Income Taxes

3 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Earnings before income taxes, provision for income taxes and income tax rates consisted of the following:

	For the Three Months Ended March 31,
(in millions)	2024			2023
Earnings before income taxes	$	2,739		$	2,479
Provision for income taxes	610			692
Income tax rate	22.3		%	27.9		%

Our income tax rate for the three months ended March 31, 2024 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense, partially offset by an income tax benefit from the partial release of a valuation allowance recorded against a deferred tax asset associated with our JUUL-related losses. The valuation allowance release was due to our capital gain on the ABI Transaction.

Our income tax rate for the three months ended March 31, 2023 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense and a valuation allowance recorded against a deferred tax asset related to the disposition of our former investment in JUUL.

The following chart provides a reconciliation of the beginning and ending valuation allowances for the three months ended March 31, 2024:

(in millions)
Balance at beginning of year	$	2,256
Additions to valuation allowance charged to income tax expense	7
Releases of valuation allowance credited to income tax benefit	(94)
Foreign currency translation	(1)
Reductions to valuation allowance due to NJOY Transaction (no impact to earnings)	(4)
Balance at end of period	$	2,164

We determine deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. We record a

valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized. We determine the realizability of deferred tax assets based on the weight of all available positive and negative evidence. In reaching this determination, we consider the character of the assets and the possible sources of taxable income of the appropriate character within the carryback and carryforward periods available under the tax law. There is a potential that sufficient positive evidence may be available in future periods to cause us to further reduce or eliminate the valuation allowance on certain deferred tax assets. That change to the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease in income tax expense in the period the release is recorded.

The changes in the valuation allowances for the three months ended March 31, 2024 were due primarily to the ABI Transaction. The cumulative valuation allowance at March 31, 2024 was primarily attributable to deferred tax assets recorded in connection with the unrealized capital losses related to our former investment in JUUL and our investment in Cronos. As we continue to evaluate all sources of potential income that may become available to utilize these losses, our valuation allowance position may change. For further discussion of our ABI Transaction, see Note 5. Investments in Equity Securities.