Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

15.    INCOME TAXES

Income Statement Components

Income before income tax expense was as follows (in millions):

	Year Ended December 31,
	2023		2022		2021
U.S. operations	$	9,335	$	11,716	$	1,023
Foreign operations	2,433		3,591		520
Income before income tax expense	$	11,768	$	15,307	$	1,543

Statutory income tax rates applicable to the countries in which we operate were as follows:

	Year Ended December 31,
	2023		2022		2021
U.S.	21	%	21	%	21	%
Canada	15	%	15	%	15	%
U.K. (a)	25	%	19	%	19	%
Ireland	13	%	13	%	13	%
Peru	30	%	30	%	30	%
Mexico	30	%	30	%	30	%

________________________

(a)Statutory income tax rate was increased to 25 percent effective April 1, 2023.

The following is a reconciliation of income tax expense computed by applying statutory income tax rates to actual income tax expense (dollars in millions):

	U.S.				Foreign				Total
	Amount		Percent		Amount		Percent		Amount		Percent
Year ended December 31, 2023
Income tax expense at statutory rates	$	1,960	21.0	%	$	449	18.5	%	$	2,409	20.5	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	114		1.2	%	161		6.6	%	275		2.3	%
Permanent differences	(87)		(0.9)	%	(18)		(0.7)	%	(105)		(0.9)	%
GILTI tax	167		1.8	%	—		—		167		1.4	%
Foreign tax credits	(149)		(1.6)	%	—		—		(149)		(1.3)	%
Repatriation withholding tax	45		0.5	%	—		—		45		0.4	%
Tax effects of income associated with noncontrolling interests	(84)		(0.9)	%	30		1.2	%	(54)		(0.4)	%
Other, net	8		—	%	23		0.9	%	31		0.3	%
Income tax expense	$	1,974	21.1	%	$	645	26.5	%	$	2,619	22.3	%

________________________

See notes on page 119.

	U.S.				Foreign				Total
	Amount		Percent		Amount		Percent		Amount		Percent
Year ended December 31, 2022
Income tax expense at statutory rates	$	2,460	21.0	%	$	611	17.0	%	$	3,071	20.1	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	182		1.6	%	255		7.1	%	437		2.8	%
Permanent differences	(61)		(0.5)	%	(16)		(0.5)	%	(77)		(0.5)	%
GILTI tax	413		3.5	%	—		—		413		2.7	%
Foreign tax credits	(396)		(3.4)	%	—		—		(396)		(2.6)	%
Repatriation withholding tax	51		0.4	%	—		—		51		0.3	%
Tax effects of income associated with noncontrolling interests	(78)		(0.7)	%	25		0.7	%	(53)		(0.3)	%
Other, net	(27)		(0.2)	%	9		0.3	%	(18)		(0.1)	%
Income tax expense	$	2,544	21.7	%	$	884	24.6	%	$	3,428	22.4	%
Year ended December 31, 2021
Income tax expense at statutory rates	$	215	21.0	%	$	73	14.0	%	$	288	18.7	%
U.S. state and Canadian provincial tax expense, net of federal income tax effect	16		1.6	%	53		10.2	%	69		4.5	%
Permanent differences	(34)		(3.3)	%	(14)		(2.7)	%	(48)		(3.1)	%
Changes in tax law (a)	(10)		(1.0)	%	74		14.2	%	64		4.1	%
CARES Act (b)	(56)		(5.5)	%	—		—		(56)		(3.6)	%
GILTI tax	125		12.2	%	—		—		125		8.1	%
Foreign tax credits	(103)		(10.1)	%	—		—		(103)		(6.7)	%
Settlements	(22)		(2.1)	%	—		—		(22)		(1.4)	%
Tax effects of income associated with noncontrolling interests	(74)		(7.2)	%	30		5.8	%	(44)		(2.9)	%
Other, net	(7)		(0.7)	%	(11)		(2.1)	%	(18)		(1.2)	%
Income tax expense	$	50	4.9	%	$	205	39.4	%	$	255	16.5	%

________________________

(a)During the three months ended June 30, 2021, certain statutory income tax rate changes (primarily an increase in the U.K. rate from 19 percent to 25 percent effective in 2023) were enacted that resulted in the remeasurement of our deferred tax liabilities and related deferred income tax expense.

