Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The jurisdictional components of book income (loss) before income taxes and non-controlling interest on our Consolidated Statements of Operations are as follows (in millions):

  Year Ended December 31,
  2022 2021 2020
U.S. $ (1,575) $ (2,317) $ 720 
International 4,669  39  (176)
Total income (loss) before income taxes and non-controlling interest $ 3,094  $ (2,278) $ 544 

Income tax provision (benefit) included in our reported net income consisted of the following (in millions): 
Year Ended December 31,
2022 2021 2020
Current:
Federal $ 6  $ —  $ — 
State 2  3  — 
Foreign 11  5  — 
Total current 19  8  — 
Deferred:
Federal 320  (633) 41 
State 118  (89) 2 
Foreign 2  1  — 
Total deferred 440  (721) 43 
Total income tax provision (benefit) $ 459  $ (713) $ 43 
 
Our income tax rates do not bear a customary relationship to statutory income tax rates. A reconciliation of the federal statutory income tax rate of 21% to our effective income tax rate is as follows: 
Year Ended December 31,
2022 2021 2020
U.S. federal statutory tax rate 21.0  % 21.0  % 21.0  %
Non-controlling interest (8.2) 7.2  (22.6)
State tax, net of federal benefit 0.5  (2.5) — 
Foreign-derived intangible income deduction (1.2) —  — 
Executive compensation 0.8  (0.5) 1.4 
Nondeductible interest expense —  —  8.0 
Foreign earnings taxed in the U.S. —  —  1.2 
Foreign rate differential 0.2  (0.1) (3.7)
Tax credits (0.6) 0.6  (4.5)
Internal restructuring —  —  7.0 
Valuation allowance 2.6  5.6  (0.9)
Other (0.3) —  1.0 
Effective tax rate as reported 14.8  % 31.3  % 7.9  %

Significant components of our deferred tax assets and liabilities are as follows (in millions): 
December 31,
2022 2021
Deferred tax assets    
Net operating loss (“NOL”) carryforwards
Federal $ 1,968  $ 3,231 
Foreign —  2 
State 177  244 
Federal and state tax credits 66  108 
Derivative instruments 1,345  951 
Operating lease liabilities 542  438 
Other 311  146 
Less: valuation allowance (143) (63)
Total deferred tax assets 4,266  5,057 
Deferred tax liabilities  
Investment in partnerships (211) (716)
Property, plant and equipment (2,646) (2,638)
Operating lease assets (536) (431)
Other (9) (68)
Total deferred tax liabilities (3,402) (3,853)
Net deferred tax assets $ 864  $ 1,204 

NOL and tax credit carryforwards

As of December 31, 2022, we had federal and state NOL carryforwards of approximately $9.4 billion and $2.2 billion, respectively. All of our NOLs have an indefinite carryforward period.

As of December 31, 2022, we had federal and state tax credit carryforwards of $65 million and $1 million, respectively. The federal tax credit carryforwards include investment tax credit carryforwards of $49 million related to capital equipment placed in service at our Liquefaction Projects. We account for our federal investment tax credits under the flow-through method. The federal tax credit carryforwards also include $15 million of foreign tax credits. Our federal and state tax credits will expire between 2026 and 2042.
Our NOL and tax credit carryforwards are not subject to, nor impacted by, any prior tax ownership change. We continue to monitor public trading activity in our shares to identify potential tax ownership changes that could impact our timing and ability to utilize such attributes.

Valuation Allowance

For the period ended December 31, 2022, our valuation allowance of $143 million primarily relates to state NOL carryforward deferred tax assets. We increased our valuation allowance on our Louisiana NOL carryforward deferred tax assets by $80 million primarily due to a reduction in our forecasted Louisiana taxable income as a result of receiving favorable guidance from the Louisiana Department of Revenue on a state apportionment tax matter.
Unrecognized Tax Benefits

As of December 31, 2022, we had unrecognized tax benefits of $74 million. If recognized, $65 million of unrecognized tax benefits would affect our effective tax rate in future periods. Interest and penalties related to income tax matters are recognized as part of income tax expense.

We are subject to tax in the U.S. and various state and foreign jurisdictions and we are subject to periodic audits and reviews by taxing authorities. Federal and state tax returns for the years after 2018 and United Kingdom tax returns for years after 2017 remain open for examination. Tax authorities may have the ability to review and adjust carryover attributes that were generated prior to these periods if utilized in an open tax year.

A reconciliation of the beginning and ending amounts of our unrecognized tax benefits is as follows (in millions): 
Year Ended December 31,
2022 2021
Balance at beginning of the year $ 65  $ 62 
Additions based on tax positions related to current year 10  3 
Additions for tax positions of prior years —  — 
Reductions for tax positions of prior years (1) — 
Settlements —  — 
Balance at end of the year $ 74  $ 65