Income Taxes (Notes)

12 Months Ended

Dec. 31, 2020

The principal components of EOG's total net deferred income tax liabilities at December 31, 2020 and 2019 were as follows (in thousands):


	2020		2019
Deferred Income Tax Assets (Liabilities)
Foreign Oil and Gas Exploration and Development Costs Deducted for Tax Under Book Depreciation, Depletion and Amortization	$	25,129	$	5,825
Foreign Net Operating Loss	74,280		66,675
Foreign Valuation Allowances	(97,499)		(70,455)
Foreign Other	217		318
Total Net Deferred Income Tax Assets	$	2,127	$	2,363
Deferred Income Tax (Assets) Liabilities
Oil and Gas Exploration and Development Costs Deducted for Tax Over Book Depreciation, Depletion and Amortization	$	5,028,010	$	5,277,550
Commodity Hedging Contracts	14,518		(4,699)
Deferred Compensation Plans	(42,594)		(47,650)
Accrued Expenses and Liabilities	—		(8,502)
Equity Awards	(102,944)		(108,324)
Alternative Minimum Tax Credit Carryforward	—		(31,904)
Undistributed Foreign Earnings	9,843		15,746
Other	(47,506)		(46,116)
Total Net Deferred Income Tax Liabilities	$	4,859,327	$	5,046,101
Total Net Deferred Income Tax Liabilities	$	4,857,200	$	5,043,738

The components of Income (Loss) Before Income Taxes for the years indicated below were as follows (in thousands):


	2020		2019		2018

United States	$	(756,479)	$	3,466,578	$	4,084,156
Foreign	17,425		78,689		156,842
Total	$	(739,054)	$	3,545,267	$	4,240,998

The principal components of EOG's Income Tax Provision (Benefit) for the years indicated below were as follows (in thousands):


	2020		2019		2018
Current:
Federal	$	(107,834)	$	(152,258)	$	(303,853)
State	6,790		10,819		17,048
Foreign	40,248		81,426		65,615
Total	(60,796)		(60,013)		(221,190)
Deferred:
Federal	(153,027)		626,901		862,075
State	(15,400)		32,541		43,293
Foreign	(17,963)		(27,784)		(11,212)
Total	(186,390)		631,658		894,156
Other Non-Current: (1)
Federal	112,704		245,125		148,992
Foreign	—		(6,413)		—
Total	112,704		238,712		148,992

Income Tax Provision (Benefit)	$	(134,482)	$	810,357	$	821,958

(1) Includes changes in certain amounts that are expected to be paid or received beyond the next twelve months. The primary component is refundable alternative minimum tax (AMT) credits.

The differences between taxes computed at the U.S. federal statutory tax rate and EOG's effective rate for the years indicated below were as follows:


	2020		2019		2018
Statutory Federal Income Tax Rate	21.00	%	21.00	%	21.00	%
State Income Tax, Net of Federal Benefit	0.92		0.97		1.12
Income Tax Provision Related to Foreign Operations	(0.09)		0.87		0.51
Income Tax Provision Related to Canadian Operations	(2.43)		—		—
TCJA (1)	—		—		(2.60)		(2)
Share-Based Compensation	(2.94)		0.02		(0.47)
Other	1.74		—		(0.18)
Effective Income Tax Rate	18.20	%	22.86	%	19.38	%

(1) The Tax Cuts and Jobs Act (TCJA) was enacted in 2017 and required certain measurement-period adjustments in 2018.

(2) Includes impact of utilizing certain tax net operating losses (NOLs) ((1.2)%), the reversal of the federal sequestration charge ((1.0)%) and other TCJA impacts ((0.4)%).

The net effective tax rate of 18% in 2020 was lower than the prior year rate of 23% primarily due to taxes attributable to EOG's foreign operations and increased stock-based compensation tax deficiencies.

Deferred tax assets are recorded for certain tax benefits, including tax NOLs and tax credit carryforwards, provided that management assesses the utilization of such assets to be "more likely than not." Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, EOG has recorded valuation allowances for the portion of certain foreign and state deferred tax assets that management does not believe are more likely than not to be realized.

The principal components of EOG's rollforward of valuation allowances for deferred income tax assets for the years indicated below were as follows (in thousands):


	2020		2019		2018

Beginning Balance	$	200,831	$	167,142	$	466,421
Increase (1)	25,573		30,673		23,062
Decrease (2)	(11,343)		(75)		(26,219)
Other (3)	3,942		3,091		(296,122)
Ending Balance	$	219,003	$	200,831	$	167,142

(1) Increase in valuation allowance related to the generation of tax NOLs and other deferred tax assets.

(2) Decrease in valuation allowance associated with adjustments to certain deferred tax assets and their related allowances.

(3) Represents dispositions, revisions and/or foreign exchange rate variances and the effect of statutory income tax rate changes. The United Kingdom operations were sold in the fourth quarter of 2018.

As of December 31, 2020, EOG had state income tax NOLs of approximately $1.9 billion, which, if unused, expire between 2021 and 2039. EOG also has Canadian NOLs of $275 million, some of which can be carried forward up to 20 years. As described above, these NOLs and other less significant tax benefits have been evaluated for the likelihood of utilization, and valuation allowances have been established for the portion of these deferred income tax assets that do not meet the “more likely than not” threshold.

The total balance of unrecognized tax benefits for all jurisdictions at December 31, 2020, was $10 million, resulting from the tax treatment of certain compensation deductions, of which the full amount may potentially have an earnings impact. During the fourth quarter of 2020, EOG settled uncertain tax positions resulting from its tax treatment of research and experiential expenditures related to certain innovations in its horizontal drilling and completion operations for taxable years 2016 and 2017. Consequently, the balance of uncertain tax positions and earnings for the period decreased $29 million and $5 million, respectively. EOG records interest and penalties related to unrecognized tax benefits to its income tax provision. No interest expense has been recognized in the Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) related to the remaining unrecognized tax benefits as these positions will be claimed on amended returns or as self-proposed audit adjustments, which, if sustained, will result in refunds. EOG does not anticipate that the amount of the unrecognized tax benefits will change materially during the next twelve months. EOG and its subsidiaries file income tax returns and are subject to tax audits in the U.S. and various state, local and foreign jurisdictions. EOG's earliest open tax years in its principal jurisdictions are as follows: U.S. federal (2016), Canada (2016), Trinidad (2013) and China (2010).

EOG's foreign subsidiaries' undistributed earnings are not considered to be permanently reinvested outside of the U.S. Accordingly, EOG may be required to accrue certain U.S. federal, state, and foreign deferred income taxes on these undistributed earnings as well as on any other outside basis differences related to its investments in these subsidiaries. As of December 31, 2020, EOG has cumulatively recorded $10 million of deferred foreign income taxes for withholdings on its undistributed foreign earnings. Additionally, EOG's foreign earnings may be subject to the U.S. federal "global intangible low-taxed income" (GILTI) inclusion. EOG records any GILTI tax as a period expense.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details