Note 21—Income Taxes
Our effective tax rate was
12
percent in the three-month periods ended September
30, 2020 and 2019.
Both
periods were primarily impacted by shifts
in our before-tax income between higher and
lower tax jurisdictions
as well as the change in our U.S. valuation allowance
driven by the fair value measurement of our Cenovus
Energy common shares.
The three-month period ended September 30, 2019
was also impacted by the
recognition of certain tax incentives in Malaysia.
Our effective tax rates for the nine-month periods ended
September 30, 2020 and 2019 were
8
21
percent,
respectively.
The nine-month period ended September 30, 2020
was impacted by the same items
noted above.
Additionally, the nine-months ended September 30, 2020 was impacted by the
gain on
disposition recognized for our Australia-West assets of $
587
million with an associated tax benefit of $
10
million, the de-recognition of $
92
million of deferred tax assets recorded as income
tax expense as a result of
this divestiture, and a $
48
million refund from the Alberta Tax and Revenue Administration.
The nine-month
period ended September 30, 2019 was impacted
by the same items noted above in addition to
a benefit of $
262
million related to the recognition of a U.S. capital
loss benefit from our U.K. entity disposition.
As a result of the COVID-19 pandemic and the
resulting economic uncertainty, many countries in which we
operate, including Australia, Canada, Norway and
the U.S., have enacted responsive tax legislation.
During
the second quarter, Norway enacted legislation to accelerate
the recovery of capital expenditures and allow
immediate monetization of tax losses.
As a result, in the second quarter of 2020,
we recorded an increase to
our net deferred tax liability of $
120
million and a decrease to our accrued income
and other taxes liability of
$
124
million.
Legislation in other jurisdictions did not have
a material impact to ConocoPhillips.
During the three-
and nine-month periods ended September 30, 2020,
our valuation allowance increased by
$
33
264
million, respectively.
The change to our U.S. valuation allowance
for both periods
relates primarily to the fair value measurement of our
Cenovus Energy common shares and our expectation
of
the tax impact related to incremental capital
gains and losses.