Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note I – Income Taxes

The components of income (loss) from continuing operations before income taxes for each of the three years presented and income tax expense (benefit) attributable thereto were as follows.

(Thousands of dollars)	2021		2020	2019
Income (loss) from continuing operations before income taxes
United States	$	114,659	(1,407,598)	282,199
Foreign	(71,768)		(141,437)	(78,701)
Total	$	42,891	(1,549,035)	203,498
Income tax expense (benefit)
U.S. Federal – Current	$	—	(10,627)	—
– Deferred	(1,480)		(249,253)	30,598
Total U.S. Federal	(1,480)		(259,880)	30,598
State	3,303		(8,413)	5,139
Foreign – Current	(5,158)		(5,072)	(17,823)
– Deferred	(2,527)		(20,376)	(3,231)
Total Foreign	(7,685)		(25,448)	(21,054)
Total	$	(5,862)	(293,741)	14,683

The following table reconciles income taxes based on the U.S. statutory tax rate to the Company’s income tax expense.

(Thousands of dollars)	2021		2020	2019
Income tax expense (benefit) based on the U.S. statutory tax rate	$	9,007	(325,299)	42,735
Alberta tax rate reduction and tax impact of deemed repatriation of foreign invested earnings (U.S. tax reform)	—		—	(17,019)
Foreign income (loss) subject to foreign tax rates different than the U.S. statutory rate	13,270		(3,791)	(1,122)
State income taxes, net of federal benefit	2,500		(6,646)	4,060
U.S. tax benefit on certain foreign upstream investments	(8,916)		—	(14,975)
Increase in deferred tax asset valuation allowance related to other foreign exploration expenditures	4,814		7,707	10,927
Tax effect on income attributable to noncontrolling interest	(25,450)		23,712	(21,750)
Other, net	(1,087)		10,576	11,827
Total	$	(5,862)	(293,741)	14,683

An analysis of the Company’s deferred tax assets and deferred tax liabilities at December 31, 2021 and 2020 showing the tax effects of significant temporary differences follows.

(Thousands of dollars)	2021		2020
Deferred tax assets
Property and leasehold costs	$	241,833	95,141
Liabilities for dismantlements	37,728		28,475
Postretirement and other employee benefits	114,790		128,281
U. S. net operating loss	577,531		589,067
Investment in partnership	39,396		65,216
Other deferred tax assets	135,838		112,685
Total gross deferred tax assets	1,147,116		1,018,865
Less valuation allowance	(111,259)		(106,448)
Net deferred tax assets	1,035,857		912,417
Deferred tax liabilities
Deferred tax on undistributed foreign earnings	(5,000)		(5,000)
Accumulated depreciation, depletion and amortization	(786,846)		(665,255)
Other deferred tax liabilities	(41,387)		(27,250)
Total gross deferred tax liabilities	(833,233)		(697,505)
Net deferred tax (liabilities) assets	$	202,624	214,912

In management’s judgment, the net deferred tax assets in the preceding table are more likely than not to be realized based on the consideration of deferred tax liability reversals and future taxable income. The valuation allowance for deferred tax assets relate primarily to tax assets arising in foreign tax jurisdictions that in the judgment of management at the present time are more likely than not to be unrealized. The valuation allowance increased $4.8 million in 2021, related all to non-U.S. items. Subsequent reductions of the valuation allowance are expected to be reported as reductions of tax expense assuming no offsetting change in the deferred tax asset.

The Company has an estimated U.S. net operating loss of $2.75 billion at year-end 2021 with a corresponding deferred tax asset of $577.5 million.  The Company believes the U.S. net operating loss being carried forward will more likely than not be utilized in future periods prior to expirations in 2036 and 2037.

Other Information

Currently the Company considers $100 million of Canada’s past foreign earnings not permanently reinvested, with an accompanying $5 million liability.  At December 31, 2021, $1.4 billion of past foreign earnings are considered permanently reinvested.  The Company closely and routinely monitors these reinvestment positions considering underlying facts and circumstances pertinent to our business and the future operation of the company.

Uncertain Income Tax Positions

The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon ultimate settlement.  If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50% likely of being realized upon ultimate settlement.  Liabilities associated with uncertain income tax positions are included in Deferred credits and other liabilities in the Consolidated Balance Sheets.  A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the three years presented is shown in the following table.

(Thousands of dollars)	2021		2020	2019
Balance at January 1	$	2,832	2,538	2,903
Additions for tax positions related to current year	71		3,042	456
Settlements due to lapse of time	—		—	(821)
Settlements with taxing authorities	—		(2,748)	—
Balance at December 31	$	2,903	2,832	2,538

All additions or settlements to the above liability affect the Company’s effective income tax rate in the respective period of change.  The Company accounts for any applicable interest and penalties on uncertain tax positions as a component of income tax expense.  The Company also had other recorded liabilities as of December 31, 2021, 2020 and 2019 for interest and penalties of $0.3 million, $0.3 million and $0.1 million, respectively, associated with uncertain tax positions.  Income tax expense for the years ended December 31, 2021, 2020 and 2019 included net benefits for interest and penalties of nil, $0.1 million and $0.1 million, respectively, associated with uncertain tax positions.

In 2022, the Company currently expects to add between $0.1 million and $1.0 million to the provision for uncertain tax positions.  Although existing liabilities could be reduced by settlement with taxing authorities or lapse due to statute of limitations, the Company believes that the changes in its unrecognized tax benefits due to these events will not have a material impact on the Consolidated Statement of Operations during 2022.

The Company’s tax returns in multiple jurisdictions are subject to audit by taxing authorities.  These audits often take years to complete and settle.  Although the Company believes that recorded liabilities for unsettled issues are adequate, additional gains or losses could occur in future years from resolution of outstanding unsettled matters. Additionally, the Company could be required to pay amounts into an escrow account as any matters are identified and appealed with the relevant taxing authorities.  As of December 31, 2021, the earliest years remaining open for audit and/or settlement in the Company’s major taxing jurisdictions are as follows:  United States – 2016; Canada – 2016; and Malaysia – 2014. The Company has retained certain possible liabilities and rights to income tax receivables relating to Malaysia for the years prior to 2019. The Company believes current recorded liabilities are adequate.

Coronavirus Aid, Relief, and Economic Security Act

In the fourth quarter of 2020, under the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Company received a refund of its remaining outstanding AMT credit balance of approximately $18.5 million.