. Cerro Verde’s current mining stability agreement subjects it to a stable income tax rate of 32% through the expiration of the agreement on December 31, 2028. The enacted tax rate on dividend distributions, which is not stabilized by the agreement, is 5%.

Chile Tax Matters. In December 2023, the US-Chilean Tax Treaty was ratified and will enter into force in 2024. Ratification of this treaty results in the extension of FCX’s share of income from El Abra being subject to an income tax rate of 35%.

Beginning in 2018, and through 2023 mining royalty rates at El Abra were based on a sliding scale of 5% to 14% (depending on a defined operational margin). In August 2023, the Chile legislature approved a mining royalty tax reform package that took effect on January 1, 2024, under which the mining royalty taxes will consist of two main components (i) profitability based mining royalty rates on a sliding scale of 8% to 26% (depending on a defined operational margin) and (ii) an additional ad valorem royalty tax based on 1% of sales.

Uncertain Tax Positions. Tax positions reflected in the consolidated financial statements are, based on their technical merits, more-likely-than-not to be sustained upon examination by taxing authorities or have otherwise been effectively settled. Such tax positions reflect the largest amount of benefit, determined on a cumulative probability basis, that is more-likely-than-not to be realized upon settlement with the applicable taxing authority with full knowledge of all relevant information. FCX’s policy associated with uncertain tax positions is to record accrued interest in interest expense and accrued penalties in other income (expense), net rather than in the provision for income taxes.
A summary of the activities associated with FCX’s reserve for unrecognized tax benefits for the years ended December 31 follows.
202320222021
Balance at beginning of year$810 $808 $474 
Additions:
Prior year tax positions27 26 330 
Current year tax positions28 25 71 
Decreases:
Prior year tax positions(13)(12)(30)
Settlements with taxing authorities(132)(37)(37)
Balance at end of year$720 $810 $808 

The total amount of accrued interest and penalties associated with unrecognized tax benefits was $536 million at December 31, 2023, primarily relating to unrecognized tax benefits associated with cost recovery methods and royalties and other related mining taxes, $551 million at December 31, 2022, and $620 million at December 31, 2021. Amounts include unpaid items on the consolidated balance sheet of $33 million at December 31, 2023, $36 million at December 31, 2022, and $41 million at December 31, 2021. Charges for interest and penalties related to unrecognized tax benefits totaled $153 million in 2023, $7 million in 2022 and $34 million in 2021.

The reserve for unrecognized tax benefits of $720 million at December 31, 2023, included $597 million ($421 million net of income tax benefits and valuation allowances) that, if recognized, would reduce FCX’s provision for income taxes. Changes in the reserve for unrecognized tax benefits associated with current and prior-year tax positions were primarily related to uncertainties associated with FCX’s tax treatment of cost recovery methods and various non-deductible costs. There continues to be uncertainty related to the timing of settlements with taxing authorities, but if additional settlements are agreed upon during the year 2024, FCX could experience a change in its reserve for unrecognized tax benefits.

FCX or its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The tax years for FCX’s major tax jurisdictions that remain subject to examination are as follows:
JurisdictionYears Subject to ExaminationAdditional Open Years
U.S. Federal2017-2018 2020-2023
Indonesia2012-2015, 2017, 20212020, 2022-2023
Peru-2017-2023
Chile20222020-2021, 2023