OCEANEERING INTERNATIONAL INC

6. INCOME TAXES

The components of income (loss) before income taxes are as follows:

The components of the income tax provision (benefit) applicable for domestic and foreign taxes and cash taxes paid are as follows:

The reconciliation between the actual income tax provision and income tax computed using the U.S. statutory federal income tax rate is summarized as follows:

Significant components of net deferred tax assets and liabilities were as follows:

Our net deferred tax assets (liabilities) are reflected within our balance sheet as follows:

As of December 31, 2024, we had approximately $460 million of deferred tax assets related to net operating and other loss carryforwards that were generated in various worldwide jurisdictions. The carryforwards include $58 million that do not expire and $402 million that will expire from 2025 through 2044. We have recorded a total valuation allowance of $640 million on net operating loss, tax credit carryforwards, and other deferred tax assets, as we believe that it is more likely than not that a portion of our deferred tax assets will not be realized. We assess the realizability of our deferred tax assets, considering all relevant factors, at each reporting period. Based on the available positive and negative evidence, including historical and forecasted earnings, we believe it is more likely than not that deferred tax assets in several non-U.S. jurisdictions will be realized. Accordingly, during the twelve-month period ended December 31, 2024 and 2023, we partially released valuation allowances for the deferred tax assets that we believe are more likely than not to be realized. Our valuation allowance decreased by $23 million in 2024 and $21 million in 2023.

During the twelve-month period ended December 31, 2023, we received refunds of $23 million, including interest of $1.7 million which was recorded as a tax benefit, under the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur material tax consequences upon the distribution of such earnings. As of December 31, 2024, we did not provide for deferred taxes on earnings of our foreign subsidiaries that are indefinitely reinvested. If we were to make a distribution from the unremitted earnings of these subsidiaries, we could be subject to taxes in various jurisdictions. However, it is not practical to estimate the amount of tax that could ultimately be due if such earnings were remitted. If our expectations were to change regarding future tax consequences, we may be required to record additional deferred taxes that could have a material effect on our consolidated financial statements.

We recognize the expense or benefit for an uncertain tax position if it is more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the uncertain tax position is then measured and recognized at the largest amount that we believe is greater than 50% likely of being realized upon ultimate settlement. We account for any applicable interest and penalties on these positions as a component of our provision for income taxes in our consolidated financial statements.

A reconciliation of the beginning and ending amount of gross uncertain tax positions, excluding penalties and interest, is as follows:

We increased (decreased) income tax expense by $1.0 million, $5.4 million and $(1.0) million in 2024, 2023 and 2022, respectively, for penalties and interest on uncertain tax positions. Our total liabilities for penalties and interest on uncertain tax positions were $5.6 million and $7.9 million in other long-term liabilities on our balance sheets as of December 31, 2024 and 2023, respectively. All additions or reductions to those liabilities would affect our effective income tax rate in the periods of change.

We believe approximately $8.0 million to $15 million of gross uncertain tax positions will be resolved within the next 12 months. As of December 31, 2023, a portion of our uncertain tax position liability was reflected as a reduction in our gross deferred tax asset before valuation allowance and as a reduction in our long-term income tax receivable, which was included in other noncurrent assets on our consolidated balance sheet. The remaining balance was reflected in other long-term liabilities on our consolidated balance sheet. The balance of gross uncertain tax position liability included in other long-term liabilities on our consolidated balance sheet was $19 million as of December 31, 2024 and 2023. The balance of gross uncertain tax position liability netted against our gross deferred tax asset before valuation allowance was $5.0 million as of December 31, 2023. The balance of gross uncertain tax position liability netted against our gross long-term income tax receivable included in other noncurrent assets was $1.0 million as of December 31, 2023.

Our tax returns are subject to audit by taxing authorities in multiple jurisdictions. These audits often take years to complete and settle. The following table lists the earliest tax years open to examination by tax authorities where we have significant operations: