Taxes



Income Taxes	Year ended December 31
	2015			2014		2013
Income tax expense (benefit)
U.S. federal
Current	$	(817	)	$	748	$	15
Deferred	(580		)	1,330		1,128
State and local
Current	(187		)	336		120
Deferred	(109		)	36		74
Total United States	(1,693		)	2,450		1,337
International
Current	2,997			9,235		12,296
Deferred	(1,172		)	207		675
Total International	1,825			9,442		12,971
Total income tax expense (benefit)	$	132		$	11,892	$	14,308

In 2015, before-tax loss for U.S. operations, including related corporate and other charges, was $(2,877), compared with before-tax income of $6,296 and $4,672 in 2014 and 2013, respectively. For international operations, before-tax income was $7,719, $24,906 and $31,233 in 2015, 2014 and 2013, respectively. U.S. federal income tax expense was reduced by $35, $68 and $175 in 2015, 2014 and 2013, respectively, for business tax credits.

The reconciliation between the U.S. statutory federal income tax rate and the company’s effective income tax rate is detailed in the following table:



	Year ended December 31
	2015			2014			2013
U.S. statutory federal income tax rate	35.0		%	35.0		%	35.0		%
Effect of income taxes from international operations¹	(25.1	)		2.1			4.4
State and local taxes on income, net of U.S. federal income tax benefit	(1.5	)		0.7			0.6
Tax credits	(0.7	)		(0.2	)		(0.5	)
Other^1,2	(5.0	)		0.5			0.4
Effective tax rate	2.7		%	38.1		%	39.9		%

¹2013 and 2014 conformed to 2015 presentation.

² 2015 includes one-time tax benefits associated with changes in uncertain tax positions and provision-to-return adjustments.

The company’s effective tax rate decreased from 38.1 percent in 2014 to 2.7 percent in 2015. The decrease primarily resulted from the impacts of jurisdictional mix, one-time tax benefits, foreign currency remeasurement, equity earnings and a reduction in statutory tax rates in the United Kingdom, partially offset by the effects of valuation allowances recognized on deferred tax assets and the sale of the company's interest in Caltex Australia Limited.

The company records its deferred taxes on a tax-jurisdiction basis and classifies those net amounts as current or noncurrent based on the balance sheet classification of the related assets or liabilities. The reported deferred tax balances are composed of the following:



	At December 31
	2015			2014
Deferred tax liabilities
Properties, plant and equipment	$	27,044		$	28,452
Investments and other	3,743			3,059
Total deferred tax liabilities	30,787			31,511
Deferred tax assets
Foreign tax credits	(10,534		)	(11,867		)
Abandonment/environmental reserves	(6,880		)	(6,686		)
Employee benefits	(4,801		)	(4,831		)
Deferred credits	(1,810		)	(1,828		)
Tax loss carryforwards	(2,748		)	(1,747		)
Other accrued liabilities	(525		)	(498		)
Inventory	(120		)	(153		)
Miscellaneous	(2,525		)	(2,128		)
Total deferred tax assets	(29,943		)	(29,738		)
Deferred tax assets valuation allowance	15,412			16,292
Total deferred taxes, net	$	16,256		$	18,065

Deferred tax liabilities at the end of 2015 decreased by approximately $700 from year-end 2014. The decrease was primarily related to decreased temporary differences related to property, plant and equipment. Deferred tax assets were essentially unchanged between periods. A reduction in U.S. foreign tax credits was substantially offset by an increase in foreign tax loss carryforwards.

The overall valuation allowance relates to deferred tax assets for U.S. foreign tax credit carryforwards, tax loss carryforwards and temporary differences. It reduces the deferred tax assets to amounts that are, in management’s assessment, more likely than not to be realized. At the end of 2015, the company had tax loss carryforwards of approximately $7,615 and tax credit carryforwards of approximately $1,249, primarily related to various international tax jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2016 through 2025. U.S. foreign tax credit carryforwards of $10,534 will expire between 2017 and 2024.

At December 31, 2015 and 2014, deferred taxes were classified on the Consolidated Balance Sheet as follows:



	At December 31
	2015			2014
Prepaid expenses and other current assets	$	(917	)	$	(1,071	)
Deferred charges and other assets	(4,512		)	(3,597		)
Federal and other taxes on income	996			813
Noncurrent deferred income taxes	20,689			21,920
Total deferred income taxes, net	$	16,256		$	18,065

Income taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. Undistributed earnings of international consolidated subsidiaries and affiliates for which no deferred income tax provision has been made for possible future remittances totaled approximately $45,400 at December 31, 2015. This amount represents earnings reinvested as part of the company’s ongoing international business. It is not practicable to estimate the amount of taxes that might be payable on the possible remittance of earnings that are intended to be reinvested indefinitely. At the end of 2015, deferred income taxes were recorded for the undistributed earnings of certain international operations where indefinite reinvestment of the earnings is not planned. The company does not anticipate incurring significant additional taxes on remittances of earnings that are not indefinitely reinvested.

Uncertain Income Tax Positions The company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The following table indicates the changes to the company’s unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013. The term “unrecognized tax benefits” in the accounting standards for income taxes refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. Interest and penalties are not included.



	2015			2014			2013
Balance at January 1	$	3,552		$	3,848		$	3,071
Foreign currency effects	(27		)	(25		)	(58		)
Additions based on tax positions taken in current year	154			354			276
Additions/reductions resulting from current-year asset acquisitions/sales	—			(22		)	—
Additions for tax positions taken in prior years	218			37			1,164
Reductions for tax positions taken in prior years	(678		)	(561		)	(176		)
Settlements with taxing authorities in current year	(5		)	(50		)	(320		)
Reductions as a result of a lapse of the applicable statute of limitations	(172		)	(29		)	(109		)
Balance at December 31	$	3,042		$	3,552		$	3,848

The decrease in unrecognized tax benefits between December 31, 2014, and December 31, 2015 was primarily due to the resolution of numerous audit issues with various tax jurisdictions during the year.

Approximately 71 percent of the $3,042 of unrecognized tax benefits at December 31, 2015, would have an impact on the effective tax rate if subsequently recognized. Certain of these unrecognized tax benefits relate to tax carryforwards that may require a full valuation allowance at the time of any such recognition.

Tax positions for Chevron and its subsidiaries and affiliates are subject to income tax audits by many tax jurisdictions throughout the world. For the company’s major tax jurisdictions, examinations of tax returns for certain prior tax years had not been completed as of December 31, 2015. For these jurisdictions, the latest years for which income tax examinations had been finalized were as follows: United States – 2011, Nigeria – 2000, Angola – 2009, Saudi Arabia – 2012 and Kazakhstan – 2007.

The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcome of these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain. However, it is reasonably possible that developments on tax matters in certain tax jurisdictions may result in significant increases or decreases in the company’s total unrecognized tax benefits within the next 12 months. Given the number of years that still remain subject to examination and the number of matters being examined in the various tax jurisdictions, the company is unable to estimate the range of possible adjustments to the balance of unrecognized tax benefits.

On the Consolidated Statement of Income, the company reports interest and penalties related to liabilities for uncertain tax positions as “Income tax expense.” As of December 31, 2015, accruals of $399 for anticipated interest and penalty obligations were included on the Consolidated Balance Sheet, compared with accruals of $233 as of year-end 2014. Income tax expense (benefit) associated with interest and penalties was $195, $4 and $(42) in 2015, 2014 and 2013, respectively.

Taxes Other Than on Income



	Year ended December 31
	2015		2014		2013
United States
Excise and similar taxes on products and merchandise	$	4,426	$	4,633	$	4,792
Import duties and other levies	4		6		4
Property and other miscellaneous taxes	1,367		1,002		1,036
Payroll taxes	270		273		255
Taxes on production	157		349		333
Total United States	6,224		6,263		6,420
International
Excise and similar taxes on products and merchandise	2,933		3,553		3,700
Import duties and other levies	40		45		41
Property and other miscellaneous taxes	2,548		2,277		2,486
Payroll taxes	161		172		168
Taxes on production	124		230		248
Total International	5,806		6,277		6,643
Total taxes other than on income	$	12,030	$	12,540	$	13,063