Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Taxes

Taxes

Income Taxes	Year ended December 31
	2021		2020		2019
Income tax expense (benefit)
U.S. federal
Current	$	174	$	(182)	$	(73)
Deferred	1,004		(1,315)		(1,074)
State and local
Current	222		65		153
Deferred	202		(152)		(172)
Total United States	1,602		(1,584)		(1,166)
International
Current	4,854		1,833		4,577
Deferred	(506)		(2,141)		(720)
Total International	4,348		(308)		3,857
Total income tax expense (benefit)	$	5,950	$	(1,892)	$	2,691

The reconciliation between the U.S. statutory federal income tax rate and the company’s effective income tax rate is detailed in the following table:

	2021			2020			2019
Income (loss) before income taxes
United States	$	9,674		$	(5,700)		$	(5,483)
International	11,965			(1,753)			11,019
Total income (loss) before income taxes	21,639			(7,453)			5,536
Theoretical tax (at U.S. statutory rate of 21% )	4,544			(1,565)			1,163
Effect of U.S. tax reform	—			—			3
Equity affiliate accounting effect	(890)			211			(687)
Effect of income taxes from international operations	2,692			(39)			2,196
State and local taxes on income, net of U.S. federal income tax benefit	216			(65)			(18)
Prior year tax adjustments, claims and settlements 1	362			(236)			192
Tax credits	(173)			(33)			(18)
Other U.S. 1, 2	(801)			(165)			(140)
Total income tax expense (benefit)	$	5,950		$	(1,892)		$	2,691
Effective income tax rate	27.5		%	25.4		%	48.6		%

1 Includes one-time tax costs (benefits) associated with changes in uncertain tax positions.

2 Includes one-time tax costs (benefits) associated with changes in valuation allowances (2021 - $(624); 2020 - $0; 2019 - $0).

The 2021 increase in income tax expense of $7,842 is a result of the year-over-year increase in total income before income tax expense, which is primarily due to higher upstream realizations, the absence of 2020 impairment and write-offs and higher downstream margins. The company’s effective tax rate changed from 25.4 percent in 2020 to 27.5 percent in 2021. The change in effective tax rate is mainly due to mix effects resulting from the absolute level of earnings or losses and whether they arose in higher or lower tax rate jurisdictions.

The company records its deferred taxes on a tax-jurisdiction basis. The reported deferred tax balances are composed of the following:

			At December 31
	2021		2020
Deferred tax liabilities
Properties, plant and equipment	$	17,169	$	16,603
Investments and other	4,105		5,617
Total deferred tax liabilities	21,274		22,220
Deferred tax assets
Foreign tax credits	(11,718)		(10,585)
Asset retirement obligations/environmental reserves	(4,553)		(4,721)
Employee benefits	(3,037)		(3,856)
Deferred credits	(996)		(1,056)
Tax loss carryforwards	(4,175)		(6,701)
Other accrued liabilities	(239)		(228)
Inventory	(289)		(633)
Operating leases	(1,255)		(1,234)
Miscellaneous	(3,657)		(3,685)
Total deferred tax assets	(29,919)		(32,699)
Deferred tax assets valuation allowance	17,651		17,762
Total deferred taxes, net	$	9,006	$	7,283

Deferred tax liabilities decreased by $946 from year-end 2020. The decrease to Investments and other was driven by a consolidated subsidiary restructuring, partially offset with an increase to Properties, plant and equipment. Deferred tax assets decreased by $2,780 from year-end 2020. This decrease was primarily related to decreases in tax loss carryforwards for various locations, and employee benefits, partially offset by the increase in foreign tax credits.

The overall valuation allowance relates to deferred tax assets for U.S. foreign tax credit carryforwards, tax loss carryforwards and temporary differences. The valuation allowance reduces the deferred tax assets to amounts that are, in management’s assessment, more likely than not to be realized. At the end of 2021, the company had gross tax loss carryforwards of approximately $10,750 and tax credit carryforwards of approximately $993, primarily related to various international tax jurisdictions. Whereas some of these tax loss carryforwards do not have an expiration date, others expire at various times from 2022 through 2040. U.S. foreign tax credit carryforwards of $11,718 will expire between 2022 and 2032.

At December 31, 2021 and 2020, deferred taxes were classified on the Consolidated Balance Sheet as follows:

	At December 31
	2021		2020
Deferred charges and other assets	$	(5,659)	$	(5,286)
Noncurrent deferred income taxes	14,665		12,569
Total deferred income taxes, net	$	9,006	$	7,283

Income taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. The indefinite reinvestment assertion continues to apply for the purpose of determining deferred tax liabilities for U.S. state and foreign withholding tax purposes.

U.S. state and foreign withholding taxes are not accrued for unremitted earnings of international operations that have been or are intended to be reinvested indefinitely. Undistributed earnings of international consolidated subsidiaries and affiliates for which no deferred income tax provision has been made for possible future remittances totaled approximately $49,200 at December 31, 2021. This amount represents earnings reinvested as part of the company’s ongoing international business. It is not practicable to estimate the amount of state and foreign taxes that might be payable on the possible remittance of earnings that are intended to be reinvested indefinitely. The company does not anticipate incurring significant additional taxes on remittances of earnings that are not indefinitely reinvested.

Uncertain Income Tax Positions The company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The following table indicates the changes to the company’s unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019. The term “unrecognized tax benefits” in the accounting standards for income taxes refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. Interest and penalties are not included.

	2021		2020		2019
Balance at January 1	$	5,018	$	4,987	$	5,070
Foreign currency effects	(1)		2		1
Additions based on tax positions taken in current year	194		253		94
Additions for tax positions taken in prior years	218		437		313
Reductions for tax positions taken in prior years	(36)		(216)		(194)
Settlements with taxing authorities in current year	(18)		(429)		(78)
Reductions as a result of a lapse of the applicable statute of limitations	(87)		(16)		(219)
Balance at December 31	$	5,288	$	5,018	$	4,987

Approximately 82 percent of the $5,288 of unrecognized tax benefits at December 31, 2021, would have an impact on the effective tax rate if subsequently recognized. Certain of these unrecognized tax benefits relate to tax carryforwards that may require a full valuation allowance at the time of any such recognition.

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 December 31, 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 outcome of 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 on 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.

On the Consolidated Statement of Income, the company reports interest and penalties related to liabilities for uncertain tax positions as “Income tax expense.” As of December 31, 2021, accrual benefit of $(76) for anticipated interest and penalty was included on the Consolidated Balance Sheet, compared with accrual benefit of $(95) as of year-end 2020. Income tax expense (benefit) associated with interest and penalties was $19, $(124) and $(3) in 2021, 2020 and 2019, respectively.

Taxes Other Than on Income
	Year ended December 31
	2021		2020		2019
United States
Import duties and other levies	7		7		2
Property and other miscellaneous taxes	3,378		2,248		1,785
Payroll taxes	302		235		254
Taxes on production	628		317		355
Total United States	4,315		2,807		2,396
International
Import duties and other levies	49		39		35
Property and other miscellaneous taxes	2,225		1,461		1,435
Payroll taxes	113		117		125
Taxes on production	138		75		145
Total International	2,525		1,692		1,740
Total taxes other than on income	$	6,840	$	4,499	$	4,136