INCOME TAXES

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The following table presents the components of our total income tax provision:

	Three months ended March 31,
	2024		2023
	(in millions)
(Loss) income before income taxes	$	(19)	$	376
Current income tax provision	—		28
Deferred income tax (benefit) provision	(9)		47
Total income tax (benefit) provision	$	(9)	$	75

Our income tax provision or benefit for interim periods is determined by applying an estimated annual effective tax rate to (loss) income before income taxes with the result adjusted for discrete items, if any, in the relevant period. A reconciliation of the U.S. federal statutory tax rate to effective tax rate, including discrete items, for the three months ended March 31, 2024 and 2023 is shown below:

	Three months ended March 31,
	2024		2023
U.S federal statutory tax rate	21	%	21	%
State income taxes, net	7		7
Other	3		—
Annual effective tax rate	31	%	28	%
Discrete items:
Stock compensation and other	16		—
Change in the valuation allowance	—		(8)
Effective tax rate	47	%	20	%

Our annual effective tax rate of 31% differed from the U.S. federal statutory tax rate of 21% for the three months ended March 31, 2024 primarily due to state taxes and disallowed executive compensation expense. During the three months ended March 31, 2024, we recognized an income tax benefit related to the settlement of certain equity-settled stock-based compensation awards, which have the effect of increasing our effective tax rate by 16%.

Our annual effective tax rate of 28% differed from the U.S. federal statutory tax rate of 21% for the three months ended March 31, 2023 due to state taxes. During the three months ended March 31, 2023 we recognized a tax benefit for the release of a valuation allowance which was recorded in 2022 related to a capital loss generated from the divestiture of oil and gas assets. See Part II, Item 8 – Financial Statements and Supplementary Data, Note 7 Income Taxes in our 2023 Annual Report for additional information.

Management expects to realize the recorded deferred tax assets primarily through future income and reversal of taxable temporary differences. Realization of our existing deferred tax assets is not assured and depends on a number of factors including our ability to generate sufficient taxable income in future periods.