INCOME TAXES
The components of the provision for income taxes are as follows:
|
| | | | | | | | | | | | |
| | Years Ended December 31, |
(in thousands) | | 2017 | | 2016 | | 2015 |
Current taxes: | | |
| | |
| | |
|
Federal (benefit) expense | | $ | (2,810 | ) | | $ | — |
| | $ | 14,417 |
|
State (benefit) expense | | (2 | ) | | (1,115 | ) | | 293 |
|
| | (2,812 | ) | | (1,115 | ) | | 14,710 |
|
Deferred taxes: | | |
| | |
| | |
|
Federal expense (benefit) | | 173,859 |
| | (201,529 | ) | | (1,386,086 | ) |
State expense (benefit) | | 16,620 |
| | (11,757 | ) | | (100,353 | ) |
| | 190,479 |
| | (213,286 | ) | | (1,486,439 | ) |
| | $ | 187,667 |
| | $ | (214,401 | ) | | $ | (1,471,729 | ) |
Federal income tax expense (benefit) for the years presented differs from the amounts that would be provided by applying the U.S. federal income tax rate, primarily due to the effect of state income taxes, non-deductible expenses, revisions, and changes in tax laws and tax rates enacted in the period. Reconciliations of the income tax expense (benefit) calculated at the federal statutory rate of 35% to the total income tax expense (benefit) are as follows:
|
| | | | | | | | | | | | |
| | Years Ended December 31, |
(in thousands) | | 2017 | | 2016 | | 2015 |
Provision at statutory rate | | $ | 238,699 |
| | $ | (218,122 | ) | | $ | (1,417,967 | ) |
Effect of state taxes | | 10,074 |
| | (10,237 | ) | | (64,794 | ) |
Revision of previous balances | | — |
| | 7,181 |
| | 5,997 |
|
Tax credits and other permanent differences | | 5,442 |
| | 5,296 |
| | 5,035 |
|
Change in valuation allowance, net | | 486 |
| | 1,481 |
| | — |
|
Stock-based compensation | | (5,888 | ) | | — |
| | — |
|
Impact of reduction in federal statutory rate | | (61,146 | ) | | — |
| | — |
|
Income tax expense (benefit) | | $ | 187,667 |
| | $ | (214,401 | ) | | $ | (1,471,729 | ) |
The company recorded a $33.1 million increase to the net operating loss deferred tax asset and corresponding increase to retained earnings in the first quarter of 2017 upon adoption of ASU 2016-09 for deductions taken for employee stock awards on the company’s tax returns in excess of amounts expensed through the company’s statement of operations. Pursuant to ASU 2016-09, excess tax benefits for employee share-based payments of $5.9 million were recognized in income tax expense in 2017.
As a result of the enactment of H.R.1 on December 22, 2017, the company remeasured the deferred tax assets and liabilities as of December 31, 2017 to reflect the reduction in the U.S. income tax rate from 35% to 21% for years after 2017. As a result of this remeasurement, we recorded an income tax benefit of $61.1 million and a corresponding $61.1 million decrease in net deferred tax liabilities as of December 31, 2017. We believe the accounting for the effects of H.R.1 recognized in the December 31, 2017 financial statements is materially complete. However, evolving analyses and interpretations of the law may cause a change to the amounts presented. Any such changes that may arise will be recognized in the period determined, but no later than December 31, 2018. As a result of H.R.1, we expect our effective tax rate in future periods will be lower than in periods prior to enactment. In addition, the limitations on utilization of net operating losses and deductibility of interest and executive compensation may result in the payment of cash taxes earlier than expected.
The components of net deferred taxes are as follows:
|
| | | | | | | | |
| | December 31, |
(in thousands) | | 2017 | | 2016 |
Assets: | | |
| | |
|
Stock compensation and other accrued amounts | | $ | 31,044 |
| | $ | 58,306 |
|
Net operating loss carryforward, net of valuation allowance | | 313,738 |
| | 399,912 |
|
Credit carryforward | | 3,995 |
| | 6,016 |
|
| | 348,777 |
| | 464,234 |
|
Liabilities: | | |
| | |
|
Property, plant and equipment | | (450,395 | ) | | (408,399 | ) |
Net deferred tax (liabilities) assets | | $ | (101,618 | ) | | $ | 55,835 |
|
At December 31, 2017, we had a U.S. net tax operating loss carryforward of approximately $1,377.7 million, which would expire in years 2031 through 2037. We believe that the carryforward will be utilized before it expires. We recorded a $3.5 million increase to the net operating loss carryforward at December 31, 2017, for certain state losses and a corresponding increase in the state net operating loss valuation allowance of $4.0 million. The net decrease in the state net operating losses after reduction for the valuation allowance was $0.5 million. The total valuation allowance on state net operating losses at December 31, 2017 was $103.7 million because it is not more likely than not that these additional state net operating losses will be utilized before they expire. There are no other valuation allowances. We also had an alternative minimum tax credit carryforward of approximately $3.0 million and enhanced oil recovery and marginal well credits of $0.9 million.
At December 31, 2017 and 2016, we had no unrecognized tax benefits that would impact our effective rate and we have made no provisions for interest or penalties related to uncertain tax positions. The tax years 2014 through 2016 remain open to examination by the Internal Revenue Service of the United States. We file tax returns with various state taxing authorities which remain open to examination for tax years 2013 through 2016. We do not anticipate the need for any significant income tax payments in the near term.