Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes.

The difference between the book basis and the tax basis of our net assets, not directly subject to income taxes, is as follows:



	Icahn Enterprises						Icahn Enterprises Holdings
	December 31,						December 31,
	2018			2017			2018			2017
	(in millions)						(in millions)
Book basis of net assets	$	6,529		$	5,106		$	6,557		$	5,133
Book/tax basis difference	(1,940		)	(450		)	(1,940		)	(450		)
Tax basis of net assets	$	4,589		$	4,656		$	4,617		$	4,683

Income (loss) from continuing operations before income tax expense (benefit) is as follows:



	Year Ended December 31,
	2018			2017		2016
	(in millions)
Domestic	$	290		$	1,798	$	(2,370	)
International	(12		)	30		(3		)
	$	278		$	1,828	$	(2,373	)

Income tax benefit (expense) attributable to continuing operations is as follows:



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Current:
Domestic	$	(11	)	$	(15	)	$	(28	)
International	(4		)	(13		)	(18		)
Total current	(15		)	(28		)	(46		)
Deferred:
Domestic	20			544			131
International	(1		)	13			3
Total deferred	19			557			134
	$	4		$	529		$	88

A reconciliation of the income tax benefit (expense) calculated at the federal statutory rate to income tax benefit (expense) on continuing operations as shown in the consolidated statements of operations is as follows:



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Income tax benefit (expense) at U.S. statutory rate	$	(58	)	$	(640	)	$	831
Tax effect from:
Valuation allowance	(4		)	529			(46		)
Non-controlling interest	26			(6		)	(6		)
Goodwill impairment	(18		)	—			(226		)
Stock dispositions	69			—			—
Income not subject to taxation	14			220			(440		)
Enactment of U.S. tax legislation, net of valuation allowance	—			392			—
Other	(25		)	34			(25		)
Income tax benefit (expense)	$	4		$	529		$	88

The tax effect of significant differences representing deferred tax assets (liabilities) (the difference between financial statement carrying value and the tax basis of assets and liabilities) is as follows:



	December 31,
	2018			2017
	(in millions)
Deferred tax assets:
Property, plant and equipment	$	17		$	61
Net operating loss	791			711
Tax credits	46			71
Capital loss	50			—
Post-retirement benefits, including pensions	—			162
Other	82			248
Total deferred tax assets	986			1,253
Less: Valuation allowance	(518		)	(483		)
Net deferred tax assets	$	468		$	770

Deferred tax liabilities:
Property, plant and equipment	$	(129	)	$	(235	)
Intangible assets	(33		)	(115		)
Investment in partnerships	(681		)	(774		)
Investment in U.S. subsidiaries	(184		)	(184		)
Other	(80		)	(119		)
Total deferred tax liabilities	(1,107		)	(1,427		)
	$	(639	)	$	(657	)

We recorded deferred tax assets and deferred tax liabilities of $37 million and $676 million, respectively, as of December 31, 2018 and $75 million and $732 million, respectively, as of December 31, 2017. Deferred tax assets are included in other assets in our consolidated balance sheets.

We analyze all positive and negative evidence to consider whether it is more likely than not that all of the deferred tax assets will be realized. Projected future income, tax planning strategies and the expected reversal of deferred tax liabilities are considered in making this assessment. As of December 31, 2018 we had a valuation allowance of approximately $518 million primarily related to tax loss and credit carryforwards and other deferred tax assets. The current and future provisions for income taxes may be significantly impacted by changes to valuation allowances. These allowances will be maintained until it is more likely than not that the deferred tax assets will be realized. For the year ended December 31, 2018, the valuation allowance on deferred tax assets increased by $35 million. The increase was primarily attributable to capital loss and state net operating loss carryforwards.

At December 31, 2018, American Entertainment Properties Corp. ("AEPC"), a wholly-owned corporate subsidiary of Icahn Enterprises and Icahn Enterprises Holdings, which includes all or parts of our Automotive, Metals, Home Fashion and Real Estate segments had U.S federal net operating loss carryforwards of approximately $2.0 billion with expiration dates from 2029 through 2037.

At December 31, 2018, CVR Energy had state income tax credits of $35 million, which are available to reduce future state income taxes. These credits, if not used, will expire beginning in 2033.

