OCCIDENTAL PETROLEUM CORP /DE/OXY
OCCIDENTAL PETROLEUM CORP /DE/ Income Taxes Disclosure
| NOTE 9 - INCOME TAXES | ||
RECENT TAX LEGISLATION
The OBBBA was enacted on July 4, 2025 and introduced provisions expected to benefit the Company including accelerated depreciation for newly acquired and constructed assets, favorable adjustments to interest expense limitation, immediate deduction of research and development costs, and increased tax credit values for qualified CO2 projects. In accordance with ASC 740, the financial statement impact of the OBBBA was recognized beginning in the third quarter of 2025. These provisions are expected to significantly reduce the Company’s 2025 cash tax liability.
The OECD Pillar Two initiative proposes to apply a 15% global minimum tax on multinational entities, applied on a jurisdiction-by-jurisdiction basis. Several countries, including European Union member states, Canada and Oman, have enacted or are in the process of enacting legislation aligned with all or portions of Pillar Two. The Company continues to monitor and assess the impact of new OECD Pillar Two administrative guidance and Pillar Two compliant legislation proposed or enacted in the jurisdictions in which the Company operates. Based on developments to date, the Company does not anticipate any significant impact on the Company’s results of operations or cash flows from the enactment of Pillar Two legislation.
The following summarizes domestic and foreign components of income from continuing operations before domestic and foreign income taxes for the years ended December 31:
| millions | 2025 | 2024 | 2023 | ||||||||
| Domestic | $ | 1,265 | $ | 2,390 | $ | 2,530 | |||||
| Foreign | 1,863 | 1,634 | 2,132 | ||||||||
Total income from continuing operations before income taxes | $ | 3,128 | $ | 4,024 | $ | 4,662 | |||||
The following summarizes components of income tax (expense) benefit on continuing operations for the years ended December 31:
| millions | 2025 | 2024 | 2023 | ||||||||
| Current | |||||||||||
| Federal | $ | (307) | $ | (775) | $ | (539) | |||||
| State and local | — | (28) | (35) | ||||||||
| Foreign | (587) | (620) | (702) | ||||||||
| Total current tax expense | $ | (894) | $ | (1,423) | $ | (1,276) | |||||
| Deferred | |||||||||||
| Federal | (99) | 197 | (34) | ||||||||
| State and local | (31) | 20 | 20 | ||||||||
| Foreign | 3 | 48 | (40) | ||||||||
| Total deferred tax (expense) benefit | $ | (127) | $ | 265 | $ | (54) | |||||
| Total income tax expense | |||||||||||
| Federal | (406) | (578) | (573) | ||||||||
| State and local | (31) | (8) | (15) | ||||||||
| Foreign | (584) | (572) | (742) | ||||||||
| Total income tax expense | $ | (1,021) | $ | (1,158) | $ | (1,330) | |||||
The following summarizes income taxes paid (net of refunds received) on continuing operations for the years ended December 31:
| millions | 2025 | 2024 | 2023 | ||||||||
| Federal | $ | 609 | $ | 405 | $ | 293 | |||||
| State | 39 | 16 | 42 | ||||||||
| Foreign | |||||||||||
| Algeria | 155 | 207 | 285 | ||||||||
| Oman | 359 | 332 | 335 | ||||||||
| Qatar | 73 | 78 | 78 | ||||||||
| All other foreign | 1 | 2 | 7 | ||||||||
| Total foreign | 588 | 619 | 705 | ||||||||
| Income taxes paid, net of refunds received | $ | 1,236 | $ | 1,040 | $ | 1,040 | |||||
The following reconciliation of the U.S. federal statutory income tax rate to the Company’s worldwide effective tax rate on income from continuing operations for the years ended December 31 is stated as both a percentage and amount of income from continuing operations before income taxes as required by the adoption of Accounting Standards Update 2023-09 in the fourth quarter of 2025:
| millions except percentages | 2025 | 2024 | 2023 | |||||||||||||||||
| Percentage | Amount | Percentage | Amount | Percentage | Amount | |||||||||||||||
| U.S. federal statutory tax rate | 21 | % | $ | 657 | 21 | % | $ | 845 | 21 | % | $ | 979 | ||||||||
State and local income tax, net of federal income tax effect (a) | 1 | 24 | — | 5 | — | 13 | ||||||||||||||
| Foreign tax effects | ||||||||||||||||||||
| Algeria | ||||||||||||||||||||
| Tax rate differential | 1 | 36 | 1 | 47 | 1 | 71 | ||||||||||||||
| Change in tax law or rate | — | — | — | — | 1 | 65 | ||||||||||||||
| Nontaxable or nondeductible items | 1 | 23 | 1 | 20 | 2 | 84 | ||||||||||||||
| Others | — | 7 | 1 | 20 | — | (3) | ||||||||||||||
| Canada | ||||||||||||||||||||
| Others | (1) | (16) | — | (7) | (1) | (54) | ||||||||||||||
| Oman | ||||||||||||||||||||
| Tax rate differential | 7 | 201 | 5 | 203 | 4 | 209 | ||||||||||||||
| Others | 1 | 34 | — | 4 | — | (3) | ||||||||||||||
| Qatar | ||||||||||||||||||||
| Tax rate differential | 1 | 33 | 1 | 28 | 1 | 37 | ||||||||||||||
| Others | — | (9) | — | 8 | — | (14) | ||||||||||||||
| United Arab Emirates | ||||||||||||||||||||
| Tax rate differential | (5) | (143) | (3) | (105) | (2) | (94) | ||||||||||||||
| Other foreign jurisdictions | 1 | 30 | — | (5) | — | (11) | ||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | — | — | — | — | ||||||||||||||
| Effect of cross-border tax laws | — | 10 | — | 1 | — | 4 | ||||||||||||||
| Tax credits | (1) | (15) | (1) | (21) | — | (22) | ||||||||||||||
| Changes in valuation allowance | — | 2 | — | 2 | — | — | ||||||||||||||
| Nontaxable or nondeductible items | 1 | 16 | 1 | 29 | — | 20 | ||||||||||||||
| Changes in unrecognized tax benefits | 5 | 144 | 3 | 136 | 2 | 105 | ||||||||||||||
| Other adjustments | — | (13) | (1) | (52) | (1) | (56) | ||||||||||||||
| Worldwide effective tax rate | 33 | % | $ | 1,021 | 29 | % | $ | 1,158 | 28 | % | $ | 1,330 | ||||||||
(a) Texas and New Mexico contributed to the majority of the tax effect in this category.
The Company’s worldwide effective tax rate in 2025, 2024 and 2023 was higher than the U.S. statutory rate of 21%, primarily driven by the Company’s jurisdictional mix of income from continuing operations, where international income is subject to tax at statutory rates as high as 55%.
The reclassification of OxyChem, which is primarily domestic, to discontinued operations increased this impact. The effective tax rate for discontinued operations was 47%, 26% and 23% for 2025, 2024 and 2023, respectively. The increase in the 2025 discontinued operations effective tax rate relative to 2024 and 2023 is the result of a one-time charge associated with the OxyChem Transaction.
The following summarized the tax effects of temporary differences resulting in deferred income taxes as of December 31:
| millions | 2025 | 2024 | ||||||
| Deferred tax liabilities | ||||||||
| Property, plant and equipment differences | $ | (7,402) | $ | (7,100) | ||||
| Equity investments, partnerships and international subsidiaries | (831) | (633) | ||||||
| Gross long-term deferred tax liabilities | $ | (8,233) | $ | (7,733) | ||||
| Deferred tax assets | ||||||||
| Environmental reserves | 409 | 416 | ||||||
| Postretirement benefit accruals | 173 | 249 | ||||||
| Deferred compensation and benefits | 344 | 258 | ||||||
| Asset retirement obligations | 893 | 788 | ||||||
| Foreign tax credit carryforwards | 713 | 1,975 | ||||||
Business credit carryforwards | 60 | 54 | ||||||
| Net operating loss carryforward | 1,095 | 1,031 | ||||||
| Interest expense carryforward | 11 | 11 | ||||||
| All other | 685 | 539 | ||||||
| Gross long-term deferred tax assets | 4,383 | 5,321 | ||||||
| Valuation allowance | (1,769) | (2,962) | ||||||
| Net long-term deferred tax assets | $ | 2,614 | $ | 2,359 | ||||
| Total deferred income tax liability, net | $ | (5,619) | $ | (5,374) | ||||
| Less: foreign deferred tax asset in long-term receivables and other assets, net | (17) | (20) | ||||||
Total deferred income tax liability (a) | $ | (5,636) | $ | (5,394) | ||||
(a) The deferred income tax assets and liabilities associated with discontinued operations were not classified as held for sale because they will be realized upon the sale of OxyChem.
Total deferred tax assets, after valuation allowances, were $2.6 billion and $2.4 billion as of December 31, 2025 and 2024, respectively. The Company expects to realize the recorded deferred tax assets, net of any allowances, through future operating income and reversal of temporary differences. The total deferred tax liabilities were $8.2 billion and $7.7 billion as of December 31, 2025 and 2024, respectively.
As of December 31, 2025, the Company had foreign tax credit carryforwards of $713 million and state tax credit carryforwards of $39 million. The Company had recorded a valuation allowance for $713 million of the foreign tax credit carryforwards and $32 million of the state tax credit carryforwards.
As of December 31, 2025, the Company had tax-effected foreign net operating loss carryforwards of $971 million, state net operating loss carryforwards of $121 million, and federal net operating loss carryforwards of $3 million. The carryforward balances have varying carryforward periods through 2045, excluding certain attributes for which there is an indefinite carryforward period. A valuation allowance was recorded for $890 million of the tax-effected foreign net operating loss carryforwards and $85 million of the tax-effected state net operating loss carryforwards. The Company had an additional valuation allowance of $46 million against other foreign deferred tax assets.
The Company had a tax-effected state interest expense carryforward of $11 million with no valuation allowance as of December 31, 2025.
In prior years, a deferred tax liability had not been recognized for temporary differences related to unremitted earnings of certain consolidated international subsidiaries. As of December 31, 2025, in connection with the OxyChem Transaction, the Company reversed its indefinite reinvestment assertion for unremitted earnings of its foreign operations. The reversal resulted in the recognition of a deferred tax liability of $101 million related to such earnings, presented as part of discontinued operations.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| millions | 2025 | 2024 | 2023 | ||||||||
| Balance as of January 1 | $ | 1,951 | $ | 1,951 | $ | 2,010 | |||||
| Increases related to prior-year positions | — | — | — | ||||||||
| Increases related to current-year positions | 1 | — | — | ||||||||
| Settlements | — | — | — | ||||||||
| Reductions for tax positions of prior years | (8) | — | (59) | ||||||||
| Balance as of December 31 | $ | 1,944 | $ | 1,951 | $ | 1,951 | |||||
The December 31, 2025 balance of unrecognized tax benefits of $1.9 billion included potential tax benefits of $1.9 billion of which, if recognized, $1.4 billion would affect the effective tax rate on income. Also included were benefits of $45 million related to tax positions for which the ultimate deductibility is highly certain, but the timing of such deductibility is uncertain. Unrecognized tax benefits are included in deferred credits and other liabilities - other. The Company records estimated potential interest and penalties related to liabilities for unrecognized tax benefits in the provisions for domestic and foreign income taxes. In 2025, the Company recorded interest related to liabilities for unrecognized tax benefits of $188 million, for a cumulative accrued interest related to liabilities for unrecognized tax benefits of $951 million as of December 31, 2025, which is not included in the table above. There were no penalties associated with liabilities for unrecognized tax benefits recorded for the years ended December 31, 2025 and 2024.
The Company recognized $54 million and $30 million in federal and state income tax receivables as of December 31, 2025 and 2024, respectively, which were recorded in other current assets. In addition, the Company recognized $470 million and $247 million in 2025 and 2024, respectively, of long-term income tax receivables, which were recorded in long-term receivables and other assets, net.
The Company is subject to audit by various tax authorities in varying periods. See Note 12 - Lawsuits, Claims, Commitments and Contingencies for a discussion of these matters.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 26, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.