Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes

Income Taxes

15. 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,
	2022		2021
CURRENT TAXES:	(in thousands)
United States	$	—	$	—
Other Countries		107		443
	$	107	$	443
DEFERRED TAXES:
United States	$	—	$	—
Other Countries		(19)		19
	$	(19)	$	19
Total income tax provision	$	88	$	462

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

	For the Year Ended December 31,
	2022		2021
	(in thousands)
United States	$	(10,151)	$	(3,723)
Other Countries		333		2,090
	$	(9,818)	$	(1,633)

The Company recorded $107,000 of current tax expense and $19,000 of deferred tax benefit for the year ended December 31, 2022, the taxable income of certain subsidiaries in Mexico related to the Rodeo operation. The Company recorded $443,000 of current tax expense and $19,000 deferred tax expense for the year ended December 31, 2021, stemming primarily from 7.5% special mining tax and the taxable income of subsidiaries in Mexico.

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 is summarized below.

	For Year Ended December 31,
	2022		2021
	(in thousands)
Tax expense (benefit) at U.S. rate of 21%	$	(2,062)	$	(343)
Other adjustments:
Rate differential of other jurisdictions		(387)		505
Effects of foreign earnings		(1,631)		687
Change in valuation allowance		(3,619)		(6,948)
Provision to tax return true-ups		113		(99)
Exchange rate changes on deferred tax assets		3,234		3,893
Mexican special mining tax		—		212
Expired net operating losses		4,099		2,667
Other		341		(112)
Income tax provision	$	88	$	462

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

	For the year ended
	December 31,
	2022		2021
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	109,397	$	110,451
Capital loss carry forwards		2,584		1,702
Stock-based compensation		868		896
Property, plant and equipment		2,730		4,624
Other		2,296		1,755
		117,875		119,428
Less: Valuation allowance		(113,987)		(118,580)
Total deferred tax assets		3,888		848
Deferred tax liabilities:
Property, plant and equipment		(3,831)		(703)
Other		(57)		(164)
Total deferred tax liabilities		(3,888)		(867)
Net deferred tax asset (liability)	$	—	$	(19)

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, 2022 was zero. The net deferred tax liability as of December 31, 2021 was $19,000, primarily related to the 7.5% special mining tax in Mexico.

At December 31, 2022 the Company had net operating loss carryforwards in the U.S. and in certain non-U.S. jurisdictions totaling $429.0 million. In the U.S. there are $91.5 million of net operating loss carryforwards, $20.8 million

of which have no expiration, while the remaining losses will expire in future years through 2038. In the remaining non-U.S. countries, there are $74.2 million of net operating loss carryforwards related to the Rodeo operation and Velardeña Properties in Mexico, which will expire in future years through 2031, $86.2 million in Spain, which have no expiration date, and $177.0 million in other non-U.S. countries (including Luxemburg, Peru, Argentina and Canada), which will expire in future years through 2042.

The valuation allowance offsetting the net deferred tax assets of the Company of $114.0 million and $118.6 million at December 31, 2022 and 2021, 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.

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.

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 had no unrecognized tax benefits at December 31, 2022. The unrecognized tax benefit as of December 31, 2021 is completely offset by net deferred tax benefits and therefore does not appear on the Consolidated Balance Sheet.

	The Year Ended December 31,
	2022		2021
	(in thousands)
Gross unrecognized tax benefits at beginning of period	$	—	$	249
Increases for tax positions taken during prior years		—		—
Decreases relating to settlements with taxing authorities		—		—
Reductions due to lapse of statute of limitations		—		(249)
Gross unrecognized tax benefits at end of period	$	—	$	—

Tax years as early as 2016 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 for the year ended December 31, 2022 or 2021, and there were no interest and penalties recognized in the statement of financial position as of December 31, 2022 and 2021. The Company classifies income tax related interest and penalties as income tax expense.