INCOME TAXES (Note)

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes [Note Text Block]

International Paper made income tax payments, net of refunds, of $389 million and $203 million for the nine months ended September 30, 2021 and 2020, respectively.

The Company currently estimates, that as a result of ongoing discussions, pending tax settlements and expirations of statutes of limitations, the amount of unrecognized tax benefits could be reduced by approximately $11 million during the next 12 months.

The Brazilian Federal Revenue Service has challenged the deductibility of goodwill amortization generated in a 2007 acquisition by Sylvamo do Brasil Ltda., a wholly-owned subsidiary of the Company. The Company received assessments for the tax years 2007-2015 totaling approximately $107 million in tax, and $351 million in interest, penalties, and fees as of September 30, 2021 (adjusted for variation in currency exchange rates). After a previous favorable ruling challenging the basis for these assessments, we received other subsequent unfavorable decisions from the Brazilian Administrative Council of Tax Appeals. The Company has appealed and intends to further appeal these and any future unfavorable administrative judgments to the Brazilian federal courts; however, this tax litigation matter may take many years to resolve. The Company believes that it has appropriately evaluated the transaction underlying these assessments, and has concluded based on Brazilian tax law, that its position would be sustained.

The Company intends to vigorously defend its position against the current assessments and any similar assessments that may be issued for tax years subsequent to 2015. This assessment pertains to a business that was conveyed to Sylvamo Corporation as of October 1, 2021, as part of our spin-off transaction. Pursuant to the terms of the tax matters agreement entered into between the Company and Sylvamo Corporation, the Company will pay 60% and Sylvamo will pay 40%, on up to $300 million of any assessment related to this matter, and the Company will pay all amounts of the assessment over $300 million. The Brazilian government may enact a tax amnesty program that would allow Sylvamo do Brasil Ltda. to resolve this dispute for less than the assessed amount. In addition, all decisions concerning the conduct of the litigation related to this matter, including strategy settlement, pursuit and abandonment, will continue to be made by the Company. Sylvamo will thus have no control over any decision related to this ongoing litigation. As of October 1, 2021, in connection with the recording of the distribution of assets and liabilities resulting from the spin-off transaction, International Paper will establish a liability on the Company's balance sheet representing the initial fair value of the contingent obligation under the tax matters agreement. The Company's fair value estimate is in process and the Company is currently unable to quantify the liability to be recognized in the fourth quarter. It is possible the amount could be material.