XML 33 R13.htm IDEA: XBRL DOCUMENT v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Taxes  
Income Taxes

6. Income Taxes

Gold Resource Corporation and its U.S. subsidiaries file a consolidated U.S. tax return and the Company’s foreign subsidiary files in Mexico. For financial reporting purposes, net income before income taxes includes the following components:

Years Ended December 31, 

    

2020

    

2019

    

2018

(in thousands)

U.S. Operations

$

(7,196)

$

(6,338)

$

(6,886)

Foreign Operations, Mexico

6,438

21,837

25,929

Total income before income taxes

$

(758)

$

15,499

$

19,043

The Company's income tax expense from continuing operations consists of the following:

Years ended December 31, 

    

2020

    

2019

    

2018

(in thousands)

Current taxes:

Federal

$

-

$

-

$

-

Foreign

3,294

6,210

7,764

Total current taxes

$

3,294

$

6,210

$

7,764

Deferred taxes:

Federal

$

2,999

$

1,881

$

(1,787)

Foreign

(720)

1,876

1,192

Total deferred taxes

$

2,279

$

3,757

$

(595)

Total income tax provision

$

5,573

$

9,967

$

7,169

The provision for income taxes for the years ended December 31, 2020, 2019 and 2018, differs from the amount of income tax determined by applying the applicable United States statutory federal income tax rate to pre-tax income from operations as a result of the following differences:

Years Ended December 31, 

    

2020

    

2019

    

2018

(in thousands)

Tax at statutory rates

$

(159)

$

3,255

$

3,999

Foreign rate differential

558

1,969

2,303

GILTI Inclusion

(886)

2,173

-

Changes in deferred tax assets

3,919

277

-

Mexico mining tax

280

1,126

1,244

Foreign exchange

866

255

(495)

Other

995

912

118

Tax provision

$

5,573

$

9,967

$

7,169

The following table sets forth deferred tax assets and liabilities:

At December 31, 

2020

    

2019

 

(in thousands)

Non-current deferred tax assets:

Tax loss carryforward - U.S.

$

2,190

$

2,268

Property and equipment

10,355

10,930

Share-based compensation

4,018

4,058

Foreign tax credits

4,089

4,364

Inventory

79

485

Other

1,488

1,261

Total deferred tax assets

22,219

23,366

Valuation allowance

(10,592)

(7,068)

Deferred tax assets after valuation allowance

$

11,627

$

16,298

Deferred tax liability – Property, plant and mine development

(11,318)

(12,398)

Net deferred tax asset

$

309

$

3,900

Mexico Mining Taxation

Mining entities in Mexico are subject to two mining duties, in addition to the 30% Mexico corporate income tax: (i) a “special” mining duty of 7.5% of taxable income as defined under Mexican tax law (also referred to as “mining royalty tax”) on extraction activities performed by concession holders, and (ii) the “extraordinary” mining duty of 0.5% on gross revenue from the sale of gold, silver and platinum.  The mining royalty tax is generally applicable to earnings before income tax, depreciation, depletion, amortization, and interest.  In calculating the mining royalty tax, there are no deductions related to depreciable costs from operational fixed assets, but exploration and prospecting depreciable costs are deductible when incurred.  Both duties are tax deductible for income tax purposes. As a result, our effective tax rate applicable to the Company’s Mexican operations is substantially higher than Mexico statutory rate.

The Company periodically transfers funds from its Mexican wholly-owned subsidiary to the U.S. in the form of dividends. Mexico requires a 10% withholding tax on dividends on all post-2013 earnings.  The Company began distributing post-2013 earnings from Mexico in 2018.  According to the existing U.S. – Mexico tax treaty, the dividend withholding tax between these countries is limited to 5% if certain requirements are met. The Company determined that it had met such requirements and paid a 5% withholding tax on dividends received from Mexico and as a result paid $0.2, $0.4, and $0.4 million for years ending December 31, 2020, 2019 and 2018, respectively. 

Other Tax Disclosures

The Company evaluates the evidence available to determine whether a valuation allowance is required on the deferred tax assets. As a result of the spin-off of Fortitude Gold Corporation and its subsidiaries, the Company determined that all of its US deferred tax assets were more likely to be unrealized, therefore a full valuation allowance of $10.6 million was recorded as of December 31, 2020. As of December 31, 2019, the Company determined that the deferred tax assets related to state net operating loss carry forwards, other state related deferred tax assets, foreign tax credits, and capital loss carryforwards were more likely to be unrealized and a full valuation allowance of $7.1 million was recorded as of December 31, 2019.

The U.S. Treasury Department issued final regulations in July 2020 concerning global intangible low-taxed income, commonly referred to as GILTI tax and introduced by the Tax Act of 2017. The GILTI provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The final tax regulations allow income to be excluded from GILTI tax that are subject to an effective tax rate higher than 90% of the U.S. tax rate. The Company completed its assessment of the new legislation and determined that we were not subject to GILTI tax in 2019 due to this high tax exception rule, therefore the Company recorded the reversal of the prior year GILTI tax expense that resulted in $0.9 million tax benefit for the year ended December 31, 2020.

At December 31, 2020, the Company has federal loss carryforwards of $3.0 million ($0.6 million tax affected), with no expiration date, U.S. Foreign Tax Credits of $4.1 million that expire at various dates between 2023 and 2026, federal capital loss carryforwards of $1.4 million ($0.3 million tax affected) that expire at various dates between 2021 and 2024, and state of Colorado tax loss carryforwards of $34.1 million ($1.6 million tax affected), of which $30.8 million expire at various dates between 2021 and 2037 and $3.3 million that have no expiration. The Company has placed a valuation allowance against all U.S. deferred tax assets as of December 31, 2020, and a valuation allowance against U.S. Foreign Tax Credits, state of Colorado tax loss carryforwards, and federal capital loss carryforwards as of December 31, 2019.

As of both December 31, 2020 and 2019, the Company believes that it has no uncertain tax positions. If the Company were to determine there was an uncertain tax position, the Company would recognize the liability and related interest and penalties within income tax expense.