

	Year Ended December 31,
(in thousands)	2020		2019
Current:
Federal	$	(119)	$	(1,900)
State	474		1,921
Total	355		21
Deferred:
Federal	(3,739)		—
State	(448)		—
Total	(4,187)		—
Total income tax (benefit) expense	$	(3,832)	$	21

The Company paid no federal income taxes during the years 2020 and 2019. The Company received a federal income tax refund of $2.8 million during the year ended December 31, 2019 as a result of a tax year 2017 election to monetize the remaining alternative minimum tax credit carryforward in lieu of accelerated tax depreciation, and as a result of amending our 2007 federal tax return under section 172(f) of the Internal Revenue Code of 186, which allowed us to carry-back and recover workers' compensation expenses in the years we had net operating losses for the previous 10 years.

The issuance of the Series A Preferred Stock as part of the acquisition of CJWS resulted in an ownership change pursuant to Internal Revenue Code Section 382 on March 9, 2020. The Section 382 limitation impacts the Company's ability to utilize certain pre-acquisition tax attributes, including net operating losses. The projected impact of the ownership change will reduce the Company's available federal net operating losses from $900.7 million as of December 31, 2019 to an estimated $383.3 million as of December 31, 2020, which begin to expire in 2032 and $382.8 million of net operating loss carryforwards for state income tax purposes which begin to expire in 2021.

The reconciliation between the amount determined by applying the U.S. Federal corporate tax rate of 21% to loss before income taxes (benefit) for the years ended December 31, 2020 and 2019 is as follows:



	Year Ended December 31,
(in thousands)	2020			2019
Loss from continuing operations before income taxes	$	(253,040)		$	(91,380)
U.S. federal statutory rate	21		%	21		%
Income tax benefit at U.S. federal statutory rate	(53,138)			(19,190)
NOLs derecognized due to Section 382 limitation	158,116			—
State taxes, net of federal benefit	(4,132)			580
Equity compensation shortfall	1,868			2,601
Change in estimates & other	2,936			206
Change in valuation allowance	(109,482)			15,824



Income tax (benefit) expense	$	(3,832)		$	21

The change in valuation allowance during 2020 was primarily due to the Section 382 limitation, less the impact from the additional tax losses generated during the year.

The Company provides a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this evaluation, as of December 31, 2020, a valuation allowance of approximately $145.4 million has been recorded on the net deferred tax assets for all federal and state tax jurisdictions in order to measure only the portion of the deferred tax asset that more likely than not will be realized. As of December 31, 2019, a valuation allowance of $210.8 million was recorded against the net deferred tax assets not expected to be realized.

Interest is recorded in interest expense and penalties are recorded in income tax expense. We had no interest or penalties related to an uncertain tax positions during 2020. The Company files federal income tax returns and state income tax returns in Texas and other state tax jurisdictions.



	Year Ended December 31,
(in thousands)	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	99,569	$	205,367
Goodwill and intangibles assets	25,505		19,350
Interest expense limitation	25,859		16,721
Accrued liabilities	11,679		11,139
Operating lease liabilities	2,367		3,299
Deferred compensation	1,302		2,889
Asset retirement obligation	2,430		2,344
Other	823		2,374
Total deferred tax assets	169,534		263,483

Valuation allowances	(145,404)		(210,808)
Total net deferred tax assets	24,130		52,675
Deferred tax liabilities:
Property and equipment	20,447		48,980
Operating lease right-of-use assets	2,184		3,299
Other	1,923		396

Total deferred tax liabilities	24,554		52,675
Net deferred tax liability	$	424	$	—

The deferred tax liabilities acquired with the acquisition of CJWS provided a source of future taxable income which allowed the Company to recognize a tax benefit on a portion of the long-lived asset impairment recorded during the three months ended March 31, 2020, as well as the Company's other deferred tax assets, and is the primary reason for the tax benefit for the year ended December 31, 2020.

On August 15, 2019, the Company was notified by the Oklahoma Tax Commission (the "OTC") that the tax court had issued findings, conclusions, and recommendations in an on-going tax case related to tax years 2006 through 2008. Based on the ruling and the advice of our Oklahoma tax counsel, the Company decided to negotiate a settlement with the OTC. The Company's analysis is that the potential liability associated with the settlement may range up to $3.5 million. The Company recorded $2.5 million of income tax and interest payable, which is included as accrued expenses on our consolidated balance sheets.