Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Earnings (losses) before income taxes and provision for income taxes consisted of the following:

	For the Years Ended December 31,
(in millions)	2021		2020		2019
Earnings (losses) before income taxes:
United States	$	4,239	$	6,842	$	266
Outside United States	(415)		48		500
Total	$	3,824	$	6,890	$	766
Provision (benefit) for income taxes:
Current:
Federal	$	1,965	$	2,025	$	1,686
State and local	542		553		470
Outside United States	2		22		3
	2,509		2,600		2,159
Deferred:
Federal	(1,190)		(130)		(78)
State and local	30		(34)		(19)
Outside United States	—		—		2
	(1,160)		(164)		(95)
Total provision (benefit) for income taxes	$	1,349	$	2,436	$	2,064

Altria’s U.S. subsidiaries join in the filing of a U.S. federal consolidated income tax return. The U.S. federal income tax statute of limitations remains open for the year 2016 and forward, with years 2017 through 2018 currently under examination by the Internal Revenue Service (“IRS”) as part of an audit conducted in the ordinary course of business. State statutes of limitations generally remain open for the year 2016 and forward. Certain of Altria’s state tax returns are currently under examination by various states as part of routine audits conducted in the ordinary course of business.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

	For the Years Ended December 31,
(in millions)	2021		2020		2019
Balance at beginning of year	$	74	$	64	$	85
Additions for tax positions of prior years	40		12		32
Reductions for tax positions due to lapse of statutes of limitations	(5)		—		—
Reductions for tax positions of prior years	(23)		(2)		(16)
Tax settlements	(33)		—		(37)
Balance at end of year	$	53	$	74	$	64

Unrecognized tax benefits and Altria’s consolidated liability for tax contingencies were as follows at December 31:

(in millions)	2021		2020
Unrecognized tax benefits	$	53	$	74
Accrued interest and penalties	11		15
Tax credits and other indirect benefits	—		(1)
Liability for tax contingencies	$	64	$	88

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2021 was $31 million, along with $22 million affecting deferred taxes. The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2020 was $47 million, along with $27 million affecting deferred taxes.

Altria recognizes accrued interest and penalties associated with uncertain tax positions as part of the tax provision.

For the years ended December 31, 2021, 2020 and 2019, Altria recognized in its consolidated statements of earnings (losses) $(4) million, $4 million and $6 million, respectively, of gross interest (income) expense associated with uncertain tax positions.

Altria is subject to income taxation in many jurisdictions. Unrecognized tax benefits reflect the difference between tax positions taken or expected to be taken on income tax returns and the amounts recognized in the financial statements. Resolution of the related tax positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within the control of Altria. It is reasonably possible that within the next 12 months certain examinations will be resolved, which could result in a decrease in unrecognized tax benefits of approximately $17 million.

A reconciliation between actual income taxes and amounts computed by applying the federal statutory rate to earnings (losses) before income taxes is as follows:

	For the Years Ended December 31,
	2021				2020				2019
(dollars in millions)	$		%		$		%		$		%
U.S. federal statutory rate	$	803	21.0	%	$	1,447	21.0	%	$	161	21.0	%
Increase (decrease) resulting from:
State and local income taxes, net of federal tax benefit	451		11.8		410		6.0		356		46.5
Tax basis in foreign investments	25		0.7		23		0.3		84		11.0
Uncertain tax positions	(25)		(0.7)		9		0.1		(40)		(5.2)
Investment in ABI	(31)		(0.8)		(16)		(0.2)		(210)		(27.4)
Investment in JUUL	7		0.2		537		7.8		1,808		236.0
Investment in Cronos	128		3.3		20		0.3		(66)		(8.6)
Other (1)	(9)		(0.2)		6		0.1		(29)		(3.8)
Effective tax rate	$	1,349	35.3	%	$	2,436	35.4	%	$	2,064	269.5	%

(1) Other in 2019 is primarily deferred profit sharing dividends tax benefit of $21 million and immaterial miscellaneous items.