At December 31, 2018, Viskase had U.S. federal net operating loss carryforwards of $68 million which will begin expiring in the year 2024 and forward, and foreign net operating loss carryforwards of $19 million with unlimited carryforward period and $5 million with a five-year carryforward period.

On August 1, 2018, CVR Energy completed an exchange offer whereby CVR Refining's public unitholders tendered a total of 21,625,106 common units of CVR Refining in exchange for 13,699,549 shares of CVR Energy common stock. As a

result of the exchange offer, AEPC owned less than 80% of the common stock of CVR Energy and CVR Energy deconsolidated from the AEPC consolidated federal income tax group. Beginning with the tax period after the exchange, CVR Energy became the parent of a new consolidated group for U.S. federal income tax purposes and will file and pay its federal income tax obligations directly to the Internal Revenue Service.

As of December 31, 2018, we have not provided taxes on approximately $54 million of undistributed earnings in foreign subsidiaries which are deemed to be indefinitely reinvested. If at some future date these earnings cease to be permanently reinvested, we may be subject to foreign income and withholding taxes upon repatriation of such amounts.

Enactment of U.S. Tax Legislation

On December 22, 2017, The Tax Cuts and Jobs Act (the "Tax Legislation") was enacted in the United States, significantly revising certain U.S. corporate income tax provisions; including, among other items, a reduction of the U.S. corporate rate from 35% to 21%, effective for tax year beginning after December 31, 2017; the transition of U.S. international taxation from a worldwide tax system to a territorial system; and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017, (or, if greater, November 2, 2017) of a “specified foreign corporation” which includes controlled foreign corporations and other foreign corporations which have at least one U.S. corporate shareholder that owns 10% or more of the value or voting power of such foreign corporation. We estimated the impact of the Tax Legislation on our income tax provision for the year ended December 31, 2017 in accordance with our understanding of the Tax Legislation and guidance available at the date of this filing and as a result have recorded adjustments to the various tax balances, current, long-term and deferred tax assets and liabilities, all during the fourth quarter of 2017, the period in which the Tax Legislation was enacted. The actual amounts recorded in 2017 were not significantly different from the provisional amounts estimated in the prior year tax provision.

In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income (“GILTI”) provisions of The Tax Legislation. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. We currently estimate no additional tax due in 2018 from the GILTI inclusion.

Under the Tax Legislation, an entity must pay a Base Erosion Anti-Abuse Tax ("BEAT") if the BEAT is greater than its regular tax liability. We currently estimate no additional tax due in 2018 pursuant to the BEAT provisions.

Accounting for Uncertainty in Income Taxes

A summary of the changes in the gross amounts of unrecognized tax benefits for the years ended December 31, 2018, 2017 and 2016 are as follows:



	Year Ended December 31,
	2018			2017			2016
	(in millions)
Balance at January 1	$	34		$	52		$	56
Addition based on tax positions related to the current year	—			—			2
Increase for tax positions of prior years	6			—			—
Decrease for tax positions of prior years	—			(3		)	(1		)
Decrease for statute of limitation expiration	(6		)	(15		)	(5		)
Balance at December 31	$	34		$	34		$	52

At December 31, 2018, 2017 and 2016, we had unrecognized tax benefits of $34 million, $34 million and $52 million, respectively. Of these totals, $30 million, $28 million and $37 million represent the amount of unrecognized tax benefits that if recognized, would affect the annual effective tax rate in the respective periods. The total unrecognized tax benefits differ from the amount which would affect the effective tax rate primarily due to the impact of valuation allowances.

During the next 12 months, CVR Energy believes that it is reasonably possible that unrecognized tax benefits of CVR Energy may decrease by approximately $3 million due to statute expirations. We do not anticipate any significant changes to the amount of our unrecognized tax benefits in our other business segments during the next 12 months.

We recognize interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense. We recorded $1 million, $2 million and $9 million as of December 31, 2018, 2017 and 2016, respectively, in liabilities for tax related net interest and penalties in our consolidated balance sheets. Income tax (benefit) expense related to interest and

penalties were $(1) million, $(7) million and $1 million for the years December 31, 2018, 2017 and 2016, respectively. We or certain of our subsidiaries file income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various non-U.S. jurisdictions. We and our subsidiaries are no longer subject to U.S. federal tax examinations for years before 2015 or state and local examinations for years before 2013, with limited exceptions.