Provision (Benefit) for Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Provision (Benefit) for Income Taxes [Text Block]

Note 8 – Provision (Benefit) for Income Taxes

The Provision (benefit) for income taxes includes:

	Year Ended December 31,
	2020		2019		2018
	(Millions)
Current:
Federal	$	(29)	$	(41)	$	(83)
State	—		(5)		1
Foreign	—		2		—
	(29)		(44)		(82)
Deferred:
Federal	98		280		183
State	10		99		37
	108		379		220
Provision (benefit) for income taxes	$	79	$	335	$	138

Reconciliations from the Provision (benefit) at statutory rate to recorded Provision (benefit) for income taxes are as follows:

	Year Ended December 31,
	2020		2019		2018
	(Millions)
Provision (benefit) at statutory rate	$	58	$	224	$	69
Increases (decreases) in taxes resulting from:
Impact of nontaxable noncontrolling interests	3		29		(73)
State income taxes (net of federal benefit)	6		74		(10)
State deferred income tax rate change	—		—		38
Federal valuation allowance	1		3		105
Other – net	11		5		9
Provision (benefit) for income taxes	$	79	$	335	$	138

Income (loss) from continuing operations before income taxes includes $1 million, $6 million, and $3 million of foreign loss in 2020, 2019, and 2018, respectively.

During the course of audits of our business by domestic and foreign tax authorities, we frequently face challenges regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the liability associated with our various filing positions, we apply the two-step process of recognition and measurement. In association with this liability, we record an estimate of related interest and tax exposure as a component of our tax provision. The impact of this accrual is included within Other – net in our reconciliation of the Provision (benefit) at statutory rate to recorded Provision (benefit) for income taxes.

Significant components of Deferred income tax liabilities and Deferred income tax assets are as follows:

	December 31,
	2020		2019
	(Millions)
Deferred income tax liabilities:
Property, plant and equipment	$	2,320	$	1,921
Investments	1,515		1,411
Other	140		82
Total deferred income tax liabilities	3,975		3,414
Deferred income tax assets:
Accrued liabilities	747		729
Minimum tax credit	—		29
Foreign tax credit	140		140
Federal loss carryovers	905		544
State losses and credits	445		362
Other	140		147
Total deferred income tax assets	2,377		1,951
Less valuation allowance	325		319
Net deferred income tax assets	2,052		1,632
Overall net deferred income tax liabilities	$	1,923	$	1,782

The valuation allowance at December 31, 2020 and 2019 serves to reduce the available deferred income tax assets to an amount that will, more likely than not, be realized. We considered all available positive and negative evidence, which incorporates available tax planning strategies, and management’s estimate of future reversals of existing taxable temporary differences, and have determined that a portion of our deferred income tax assets related to the Foreign tax credit and State losses and credits may not be realized. The amounts presented in the table above are, with respect to state items, before any federal benefit. The change from prior year for the State losses and credits reflects increases in losses and credits generated in the current and prior years less losses and/or credits utilized in the current year. We have loss and credit carryovers in multiple state taxing jurisdictions. These attributes generally expire between 2021 and 2039 with some carryovers having indefinite carryforward periods.

Federal loss carryovers include deferred tax assets on loss carryovers of $905 million which have no expiration date.

Cash refunds for income taxes (net of payments) were $40 million and $86 million in 2020 and 2019, respectively. Cash payments for income taxes (net of refunds) were $11 million in 2018.

As of December 31, 2020, we had approximately $51 million of unrecognized tax benefits. No change occurred to the amount of unrecognized tax benefits in each of the years 2020 and 2019. If recognized, income tax expense would be reduced by $51 million for each of the years 2020 and 2019, including the effect of these changes on other tax attributes, with state income tax amounts included net of federal tax effect.

We recognize related interest and penalties as a component of Provision (benefit) for income taxes. Total interest and penalties recognized as part of income tax provision were a benefit of $900 thousand in 2020 and expenses of $500 thousand and $800 thousand for 2019 and 2018, respectively. Approximately $4 million and $3 million of interest and penalties primarily relating to uncertain tax positions have been accrued as of December 31, 2020 and 2019, respectively.

During the next 12 months, we do not expect ultimate resolution of any unrecognized tax benefit associated with domestic or international matters to have a material impact on our unrecognized tax benefit position.

Consolidated U.S. Federal income tax returns are open to Internal Revenue Service (IRS) examination for years after 2010, excluding 2015 and 2016, for which the statutes have expired. As of December 31, 2020, examinations of tax returns for 2011 through 2014 are currently in appeals. We do not expect material changes in our financial position resulting from these examinations. The statute of limitations for most states expires one year after expiration of the IRS statute. Generally, tax returns for our previously owned Canadian entities are open to audit for tax years after 2012. Tax years 2013 and 2014 are currently under income tax examination. In September 2016, we sold the majority of our Canadian operations and, as part of the sale, indemnified the purchaser for any increases in Canadian tax due to an audit of any tax periods prior to the sale.