Note 19—Income Taxes
Our effective tax rate
for the three-month periods ended
September 30, 2021 and 2020 was
34
12
percent, respectively.
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 CVE common shares.
Our effective tax rate
for the nine-month periods ended September
30, 2021 and 2020 was
35
8
percent,
respectively,
and both periods were impacted by the
same items noted above.
Our 2021 effective tax
rate was adversely
impacted by $
75
million due to incremental interest
deductions from the exchange of debt
acquired from Concho offsetting
U.S. foreign source revenue
that would otherwise have been offset
by foreign tax
credits.
The nine-month period ending September 30, 2020,
also reflects the tax impact of the gain
on disposition
recognized for the Australia-West
divestiture.
During the three and nine-month periods of 2021, our valuation
allowance decreased by $
4
156
million, respectively,
compared to increases of $
33
264
million for the same periods of 2020.
The
change to our U.S. valuation
allowance for all periods relates
primarily to the fair value measurement of our
CVE
common shares and our expectation
of the tax impact related to incremental
capital gains and losses.
The Company has ongoing income tax audits
in numerous jurisdictions which are occasionally
extended or
completed earlier than anticipated.
Within the next twelve months we may
have audit periods close that could
significantly impact our total unrecognized
tax benefits.
The amount of such change and the associated
impact on
our financial statements is not estimable
at this time.
Our deferred tax liability
increased by approximately
$
1.1
billion as part of the liabilities assumed through our
Concho acquisition.
Additionally, our reserve
for unrecognized tax
benefits increased by $
150
tax credit carryovers
acquired from Concho that we do not expect
to recognize.