Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax expense increased between quarterly periods from $165 million in 2020 to $1.94 billion in 2021. The company's income before income tax expense increased $8.10 billion from a loss of $44 million in 2020 to income of $8.06 billion in 2021, primarily due to higher realizations, upstream sales volumes and downstream margins. The company’s effective tax rate changed between quarterly periods from negative 375 percent in 2020 to 24 percent in 2021. The change in the effective tax rate is mainly due to the consequence of mix effects, resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions and the absence of a one-time tax charge in an international location.

The income tax expense increased between the nine-month periods from a benefit of $1.59 billion in 2020 to a charge of $4.05 billion in 2021. This increase is a direct result of the company’s income before income tax expense increasing $21.15 billion, from a loss of $6.50 billion in 2020 to income of $14.65 billion in 2021. The increase in income is primarily due to higher crude oil realizations, the absence of second quarter 2020 impairments and write-offs and higher upstream sales volumes, partially offset by lower asset sale gains. The company’s effective tax rate changed between nine-month periods from 24 percent in 2020 to 28 percent in 2021. The change in effective tax rate is primarily a consequence of mix effects, resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions and unfavorable tax items.

Tax positions for Chevron and its subsidiaries and affiliates are subject to income tax audits by many tax jurisdictions throughout the world. For the company’s major tax jurisdictions, examinations of tax returns for certain prior tax years had not been completed as of September 30, 2021. For these jurisdictions, the latest years for which income tax examinations had been finalized were as follows: United States — 2013, Nigeria — 2007, Australia — 2009, Kazakhstan — 2012 and Saudi Arabia — 2015.

The company engages in ongoing discussions with tax authorities regarding the resolution of tax matters in the various jurisdictions. Both the outcomes for these tax matters and the timing of resolution and/or closure of the tax audits are highly uncertain. However, it is reasonably possible that developments regarding tax matters in certain tax jurisdictions may result in significant increases or decreases in the company’s total unrecognized tax benefits within the next 12 months. Given the number of years that still remain subject to examination and the number of matters being examined in the various tax jurisdictions, the company is unable to estimate the range of possible adjustments to the balance of unrecognized tax benefits.