(b)Upon filing our superseding 2020 federal income tax return in the fourth quarter of 2021, we recorded an additional tax benefit during the year ended December 31, 2021 related to the additional 2020 tax net operating loss (NOL) carryback to 2015, as permitted by the Coronavirus Aid, Relief and Economic Security (CARES) Act enacted on March 27, 2020.

Components of income tax expense were as follows (in millions):

	U.S.		Foreign		Total
Year ended December 31, 2023
Current:
Country	$	1,804	$	415	$	2,219
U.S. state / Canadian provincial	157		140		297
Total current	1,961		555		2,516
Deferred:
Country	25		69		94
U.S. state / Canadian provincial	(12)		21		9
Total deferred	13		90		103
Income tax expense	$	1,974	$	645	$	2,619
Year ended December 31, 2022
Current:
Country	$	2,147	$	766	$	2,913
U.S. state / Canadian provincial	153		312		465
Total current	2,300		1,078		3,378
Deferred:
Country	164		(138)		26
U.S. state / Canadian provincial	80		(56)		24
Total deferred	244		(194)		50
Income tax expense	$	2,544	$	884	$	3,428
Year ended December 31, 2021
Current:
Country	$	68	$	215	$	283
U.S. state / Canadian provincial	1		97		98
Total current	69		312		381
Deferred:
Country	5		(63)		(58)
U.S. state / Canadian provincial	(24)		(44)		(68)
Total deferred	(19)		(107)		(126)
Income tax expense	$	50	$	205	$	255

Income Taxes Paid (Refunded)

Income taxes paid to (received from) U.S. and foreign taxing authorities were as follows (in millions):

	Year Ended December 31,
	2023		2022		2021
U.S.	$	2,158	$	2,396	$	(878)	(a)
Foreign	1,336		892		36
Income taxes paid (refunded), net	$	3,494	$	3,288	$	(842)

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(a)This amount includes a refund of $962 million that we received related to our U.S. federal income tax return for 2020.

Deferred Income Tax Assets and Liabilities

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in millions):

	December 31,
	2023		2022
Deferred income tax assets:
Tax credit carryforwards	$	809	$	660
NOLs	710		642
Inventories	237		326
Compensation and employee benefit liabilities	32		44
Environmental liabilities	59		57
Finance lease obligations	314		309
Operating lease liabilities	519		512
Other	130		186
Total deferred income tax assets	2,810		2,736
Valuation allowance	(1,383)		(1,234)
Net deferred income tax assets	1,427		1,502
Deferred income tax liabilities:
Property, plant, and equipment	5,121		5,022
Deferred turnaround costs	399		369
Operating lease ROU assets	546		507
Inventories	106		234
Investments	423		431
Other	181		156
Total deferred income tax liabilities	6,776		6,719
Net deferred income tax liabilities	$	5,349	$	5,217

We had the following income tax credit and loss carryforwards as of December 31, 2023 (in millions):

	Amount		Expiration
U.S. state income tax credits (gross amount)	$	76	2024 through 2033
U.S. state income tax credits (gross amount)	2		Unlimited
U.S. foreign tax credits	748		2027 through 2033
U.S. state income tax NOLs (gross amount)	12,164		2024 through 2040
Foreign NOLs (gross amount)	329		Unlimited

We have recorded a valuation allowance as of December 31, 2023 and 2022 due to uncertainties related to our ability to utilize some of our deferred income tax assets associated with our U.S. foreign tax credits, certain U.S. state income tax credits, certain foreign deferred tax assets, and certain NOLs before they expire. The valuation allowance is based on our estimates of future taxable income in the various jurisdictions in which we operate and the period over which deferred income tax assets will be recoverable. The valuation allowance increased by $149 million in 2023 primarily due to the generation of foreign tax credits that cannot be realized.