The tax provision (benefit) in 2021 was impacted by the state tax treatment of the impairment charge on Altria’s equity investment in ABI. The tax provision (benefit) in 2021 also included net tax expense of $128 million related to Altria’s Investment in Cronos, including an addition to a valuation allowance on a deferred tax asset.

The tax provision (benefit) in 2020 included tax expense of $612 million for a valuation allowance on a deferred tax asset related to Altria’s impairment of its investment in JUUL in the third quarter of 2020, partially offset by a $24 million tax benefit reflecting the

release of a portion of the valuation allowance related to a reduction of a deferred tax asset associated with an increase in the estimated fair value of JUUL in the fourth quarter of 2020.

The tax provision (benefit) in 2019 included tax expense of $2,024 million for a valuation allowance on a deferred tax asset related to Altria’s impairment of its investment in JUUL, tax expense of $84 million resulting from a partial reversal of the tax basis benefit associated with the deemed repatriation tax recorded in 2017 and tax expense of $38 million for a valuation allowance against foreign tax credits not realizable. These amounts were partially offset by a tax benefit of $105 million for amended tax returns and audit adjustments relating to prior years, a tax benefit of $100 million for accruals no longer required and a net tax benefit of $79 million related to Altria’s Investment in Cronos, including a valuation allowance release on a deferred tax asset.

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following at December 31:

(in millions)	2021		2020
Deferred income tax assets:
Accrued postretirement and postemployment benefits	$	387	$	524
Settlement charges	835		888
Accrued pension costs	—		148
Investment in JUUL	2,652		2,642
Investment in Cronos	403		128
Net operating losses and tax credit carryforwards	46		81
Total deferred income tax assets	4,323		4,411
Deferred income tax liabilities:
Property, plant and equipment	(216)		(273)
Intangible assets	(2,802)		(2,806)
Investment in ABI	(1,695)		(2,819)
Finance assets, net	(29)		(117)
Accrued pension costs	(55)		—
Other	(94)		(12)
Total deferred income tax liabilities	(4,891)		(6,027)
Valuation allowances	(3,097)		(2,817)
Net deferred income tax liabilities	$	(3,665)	$	(4,433)

At December 31, 2021, Altria had estimated gross state tax net operating losses of $272 million that, if unused, will expire in 2022 through 2038.

A reconciliation of the beginning and ending valuation allowances was as follows:

	For the Years Ended December 31,
(in millions)	2021		2020		2019
Balance at beginning of year	$	2,817	$	2,324	$	71
Additions to valuation allowance related to Altria’s initial Investment in Cronos	—		—		352
Additions to valuation allowance charged to income tax expense	401		692		2,063
Reductions to valuation allowance credited to income tax benefit	(118)		(200)		(159)
Foreign currency translation	(3)		1		(3)
Balance at end of year	$	3,097	$	2,817	$	2,324

Altria determines the realizability of deferred tax assets based on the weight of available evidence, that it is more-likely-than-not that the deferred tax asset will not be realized. In reaching this determination, Altria considers all available positive and negative evidence, including the character of the loss, carryback and carryforward considerations, future reversals of temporary differences and available tax planning strategies.

The changes in valuation allowances during 2021 were primarily due to deferred tax assets recorded in connection with Altria’s Investment in Cronos. The cumulative valuation allowance at December 31, 2021 was primarily attributable to deferred tax assets recorded in connection with Altria’s investment in JUUL ($2,652 million) and its Investment in Cronos ($407 million).

The 2020 valuation allowance was primarily attributable to deferred tax assets recorded in connection with the impairments of Altria’s investment in JUUL ($2,610 million), and its Investment in Cronos ($121 million).

The 2019 valuation allowance was primarily attributable to the deferred tax asset recorded in connection with the impairment of Altria’s investment in JUUL. Altria recorded a full valuation allowance of $2,024 million against this deferred tax asset. For a discussion regarding the impairment of Altria’s investment in JUUL, see Note 6. Investments in Equity Securities.