16.Income Taxes

The Company accounts for income taxes in accordance with the provisions of ASC 740 on a tax jurisdictional basis. The provision for income taxes consists of the following:


	For the Year Ended December 31,
	2019		2018
CURRENT TAXES:	(in thousands)
United States	$	—	$	—
Other Countries		35		13
	$	35	$	13
DEFERRED TAXES:
United States	$	—	$	—
Other Countries		—		—
	$	—	$	—
Total income tax provision	$	35	$	13

Income (loss) from operations before income taxes by country consists of the following:


	For the Year Ended December 31,
	2019		2018
	(in thousands)
United States	$	(7,373)	$	(1,930)
Other Countries		2,022		(2)
	$	(5,351)	$	(1,932)

The Company recorded $35,000 and $13,000 of current tax expense for the years ended December 31, 2019 and December 31, 2018, respectively, stemming primarily from taxable income of a subsidiary in Mexico. No deferred taxes were recorded in 2019 or 2018, as any such tax expense or benefit incurred during the year has been offset against a change in the valuation allowance of various deferred tax assets in each country.

A reconciliation of the provision for income taxes computed at the statutory rate to the provision for income taxes as shown in the Consolidated Statements of Operations and Comprehensive Loss is summarized below.


	For Year Ended December 31,
	2019		2018
	(in thousands)
Tax expense (benefit) at U.S. rate of 21%	$	(1,124)	$	(406)
Other adjustments:
Rate differential of other jurisdictions		292		67
Effects of foreign earnings		(937)		(455)
Change in valuation allowance		(78)		(16,142)
Provision to tax return true-ups		(24)		(2,012)
Exchange rate changes on deferred tax assets		1,340		5,891
GILTI inclusion		537		—
Inflation adjustment on net operating losses		(1,183)		(550)
Expired net operating losses		1,138		13,669
Other		74		(49)
Income tax provision	$	35	$	13

The components of the deferred tax assets and deferred tax liabilities are as follows:


	For the year ended
	December 31,
	2019		2018
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	112,553	$	117,665
Stock-based compensation		671		593
Property, plant and equipment		2,940		3,284
Other		2,985		2,809
		119,149		124,351
Less: Valuation allowance		(118,283)		(123,652)
Total deferred tax assets		866		699

Deferred tax liabilities:
Property, plant and equipment		(686)		(699)
Other		(180)		—
Total deferred tax liabilities		(866)		(699)
Net deferred tax asset (liability)	$	—	$	—

In accordance with ASC 740, the Company presents deferred tax assets net of its deferred tax liabilities on a tax jurisdictional basis on its Consolidated Balance Sheets. The net deferred tax liability as of December 31, 2019 and December 31, 2018 was zero.

At the end of 2017 a new U.S. tax law was enacted, lowering the U.S. corporate tax rate beginning in 2018 to 21% from the top rate of 35%. In addition, the new U.S. tax law introduced the Global Intangible Low Taxed Income (GILTI) tax. During 2019, one of the Company’s foreign subsidiaries had significant taxable income prior to net operating loss carryovers, which resulted in a GILTI income inclusion of approximately $2.6M. The GILTI income was fully offset by the Company’s current U.S. income tax losses. There was no significant GILTI income inclusion in 2018. No other provisions of the new tax law had a material impact on the Company’s financial statements for the periods ended December 31, 2019 and 2018.

At December 31, 2019 the Company had net operating loss carryforwards in the U.S. and in certain non-U.S. jurisdictions totaling $435.6 million. Of these, $80.1 million is related to the Velardeña Properties in Mexico and expires in future years through 2028, $13.7 million is related to other Mexico exploration activities expiring in future years through 2029, $88.5 million exists in Spain and has no expiration date, and $176.6 million exists in other non-U.S. countries, which will expire in future years through 2036. In the U.S. there are $76.7 million of net operating loss carryforwards which have no expiration.

The valuation allowance offsetting the net deferred tax assets of the Company of $123.5 million and $118.3 million at December 31, 2019 and 2018, respectively, relates primarily to the uncertain utilization of certain deferred tax assets, primarily net operating loss carryforwards, in various tax jurisdictions. The Company continually assesses both positive and negative evidence to determine whether it is more likely than not that deferred tax assets can be realized prior to their expiration.

In the third quarter 2019, the Company became aware that it had failed to timely file withholding tax returns and pay taxes that were due relating to return of capital distributions made to the Company by ECU Silver Mining Inc. (the Company’s wholly-owned Canadian subsidiary) at the end of 2017 and 2018. The capital distributions constituted dividends under Canadian tax law, subject to a 5% withholding tax. The Canadian withholding taxes, which constituted taxes on income for the months of December 2017 and December 2018, totaled approximately $292,000 at December 31, 2019, including an estimate of interest due of approximately $23,000 on the late filing. The Company has accrued this amount in “other accrued liabilities” in its Condensed Consolidated Balance Sheets at December 31, 2019. The Company has treated the income tax expense related to this liability as the correction of an accounting error and has adjusted the beginning balance of retained earnings at January 1, 2018 and January 1, 2019 (Note 3). In February 2020 the Company applied to enter into the Canadian Revenue Agency’s Voluntary Disclosure Program, whereby the Company paid the taxes and the estimated interest due and requested abatement of any penalties or additional interest that may apply. If the Canada Revenue Agency denies the Company’s request for abatement, additional interest and penalties could be assessed.

The Company, a Delaware corporation, and its subsidiaries file tax returns in the United States and in various foreign jurisdictions. The tax rules and regulations in these countries are highly complex and subject to interpretation. The Company’s tax returns are subject to examination by the relevant taxing authorities and in connection with such examinations, disputes can arise with the taxing authorities over the interpretation or application of certain tax rules within the country involved. In accordance with ASC 740, the Company identifies and evaluates uncertain tax positions, and recognizes the impact of uncertain tax positions for which there is less than a more-likely-than-not probability of the position being upheld upon review by the relevant taxing authority. Such positions are deemed to be “unrecognized tax benefits” which require additional disclosure and recognition of a liability within the financial statements. If recognized, none of the unrecognized tax benefits would affect the Company’s effective tax rate. The Company had no unrecognized tax benefits at December 31. 2019 or December 31, 2018.

Below is a reconciliation of the beginning and ending amount of gross unrecognized tax benefits, which excludes any estimated penalties and interest on all identified unrecognized tax benefits. The Company’s unrecognized tax benefits as of December 31, 2019 and 2018 are completely offset by net deferred tax benefits and therefore do not appear on the Consolidated Balance Sheet.


	The Year Ended December 31,
	2019		2018
	(in thousands)
Gross unrecognized tax benefits at beginning of period	$	373	$	586
Increases for tax positions taken during prior years		—		—
Decreases relating to settlements with taxing authorities		—		—
Reductions due to lapse of statute of limitations		(104)		(213)
Gross unrecognized tax benefits at end of period	$	269	$	373

Tax years as early as 2014 remain open and are subject to examination in the Company’s principal tax jurisdictions. The Company does not expect a significant change to its net unrecognized tax benefits over the next 12 months. No interest and penalties were recognized in the Consolidated Statement of Operations and Comprehensive Loss for the year ended December 31, 2019 or 2018, and there were no interest and penalties recognized in the statement of financial position as of December 31, 2019 and 2018. The Company classifies income tax related interest and penalties as income tax expense.