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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Income (loss) before income taxes is composed of the following:
 For the Year Ended December 31,    
 202120202019
 (In millions)
U.S.$689 $(4,581)$(4,397)
Foreign1,291 (259)1,389 
Total$1,980 $(4,840)$(3,008)
The total income tax provision consists of the following:
 For the Year Ended December 31,    
 202120202019
 (In millions)
Current income taxes:
Federal$16 $(2)$1 
Foreign636 178 659 
652 176 660 
Deferred income taxes:
Federal— — 67 
Foreign(74)(112)(53)
(74)(112)14 
Total$578 $64 $674 
The total income tax provision differs from the amounts computed by applying the U.S. statutory income tax rate to income (loss) before income taxes. A reconciliation of the tax on the Company’s income (loss) before income taxes and total tax expense is shown below:
 For the Year Ended December 31,    
 202120202019
 (In millions)
Income tax expense (benefit) at U.S. statutory rate$416 $(1,016)$(631)
State income tax, less federal effect(1)
— — 1 
Taxes related to foreign operations300 97 328 
Tax credits(10)(13)(6)
Net change in tax contingencies16 1 1 
Goodwill impairment— 35 — 
Valuation allowances(1)
(111)965 972 
Tax attributable to Altus Preferred Unit limited partners(34)(16)(8)
All other, net1 11 17 
$578 $64 $674 
(1)The change in state valuation allowance is included as a component of state income tax.
The net deferred income tax liability reflects the net tax impact of temporary differences between the asset and liability amounts carried on the balance sheet under GAAP and amounts utilized for income tax purposes. The net deferred income tax liability consists of the following as of December 31:
 20212020
 (In millions)
Deferred tax assets:
U.S. and state net operating losses$2,494 $2,306 
Capital losses647 633 
Tax credits and other tax incentives24 33 
Foreign tax credits2,241 2,241 
Accrued expenses and liabilities152 93 
Asset retirement obligation712 654 
Property and equipment3 261 
Investment in Altus Midstream LP64 76 
Net interest expense limitation135 252 
Lease liability81 79 
Decommissioning contingency for sold Gulf of Mexico properties263 — 
Other1 1 
Total deferred tax assets6,817 6,629 
Valuation allowance(5,875)(5,991)
Net deferred tax assets942 638 
Deferred tax liabilities:
Equity investments2 4 
Property and equipment748 750 
Right-of-use asset77 74 
Decommissioning security for sold Gulf of Mexico properties164 — 
Other86 13 
Total deferred tax liabilities1,077 841 
Net deferred income tax liability$135 $203 
Net deferred tax assets and liabilities are included in the consolidated balance sheet as of December 31 as follows:
 20212020
 (In millions)
Assets:
Deferred charges and other$13 $12 
Liabilities:
Income taxes148 215 
Net deferred income tax liability$135 $203 
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to realize existing deferred tax assets. A significant piece of negative evidence evaluated was the pre-tax book cumulative loss incurred over the three-year period ended December 31, 2021. This cumulative loss was primarily the result of low commodity prices and oil and gas impairments during this period. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth.
In 2021, 2020, and 2019, the Company’s valuation allowance decreased by $116 million, increased by $1.0 billion, and increased by $1.0 billion, respectively, as detailed in the table below:
202120202019
 (In millions)
Balance at beginning of year$5,991 $4,959 $3,947 
State(1)
1 67 41 
U.S.(112)960 971 
Foreign(5)5 — 
Balance at end of year$5,875 $5,991 $4,959 
(1)Reported as a component of state income taxes.
On December 31, 2021, the Company had net operating losses as follows:
 Amount    Expiration    
 (In millions) 
U.S.$9,717 2021 - Indefinite
State6,695 Various
Foreign12028 - Indefinite
The Company has a U.S. net operating loss carryforward of $9.7 billion, which includes $177 million of net operating loss subject to annual limitation under Section 382 of the Internal Revenue Code (Code). Net operating losses generated in tax years beginning after 2017 are subject to an 80 percent taxable income limitation with indefinite carryover under the 2017 Tax Cuts and Jobs Act. The Company also has a net interest expense carryover of $610 million under Section 163(j) of the Code subject to indefinite carryover, a U.S. capital loss carryforward of $1.9 billion, which has a five year carryover period expiring in 2023 and a Canadian capital loss carryforward of $836 million which has an indefinite carryover. The Company has recorded a full valuation allowance against the U.S. net operating losses, the state net operating losses, the net interest expense carryover, the U.S. capital loss, and the Canadian capital loss because it is more likely than not that these attributes will not be realized.
On December 31, 2021, the Company had foreign tax credits as follows:
 Amount    Expiration    
 (In millions) 
Foreign tax credits$2,241 2025-2026
The Company has a $2.2 billion U.S. foreign tax credit carryforward. The Company has recorded a full valuation allowance against the U.S. foreign tax credits listed above because it is more likely than not that these attributes will expire unutilized.
The Company accounts for income taxes in accordance with ASC Topic 740, “Income Taxes,” which prescribes a minimum recognition threshold that a tax position must meet before being recognized in the financial statements. Tax positions generally refer to a position taken in a previously filed income tax return or expected to be included in a tax return to be filed in the future that is reflected in the measurement of current and deferred income tax assets and liabilities. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
202120202019
 (In millions)
Balance at beginning of year$93 $82 $24 
Additions based on tax positions related to prior year16 — 49 
Additions based on tax positions related to the current year7 11 9 
Balance at end of year$116 $93 $82 
The Company records interest and penalties related to unrecognized tax benefits as a component of income tax expense. Each quarter, the Company assesses the amounts provided for and, as a result, may increase or reduce the amount of interest and penalties. During each of the years ended December 31, 2021, 2020, and 2019, the Company recorded tax expense of $1 million for interest and penalties. At December 31, 2021, 2020, and 2019, the Company had an accrued liability for interest and penalties of $4 million, $3 million, and $2 million, respectively.
In 2021, 2020, and 2019, the Company recorded a $23 million net increase, an $11 million net increase, and a $58 million net increase, respectively, in its reserve for uncertain tax positions. The Company is currently under IRS audit for the 2014 through 2017 tax years.
Apache and its subsidiaries are subject to U.S. federal income tax as well as income tax in various states and foreign jurisdictions. The Company’s uncertain tax positions are related to tax years that may be subject to examination by the relevant taxing authority. Apache’s earliest open tax years in its key jurisdictions are as follows:
Jurisdiction
U.S.2014
Egypt2005
U.K.2020