15. Income Taxes
Our Income (loss) before income tax provision and earnings from unconsolidated affiliates is earned solely in the U.S.
TCJA made significant changes to U.S. tax laws. We have historically been subject to the AMT under which taxes are imposed at a 20% rate on taxable income, subject to certain adjustments, and we have assumed that we would be subject to the AMT rate in future periods. As such, the elimination of the AMT and reduction in the federal corporate tax rate to 21% does not have a material impact on our estimates for cash taxes payable in the next several years. The corporate rate reduction required a revaluation of our net deferred tax asset as of December 31, 2017. However, since we have a full valuation allowance on our net deferred tax asset, there is no revaluation impact to our income statement. We will continue to analyze the future impact of TCJA on us and assess whether release of all or a portion of our valuation allowance is warranted.
A material immediate impact of TCJA is the elimination of the AMT and the ability to offset our regular tax liability or claim refunds for taxable years 2018 through 2021 for our AMT credits carried forward from prior periods. We currently anticipate we will realize approximately $30 million in AMT value over the next four years with approximately half of this value realized in 2019 for taxable year 2018.
Income tax benefit (expense) consisted of the following for the years ended December 31 (in thousands):
| 2017 | 2016 | 2015 | |||||||||
| Current: | |||||||||||
| Federal | $ | 29,537 | $ | 1,494 | $ | 1,571 | |||||
| State | (67) | (252) | 535 | ||||||||
| Total current | 29,470 | 1,242 | 2,106 | ||||||||
| Deferred: | |||||||||||
| Federal | — | 915 | (76,300) | ||||||||
| State | — | 56 | (3,186) | ||||||||
| Total deferred | — | 971 | (79,486) | ||||||||
| Total income tax benefit (expense) | $ | 29,470 | $ | 2,213 | $ | (77,380) | |||||
We report the tax effects of differences between the tax bases of assets and liabilities and the financial statement carrying amounts of these items as deferred tax assets and deferred tax liabilities. Our deferred tax assets and liabilities consisted of the following as of December 31 (in thousands):
| 2017 | 2016 | |||||||
| Deferred income tax assets: | ||||||||
| Accrued expense and liabilities | $ | 17,530 | $ | 26,746 | ||||
| Pension and other postretirement benefits | 5,898 | 8,621 | ||||||
| Accrued reclamation and mine closure costs | 22,229 | 34,326 | ||||||
| Contract rights | 38,793 | 69,352 | ||||||
| Debt restructuring | 12,762 | 25,183 | ||||||
| Mark-to-market gain (loss) | 52 | (191) | ||||||
| AMT Credit carryforward | — | 31,625 | ||||||
| Net operating loss carryforward | 55,160 | 54,764 | ||||||
| Other | 866 | 7,606 | ||||||
| Total deferred income tax assets | 153,290 | 258,032 | ||||||
| Less valuation allowance | (52,010) | (99,638) | ||||||
| Net deferred income tax asset | 101,280 | 158,394 | ||||||
| Deferred income tax liabilities: | ||||||||
| Property, plant and equipment | (33,420) | (37,954) | ||||||
| Inventories | (11,521) | (17,435) | ||||||
| Mineral rights | (44,878) | (78,819) | ||||||
| Throughput payments | (3,604) | (12,928) | ||||||
| Other | (7,857) | (11,258) | ||||||
| Total deferred income tax liabilities | (101,280) | (158,394) | ||||||
| Net deferred income tax assets (liabilities) | $ | — | $ | — | ||||
The estimated statutory income tax rates that are applied to our current and deferred income tax calculations are impacted significantly by the states in which we do business. Changes in apportionment laws or business conditions result in changes in the calculation of our current and deferred income taxes, including the valuation of our deferred tax assets and liabilities. Such adjustments can increase or decrease our net deferred tax assets at period end as well as the corresponding deferred tax expense or benefit during the period.
The realization of our deferred income tax assets depends on the existence of sufficient future taxable income. In 2015, after considering operating results as well as our projected results for the next few years, we determined that it was unlikely that we would realize our deferred tax assets. As a result, we increased our deferred tax valuation allowance to $119.0 million and reduced the carrying value of our deferred tax assets to zero. As of December 31, 2016, the deferred tax valuation allowance decreased by $19.3 million to $99.6 million in order to keep the carrying value of our deferred tax assets at zero. As of December 31, 2017, the deferred tax valuation allowance decreased by $47.6 million to $52.0 million in order to keep the carrying value of our deferred tax assets at zero. The valuation allowance will be released once sustained profitable operations return.
As of December 31, 2017, we have a federal net operating loss carryforward of $247.4 million, which is scheduled to expire between 2029 and 2037. We also have a combined state net operating loss carryforward of $68.9 million, which is scheduled to expire between 2022 and 2037.
As of December 31, 2016, we had a federal net operating loss carryforward of $151.6 million, which is scheduled to expire between 2029 and 2036. We also had a combined state net operating loss carryforward of $45.2 million, which is scheduled to expire between 2022 and 2036. In addition, we had an alternative minimum tax credit carryforward of $31.6 million.
The effective tax rate is reconciled to the U.S. federal statutory income tax rate for the years ended December 31 as follows:
| 2017 | 2016 | 2015 | ||||||||
| United States federal statutory income tax rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||
| State income taxes, net of federal tax benefit | 2.2 | 1.2 | 1.3 | |||||||
| Percentage depletion | 12.9 | (25.0) | 5.7 | |||||||
| Change in valuation allowance | 48.5 | (32.4) | (86.9) | |||||||
| AMT credit monetization - valuation allowance release | 85.6 | — | — | |||||||
| Other non-deductible expenses | (2.1) | 1.7 | (0.5) | |||||||
| Stock compensation | (5.8) | 12.1 | (1.5) | |||||||
| Non-deductible goodwill impairment | — | — | (9.1) | |||||||
| Deferred tax adjustments | (9.0) | (4.7) | (4.7) | |||||||
| Impact of US Tax Reform | (87.3) | — | — | |||||||
| Other | — | 0.4 | 0.6 | |||||||
| Effective tax rate | 80.0 | % | (11.7) | % | (60.1) | % | ||||
The difference between our statutory income tax rate and our effective income tax rate for the year ended December 31, 2017 is primarily the result of changes in federal tax laws releasing the valuation allowance on our AMT credit carry forwards and the change in valuation allowance to maintain the carrying amount of our deferred tax assets at zero. The difference between our statutory rate and the effective rate for the year ended December 31, 2016 was primarily the result of the change in valuation allowance to maintain the carrying amount of our deferred tax assets at zero. The difference between our statutory rate and the effective rate for the year ended December 31, 2015 was primarily the result of the increase to the valuation allowance to reduce the carrying amount of our deferred tax assets to zero.
Federal and state tax laws impose limitations on the utilization of net operating losses (“NOLs”) in the event of an ‘ownership change’ for tax purposes, as defined in Section 382 of the Internal Revenue Code. If our valuation allowance on our deferred tax assets would be released in future periods, and we experienced an ownership change, our ability to utilize our NOLSs may be limited.
As of December 31, 2017 2016, and 2015, we had no uncertain tax positions that we expect to have a material impact on the Consolidated Financial Statements as a result of tax deductions taken during the year or in prior periods or due to settlements with taxing authorities or lapses of applicable statute of limitations. We are open to federal and state tax audits until the applicable statutes of limitations expire. The statute of limitations has expired for all federal and state returns filed for periods ending before 2012.