Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

In August 2022, the U.S. Government enacted legislation commonly referred to as the Inflation Reduction Act. The main provisions of the Inflation Reduction Act that we anticipate may impact us are: (i) a 15% corporate alternative minimum tax (“Corporate AMT”) and (ii) a 1% excise tax on share repurchases, which we expect to record in equity on our consolidated statements of stockholders’ equity (deficit), in each case, effective for tax years beginning after December 31, 2022.

We will be considered an “applicable corporation” for purposes of the new Corporate AMT. We anticipate our regular federal income tax liability will generally exceed our Corporate AMT liability in future years.

Earnings (losses) before income taxes, provision (benefit) for income taxes and income tax rates consisted of the following:

	For the Nine Months Ended September 30,						For the Three Months Ended September 30,
(in millions)	2022			2021			2022			2021
Earnings (losses) before income taxes	$	4,685		$	1,544		$	407		$	(3,302)
Provision (benefit) for income taxes	1,611			693			183			(582)
Income tax rate	34.4		%	44.9		%	45.0		%	17.6		%

Our income tax rate for the nine and three months ended September 30, 2022 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense, including the state tax treatment of the impairment charge on our equity investment in ABI, and a valuation allowance recorded against a deferred tax asset related to the decrease in the estimated fair value of our investment in JUUL, partially offset by the release of a valuation allowance related to our Cronos warrant and tax accruals no longer required.

Our income tax rates for the nine and three months ended September 30, 2021 differ from the U.S. federal statutory rate of 21%, due primarily to the state tax treatment of the impairment charge on our equity investment in ABI.

For further information on the changes in the estimated fair value of our investment in JUUL and the impairment of our equity investment in ABI, see Note 3. Investments in Equity Securities.

The following chart provides a reconciliation of the beginning and ending valuation allowances for the period ended September 30, 2022:

(in millions)
Balance at beginning of year	$	3,097
Additions to valuation allowance charged to income tax expense	395
Releases to valuation allowance credited to income tax benefit	(65)
Foreign currency translation	—
Balance at end of period	$	3,427

We determine 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, we consider 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 additions in valuation allowances for the nine months ended September 30, 2022 were due primarily to deferred tax assets recorded in connection with decreases in the estimated fair value of our investment in JUUL. The releases in valuation allowances for the nine months ended September 30, 2022 were due to realizability of anticipated capital losses related to our Cronos warrant. The cumulative valuation allowance at September 30, 2022 was primarily attributable to deferred tax assets recorded in connection with our investment in JUUL and our Investment in Cronos.