Unrecognized Tax Benefits

Changes in Unrecognized Tax Benefits

The following is a reconciliation of the changes in unrecognized tax benefits, excluding related interest and penalties (in millions):

	Year Ended December 31,
	2023		2022		2021
Balance as of beginning of year	$	284	$	816	$	847
Additions for tax positions related to the current year	18		27		3
Additions for tax positions related to prior years	4		19		13
Reductions for tax positions related to prior years	(73)		(573)		(25)
Reductions for tax positions related to the lapse of applicable statute of limitations	(9)		(5)		—
Settlements	(38)		—		(22)
Balance as of end of year	$	186	$	284	$	816

As of December 31, 2023 and 2022, there was $126 million and $190 million, respectively, of unrecognized tax benefits that if recognized would reduce our annual effective tax rate.

Interest and penalties incurred during the years ended December 31, 2023, 2022, and 2021 were not material. Accrued interest and penalties as of December 31, 2023 and 2022 were not material.

Although reasonably possible, we do not anticipate that any of our tax audits will be resolved during the next 12 months that would result in a reduction in our liability for unrecognized tax benefits either due to our tax positions being sustained or due to our agreement to their disallowance. Should any reductions occur, we do not expect that they would have a material impact on our financial statements because such reductions would not materially affect our annual effective tax rate.

Tax Returns Under Audit

U.S. Federal

In 2023, we settled the audits related to our U.S. federal income tax returns for 2012 through 2015, with the exception of one issue regarding the timing of deductibility of certain costs at our refineries. We intend to file formal claims for refund with the Internal Revenue Service (IRS) for this disagreed-upon issue. The settlement related to these audits resulted in a favorable reduction in our unrecognized tax benefits.

As of December 31, 2023, our U.S. federal income tax returns for 2017 through 2020 were under audit by the IRS. We continue to work with the IRS to resolve these audits and we believe that they will be resolved for amounts consistent with our recorded amounts of unrecognized tax benefits associated with these audits.

U.S. State

As of December 31, 2023, our California tax returns for 2011 through 2019 were under audit by the state of California. We do not expect the ultimate disposition of these audits will result in a material change to our financial condition, results of operations, and liquidity. We believe these audits will be resolved for amounts consistent with our recorded amounts for unrecognized tax benefits associated with these audits.

Foreign

As of December 31, 2023, certain of our Canadian subsidiaries’ federal tax returns for 2013 through 2015 and 2017 through 2020 were under audit by the Canada Revenue Agency and our Quebec provincial tax returns for 2013 through 2015 and 2017 through 2020 were under audit by Revenue Quebec. As of December 31, 2023, the 2020 tax return for one of our Mexican subsidiaries was under audit by Servicio de Administración Tributaria, and we are protesting proposed adjustments for this tax return. We do not expect the ultimate disposition of these audits or inquiries will result in a material change to our financial condition, results of operations, and liquidity.

Other Disclosures

Undistributed Earnings of Foreign Subsidiaries

As of December 31, 2023, the cumulative undistributed earnings of our foreign subsidiaries that is considered permanently reinvested in the relevant foreign countries were $7.1 billion. This amount excludes $1.4 billion of earnings that are no longer considered permanently reinvested. We are able to distribute cash via a dividend from our foreign subsidiaries with a full dividend received deduction in the U.S. However, there is a cost to repatriate the undistributed earnings of certain of our foreign subsidiaries to us, including, but not limited to, withholding taxes imposed by certain foreign jurisdictions, U.S. state income taxes, and U.S. federal income tax on foreign exchange gains. We have accrued $45 million of withholding and other taxes on the $1.4 billion of earnings previously noted, but it is not practicable to estimate the amount of additional tax that would be payable on the undistributed earnings that are considered permanently reinvested.

Repatriation Tax Liability

Our repatriation tax liability relates to our recognition of a one-time transition tax on the deemed repatriation of previously undistributed accumulated earnings and profits of our foreign subsidiaries and is included in other long-term liabilities (see Note 8). This transition tax will be remitted to the IRS over

the eight-year period provided in the Internal Revenue Code of 1986, as amended, with annual installments through 2025.