1.What income tax expense does Valero Energy report in its 2020 income statement? How much of this expense is currently payable?

2.Valero Energy reports deferred tax liabilities related to Property, plant and equipment. Describe how these liabilities arise. How likely is it that these liabilities will be paid? Specifically, describe a scenario that will defer these taxes indefinitely.

3.Valero Energy reports a deferred tax asset relating to Compensation and employee benefit liabilities. When a company has a pension plan it records an expense and related liability each year while the employee works for the company. Pension payments are not made to employees until they retire. Explain why pension plans create a deferred tax asset.

4.Valero Energy reports deferred tax assets from net loss carry forwards. Explain how these arise and how they will result in a future benefit.

5.Valero Energy reports a valuation allowance of $295 million in 2020 and of $270 million in 2019, which is deducted from the deferred tax assets. Why? How did the change in the allowance from 2019 to 2020 affect net income in 2020? How can a company use this allowance to meet its income targets in a particular year?

6.If a company has consistently reported an increase in deferred tax liability from one year to the next, investors become concerned about this trend though there may be some legitimate reasons for such an increase. Give an example of legitimate reason for increase in deferred tax liability. Also, provide a reason or an example that may cause concern for an increase in deferred tax liability.

The following are excerpts from the 2020 annual report of Valero Energy. Use the information to answer the requirements. Components of income tax expense (benefit) related to continuing operations were as follows (in millions): The significant components of deferred tax assets and liabilities were as follows (in millions): Deferred income tax liabilities: Turnarounds (310) (256) Property, plant and equipment (5,292)(4,835) Inventories (274)(260) Other (119) (65) Total deferred income tax liabilities (5,995)(5,416) Net deferred income tax liabilities $(4,983)$(4,597)