LOUISIANA-PACIFIC CORP

8. INCOME TAXES

Income Tax Provision

The components of income from continuing operations before income taxes, including equity in unconsolidated affiliates, were (dollars in millions):

The components of our income tax provision (benefit) from continuing operations were (dollars in millions):

We paid income taxes, net of refunds, of $65 million, $320 million, and $421 million during 2023, 2022, and 2021, respectively. Included in our Consolidated Balance Sheet at December 31, 2023 is a net income tax receivable of $22 million compared to a net income tax payable of $16 million at December 31, 2022.

Deferred Taxes

The tax effects of significant temporary differences creating deferred tax assets and liabilities were (dollars in millions):

The benefit relating to capital loss, operating loss, and credit carryforwards included in the above table at December 31, 2023, consisted of (dollars in millions):

We periodically review the need for valuation allowances against deferred tax assets and recognize these deferred tax assets to the extent that their realization is more likely than not. As part of our review, we consider all positive and negative evidence, including earnings history, the future reversal of deferred tax liabilities, and the relevant expirations of carryforwards. We believe that the valuation allowances provided are appropriate. If future years’ earnings differ from the estimates used to establish these valuation allowances, or other objective positive or negative evidence arises, we may record an adjustment to the valuation allowance resulting in an impact on tax provision (benefit) for that period.

In the second quarter of 2023 we assessed the overall financial position of our foreign subsidiaries and management decided it no longer has the intent to indefinitely reinvest undistributed earnings in Chile and Brazil. As a result of this change, we recorded deferred taxes relating to the tax effect of repatriating all unremitted earnings in Chile and Brazil. The deferred tax liability is reflective of the difference between outside book and outside tax basis associated with the investments in LP Brasil, LP Chile, and LP South America. However, LP expects the outside basis difference to reverse through dividend distributions and the primary tax impacts of these distributions are expected to be Chilean income tax withheld on dividend income received by LP Corporation, and tax related to Section 986(c) foreign exchange gain or loss on distributions of earnings subject to U.S. GILTI tax in prior periods.

As of December 31, 2023, LP Corporation expects to incur Chilean withholding tax of approximately $22 million on the potential distributions of Chile and Brazil cumulative earnings and will be able to claim a foreign tax credit of $1 million, for a net tax deferred tax liability of $21 million. The charge was recorded as a component of income tax expense from continuing operations for the year ended December 31, 2023.

In 2021 the Organization for Economic Cooperation and Development (OECD) announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently multiple sets of administrative guidance have been issued. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or announced their plans to enact legislation in future years. Although we expect increased tax compliance efforts as a result of new legislation, we do not expect Pillar 2 to have a significant impact on our effective tax rate or our consolidated results of operations, financial position and cash flows.

Reconciliation of the U.S. Federal Statutory Rate to the Effective Rate

Reconciliation of the U.S. federal statutory tax rate to the total effective tax rates from continuing operations (dollars in millions):

We are subject to U.S. federal income tax as well as income taxes of multiple state jurisdictions. Our foreign subsidiaries are subject to income tax in Canada, Chile, Brazil, Peru, Colombia, Argentina, Paraguay, and Mexico.

We generally remain subject to U.S. federal and state examinations for tax years 2018 and subsequent. In addition to the U.S., we have tax years that remain open and subject to examination by tax authorities in the following major tax jurisdictions: Brazil and Chile for tax years 2017 and subsequent; and Canada for tax years 2018 and subsequent. Our tax returns are currently under examination by tax authorities in the U.S. for years 2018, 2019, and 2020, in Canada for year 2019, and in Chile for years 2016 and 2020.

Uncertain Tax Positions

Tabular reconciliation of the total amount of unrecognized tax benefits at the beginning and end of the years (dollars in millions):

Included in the above balances at December 31, 2023, are $13 million of tax benefits that, if recognized, would affect our effective tax rate. We accrued interest of $2 million and paidno interest during 2023. We accrued and paidno interest during 2022.