Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax expense decreased $190 million between quarterly periods from $2.2 billion in 2023 to $2.0 billion in 2024. The company’s income before income tax expense decreased $2.2 billion from $8.7 billion in 2023 to $6.5 billion in 2024, primarily due to lower downstream margins, lower upstream realizations, unfavorable foreign currency effects and higher upstream depreciation, depletion and amortization, partially offset by higher upstream sales volumes. The company’s effective tax rate increased between quarterly periods from 25 percent in 2023 to 31 percent in 2024. The change in effective tax rate was primarily due to the absence of prior period favorable tax items and mix effects, resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions.

The income tax expense increased $31 million between the nine-month periods from $6.9 billion in 2023 to $7.0 billion in 2024. The company’s income before income tax expense decreased $4.6 billion from $26.1 billion in 2023 to $21.4 billion in 2024, primarily due to lower downstream margins, higher upstream depreciation, depletion and amortization, higher operating expenses, unfavorable foreign currency effects and lower upstream realizations, partially offset by higher upstream sales volumes and higher downstream affiliate earnings. The company’s effective tax rate increased between nine-month periods from 27 percent in 2023 to 32 percent in 2024. The change in effective tax rate was primarily due to the absence of prior period favorable tax items, current period unfavorable tax items and mix effects, resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions.

The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in various jurisdictions. Both the outcomes for these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain. 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