Effective Income Tax Rate Reconciliation, Tax Settlement, Foreign, Amount

[Table of Contents](#i0302cc7c03c44d0c8270f104de834cdb_7)CF INDUSTRIES HOLDINGS, INC.  
Embedded Derivative LiabilityUnder the terms of our strategic venture with CHS Inc. (CHS), if our credit rating as determined by two of three specified credit rating agencies is below certain levels, we are required to make a non-refundable yearly payment of $5 million to CHS. Since 2016, our credit ratings have been below certain levels and, as a result, we made an annual payment of $5 million to CHS in the fourth quarter of each year. These payments will continue on a yearly basis until the earlier of the date that our credit rating is upgraded to or above certain levels by two of the three specified credit rating agencies or February 1, 2026. This obligation is recognized on our consolidated balance sheets as an embedded derivative and is included within other current liabilities and other liabilities. As of both March 31, 2022 and December 31, 2021, the embedded derivative liability was $15 million. The inputs into the fair value measurement include the probability of future upgrades and downgrades of our credit rating based on historical credit rating movements of other public companies and the discount rates to be applied to potential annual payments based on applicable credit spreads of other public companies at different credit rating levels. Based on these inputs, our fair value measurement is classified as Level 2. See Note 14—Noncontrolling Interest for additional information regarding our strategic venture with CHS. Financial InstrumentsThe carrying amount and estimated fair value of our financial instruments are as follows: 

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | March 31, 2022 |  | December 31, 2021 |
|   | CarryingAmount |  | Fair Value |  | CarryingAmount |  | Fair Value |
|   | (in millions) |
| Long-term debt, including current maturities | $ | 3,462  |  |  | $ | 3,781  |  |  | $ | 3,465  |  |  | $ | 4,113  |  |

The fair value of our long-term debt was based on quoted prices for identical or similar liabilities in markets that are not active or valuation models in which all significant inputs and value drivers are observable and, as a result, they are classified as Level 2 inputs.The carrying amounts of cash and cash equivalents, as well as instruments included in other current assets and other current liabilities that meet the definition of financial instruments, approximate fair values because of their short-term maturities.Assets and Liabilities Measured at Fair Value on a Nonrecurring BasisWe also have assets and liabilities that may be measured at fair value on a nonrecurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment, when there is allocation of purchase price in an acquisition or when a new liability is being established that requires fair value measurement. These include long-lived assets, goodwill and other intangible assets and investments in unconsolidated subsidiaries, such as equity method investments, which may be written down to fair value as a result of impairment. The fair value measurements related to each of these rely primarily on Company-specific inputs and the Company’s assumptions about the use of the assets. Since certain of the Company’s assumptions would involve inputs that are not observable, these fair values would reside within Level 3 of the fair value hierarchy.   
10.   Income Taxes For the three months ended March 31, 2022, we recorded an income tax provision of $401 million on pre-tax income of $1.45 billion, or an effective tax rate of 27.6%, compared to an income tax provision of $18 million on pre-tax income of $193 million, or an effective tax rate of 9.3%, for the three months ended March 31, 2021. For the three months ended March 31, 2022, our income tax provision includes $20 million of income tax benefit due to share-based compensation activity and $78 million of income tax provision related to the Canada Revenue Agency Competent Authority Matter and certain transfer pricing reserves recorded in the period, as discussed below. For the three months ended March 31, 2021, our income tax provision includes a $22 million benefit reflecting the impact of agreement on certain issues related to U.S. federal income tax audits.Our effective tax rate is also impacted by earnings attributable to the noncontrolling interest in CF Industries Nitrogen, LLC (CFN), as our consolidated income tax provision does not include a tax provision on the earnings attributable to the 13
