Entity information:
Income Taxes
The Company is a corporation under the Internal Revenue Code subject to federal income tax at a statutory rate of 35% of pretax earnings. We did not report any income tax benefit or expense for periods prior to the consummation of our IPO in January 2014 because Rice Drilling B, our accounting predecessor, is a limited liability company that was not subject to federal income tax. The reorganization of our business into a corporation in connection with the closing of our IPO required the recognition of a deferred tax asset or liability for the initial temporary differences at the time of our IPO. The resulting deferred tax liability of approximately $162.3 million was recorded in equity at the date of the completion of our IPO as it represents a transaction among shareholders. Additionally, the pro forma EPS for the year ended December 31, 2014 disclosed in the accompanying consolidated statements of operations assumes a statutory tax rate.
The components of the income tax provision are as follows:
 
Year Ended December 31,
(in thousands)
2016
 
2015
 
2014
Current tax (benefit) expense:
 
 
 
 
 
Federal
$
33,086

 
$
4,039

 
$
3,961

State
—

 
—

 
—

Total
33,086

 
4,039

 
3,961

Deferred tax (benefit) expense:
 
 
 
 
 
Federal
(150,538
)
 
19,878

 
68,846

State
(24,760
)
 
(11,799
)
 
18,793

Total
(175,298
)
 
8,079

 
87,639

Total income tax (benefit) expense
$
(142,212
)
 
$
12,118

 
$
91,600


The effective tax rate for the year ended December 31, 2016 differs from the statutory rate due principally to nondeductible incentive unit expense, state income taxes and noncontrolling interest. The effective tax rate for the year ended December 31, 2015 differs from the statutory rate due principally to nondeductible incentive unit expense, impairment losses and noncontrolling interest.
Prior to 2016, the noncontrolling interest was principally due to RMP earnings. During 2016, the Company formed several partnerships in addition to RMP and these new partnerships are reflected in noncontrolling interest.
Income tax (benefit) expense differs from amounts computed at the federal statutory rate of 35% on pre-tax income as follows:
 
Year Ended December 31,
(in thousands)
2016
 
2015
 
2014
Tax at statutory rate
$
(136,861
)
 
$
(89,560
)
 
$
108,722

Permanent tax differences
41

 
74

 
18

State income taxes
(16,094
)
 
(7,668
)
 
12,216

Partnership earnings (1/1/14 - 1/28/14)
—

 
—

 
(66,239
)
Noncontrolling partners’ share of partnership earnings
(7,326
)
 
(8,168
)
 
(203
)
Goodwill impairment
—

 
103,218

 
—

Incentive unit expense
17,299

 
12,634

 
37,086

Other, net
729

 
1,588

 
—

Income tax (benefit) expense
$
(142,212
)
 
$
12,118

 
$
91,600

Effective tax rate
36.37
%
 
(4.74
)%
 
29.49
%

The Company recognizes deferred tax liabilities for temporary differences between the financial statement and tax basis of assets and liabilities. The effect of changes in the tax laws or tax rates is recognized in income in the period such changes are enacted. Prior to 2016, the deferred tax liabilities primarily relate to intangible drilling costs, depreciation and depletion. As a result of the Vantage Acquisition, all intangible drilling costs and depletion reported as drilling and development costs are reclassified to the investment in partnership component. Additionally, $70.6 million of depreciation and $35.5 million of hedging loss has also been reclassified to the investment in partnerships component. The following table summarizes the source and tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities at December 31, 2016 and December 31, 2015.
 
Year Ended December 31,
(in thousands)
2016
 
2015
Deferred income taxes:
 
 
 
Total deferred tax assets
$
336,257

 
$
299,032

Total deferred tax liabilities
(694,883
)
 
(571,020
)
Total net deferred tax liabilities
(358,626
)
 
(271,988
)
 
 
 
 
Principal components of deferred tax assets and liabilities:
 
 
 
Drilling and development costs expensed for tax
—

 
(368,949
)
Tax depreciation in excess of book depreciation
4,846

 
(92,710
)
Investment in partnerships
(694,883
)
 
57,227

Incentive compensation
7,435

 
5,576

Net operating loss carryforwards
30,432

 
153,558

Hedging loss
20,799

 
(109,352
)
AMT tax credit
41,085

 
7,999

IDC 59e election
230,351

 
73,977

Other
1,309

 
686

Total
$
(358,626
)
 
$
(271,988
)

As of December 31, 2016, the Company had a federal income tax net operating loss (“NOL”) carryforward of approximately $87.0 million. The associated deferred tax assets related to the NOL carryforward was $30.4 million. The NOL carryforward will expire in 2035. The value of these carryforwards depends on the Company’s ability to generate taxable income.
The Company is subject to the alternative minimum tax (“AMT”) if the computed AMT liability exceeds the regular tax liability for the year. As a result of certain AMT preference items related to intangible drilling costs, the Company has generated AMT carryforwards. Because AMT taxes paid can be credited against regular tax and have an indefinite carryforward, this item is reflected as a deferred tax asset in the amount of $41.1 million at December 31, 2016.    

Pursuant to an agreement between the Partnership and the IRS regarding our 2016 tax reporting, we will have two short
tax years for the calendar year 2016 as a result of a technical termination that occurred on February 22, 2016. This technical
termination will result in a significant deferral of depreciation deductions that were otherwise allowable in computing the taxable income of the Partnership’s unitholders for the period February 23, 2016 through December 31, 2016. The Partnership expects to provide a single Schedule K-1 to each unitholder reflecting the unitholder’s taxable income for the full calendar year.
Based on management’s analysis, the Company did not have any uncertain tax positions as of December 31, 2016.