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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s income tax provision consists of the following components:
        
Years Ended
 (In thousands)
December 31, 2022
December 31, 2021December 31, 2020
Current:
Federal$66,540 $5,452 $(1,167)
State5,818 3,399 (339)
 Total current72,358 8,851 (1,506)
Deferred:
Federal(62,826)— (71,792)
State(2,894)— (6,042)
 Total deferred(65,720)— (77,834)
Income tax expense (benefit)$6,638 $8,851 $(79,340)
    
The Company is subject to U.S. federal income tax, margin tax in the state of Texas, and Louisiana corporate income tax. The Company’s effective tax rates for the years ended December 31, 2022, 2021, and 2020, were 0.6%, 1.6%, and 4.1%, respectively. The primary differences between the annual effective tax rates and the statutory rate of 21.0% are income attributable to noncontrolling interest, state taxes, and changes in valuation allowances. As a result of impairments in the first quarter of 2020, the Company established full valuation allowances on the federal and state deferred tax assets which resulted in additional differences between the effective tax rate and the statutory rate for the years ended December 31, 2021 and 2020. During the year ended December 31, 2022, the Company released the valuation allowance against net deferred tax assets.

As of December 31, 2022, the Company does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. For the year ended December 31, 2022, no significant amounts were incurred for interest and penalties. Currently, the Company is not aware of any issues under review that could result in significant payments, accruals, or a material deviation from its position. The Company’s tax years since its formation remain subject to possible income tax examinations by its major taxing authorities.

During the year ended December 31, 2022, the Magnolia LLC Unit Holders redeemed 19.5 million Magnolia LLC Units (and a corresponding number of shares of Class B Common Stock) for an equivalent number of shares of Class A Common Stock and subsequently sold these shares to the public. Magnolia did not receive any proceeds from the sale of shares of Class A Common Stock by the Magnolia LLC Unit Holders. The redemption and exchange of these Magnolia LLC Units increased Magnolia’s tax basis in Magnolia LLC. The Company recorded a deferred tax asset of $99.4 million related to this additional tax basis in Magnolia LLC Units with a corresponding increase to additional paid-in capital on the Company’s consolidated balance sheet.

The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets. Valuation allowances for deferred tax assets are recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. As of December 31, 2022, the Company’s total deferred tax assets were $162.8 million. Management assessed whether it is more likely than not that the Company will generate sufficient taxable income to realize its deferred income tax assets. In making this determination, the Company considered all available positive and negative evidence and made certain assumptions. The Company considered, among other things, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years. As of December 31, 2022, the Company concluded that it is more likely than not that it will be able to realize all of its deferred tax assets and that a valuation allowance is no longer necessary.
A reconciliation of the statutory federal income tax expense to the income tax expense (benefit) from continuing operations is as follows:

Year Ended
(In thousands)December 31, 2022December 31, 2021December 31, 2020
Income tax expense at the federal statutory rate$221,954 $119,392 $(409,148)
State income tax expense, net of federal income tax benefits9,526 2,763 (12,759)
Noncontrolling interest in partnerships(33,325)(30,615)141,027 
Change in valuation allowances(183,976)(82,696)201,786 
Research and development credits(4,980)— — 
Other(2,561)7 (246)
Income tax expense (benefit)$6,638 $8,851 $(79,340)

The tax effects of temporary differences that give rise to significant positions of the deferred income tax assets and liabilities are presented below:

 (In thousands)December 31, 2022December 31, 2021
Deferred tax assets:
Investment in partnership$153,938 $161,910 
Net operating loss carryforwards— 11,855 
Capital loss carryforward319 1,522 
Oil and natural gas properties6,093 6,337 
Capitalized transaction costs2,442 2,690 
Total deferred tax assets162,792 184,314 
Deferred tax liabilities:
Oil and natural gas properties(53)— 
Total deferred tax liabilities(53)— 
Net deferred tax assets162,739 184,314 
Valuation allowances— (184,314)
Net deferred tax assets, net of valuation allowances$162,739 $— 

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act. Applying the net operating loss (“NOL”) carryback provision resulted in an income tax benefit of $1.2 million during the year ended December 31, 2021. As of December 31, 2022, the Company had no U.S. federal net operating loss carryforward, and a $1.5 million capital loss carryforward which will expire in 3 years.

On August 16, 2022, the U.S. enacted legislation referred to as the Inflation Reduction Act (the “IRA”), which significantly changes U.S. corporate income tax laws and is effective for tax years beginning after December 31, 2022. These changes include, among others, a new 15% corporate alternative minimum tax on adjusted financial statement income of corporations with profits over $1 billion, a 1% excise tax on stock buybacks, and various tax incentives for energy and climate initiatives. The Company is in the process of evaluating the provisions of the IRA, but it does not currently believe the IRA will have a material impact on its reported results, cash flows or financial position.