Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 11 - INCOME TAXES
Income from continuing operations before income taxes includes the following components:
Year Ended December 31,
(In millions) 2023 2022 2021
United States $ 600  $ 1,803  $ 3,827 
Foreign (3) (7) (24)
Total $ 597  $ 1,796  $ 3,803 
The components of the income tax expense from continuing operations consist of the following:
Year Ended December 31,
(In millions) 2023 2022 2021
Current provision:
United States federal $ 4  $ 201  $ 14 
United States state & local 26  131  55 
Foreign 4  1  — 
34  333  69 
Deferred provision (benefit):
United States federal 97  117  683 
United States state & local 7  (22) 31 
  Foreign 10  (5) (10)
Total income tax expense from continuing operations $ 148  $ 423  $ 773 
Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate is as follows:
(In millions) 2023 2022 2021
Tax at U.S. statutory rate $ 125  21  % $ 377  21  % $ 799  21  %
Increase (decrease) due to:
Percentage depletion in excess of cost depletion (32) (5) (49) (3) (99) (3)
Valuation allowance 14  2  —  —  —  — 
Unrecognized tax benefits 7  1  2  —  9  — 
State taxes, net 28  5  71  4  86  2 
Federal & state provision to return (20) (3) 27  1  (2) — 
Income not subject to tax (11) (2) (9) —  (9) — 
Goodwill impairment 26  4  —  —  —  — 
Other items, net 11  2  4  —  (11) — 
Provision for income tax expense and effective income tax rate including discrete items $ 148  25  % $ 423  23  % $ 773  20  %
The decreases in income tax expense in 2023, as compared to 2022, as well as 2022 compared to 2021 are predominately related to the decrease in the pre-tax book income year-over-year.
The components of income taxes for other than continuing operations consisted of the following:
(In millions) 2023 2022 2021
Other comprehensive income (loss):
Pension and OPEB $ 10  $ (425) $ (206)
Derivative financial instruments 47  26  (21)
Total $ 57  $ (399) $ (227)
Significant components of our deferred tax assets and liabilities are as follows:
(In millions) 2023 2022
Deferred tax assets:
Operating loss and other carryforwards $ 390  $ 389 
Pension and OPEB liabilities 155  244 
Environmental 67  96 
Product inventories 92  54 
State and local 9  14 
Lease liabilities 79  62 
Other liabilities 180  135 
Total deferred tax assets before valuation allowance 972  994 
Deferred tax asset valuation allowance (396) (390)
Net deferred tax assets 576  604 
Deferred tax liabilities:
Investment in ventures (192) (195)
Lease assets (79) (38)
Property, plant and equipment and mineral rights (837) (827)
Other assets (103) (122)
Total deferred tax liabilities (1,211) (1,182)
Net deferred tax assets (liabilities) $ (635) $ (578)
We had gross domestic (including states) and foreign NOLs of $1,704 million and $1,452 million, respectively, at December 31, 2023. We had gross domestic (including states) and foreign NOLs of $2,278 million and $1,444 million, respectively, at December 31, 2022. The U.S. federal NOLs will begin to expire in 2034 and state NOLs begin to expire in 2024. The foreign NOLs begin to expire in 2035. For the year ended December 31, 2023, we had no gross interest expense limitation carryforwards. For the year ended December 31, 2022, we had $77 million gross interest expense limitation carryforwards.
The changes in the valuation allowance are presented below:
(In millions) 2023 2022 2021
Balance at beginning of year $ 390  $ 409  $ 836 
Change in valuation allowance:
Included in income tax expense 6  (19) (82)
Decrease from acquisitions —  —  (345)
Balance at end of year $ 396  $ 390  $ 409 
At December 31, 2023 and 2022, we have a valuation allowance recorded of $356 million and $342 million, respectively, related to foreign deferred tax assets, and an additional $40 million and $48 million, respectively, against certain state NOLs, which are expected to expire before utilization.
During 2023, we recorded a $14 million valuation allowance against a portion of our Canadian deferred tax assets due to losses in recent years. We intend to maintain a valuation allowance against these deferred tax assets, unless and until sufficient positive evidence exists to support the realization of such assets.
During 2021, we recorded a decrease to the valuation allowance of $345 million related to the election filed with our 2020 federal tax return to waive the pre-acquisition NOLs that are limited under Section 382 of the IRC. An offsetting decrease was recorded in the NOL deferred tax asset in the same period.
Our losses in Luxembourg in recent periods represent sufficient negative evidence to require a full valuation allowance against the deferred tax assets in that jurisdiction. We intend to maintain a valuation allowance against the deferred tax assets related to these operating losses, unless and until sufficient positive evidence exists to support the realization of such assets.
At December 31, 2023 and 2022, we had no cumulative undistributed earnings of foreign subsidiaries included in retained earnings. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of earnings.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(In millions) 2023 2022 2021
Unrecognized tax benefits balance as of January 1 $ 58  $ 35  $ 107 
Increases for tax positions in current year 18  24  4 
Decrease due to tax positions in prior year —  (1) (66)
Lapses in statutes of limitations —  —  (10)
Unrecognized tax benefits balance as of December 31 $ 76  $ 58  $ 35 
At December 31, 2023 and 2022, we had unrecognized tax benefits of $76 million and $58 million, respectively, included in Other non-current liabilities on the Statements of Consolidated Financial Position. If the unrecognized tax benefits were recognized, the full $76 million would impact the effective tax rate. Interest and penalties related to unrecognized tax benefits are $8 million for the year ended December 31, 2023. We do not expect that the amount of unrecognized benefits will change significantly within the next 12 months.
Tax years 2016 and forward remain subject to examination for the U.S., and tax years 2018 and forward remain subject to examination for Canada.