Taxes (Notes)

9 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Valuation Allowances on Deferred Tax Assets [Text Block]

Taxes

As described in Note 2, Emergence from Voluntary Reorganization under Chapter 11, in accordance with the Plan, our Prepetition Senior Notes were exchanged for shares of our new common stock. Absent an exception, a debtor recognizes cancellation of debt income (CODI) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The Internal Revenue Code (IRC) provides that a debtor in a Chapter 11 bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. As a result of the market value of equity upon emergence from Chapter 11 bankruptcy proceedings, the estimated amount of CODI for federal income tax purposes is approximately $217 million, which will reduce the value of our net operating losses by an equal amount. The actual reduction in tax attributes does not occur until the first day of our tax year subsequent to the date of emergence, or January 1, 2021. The reduction of net operating losses is expected to be fully offset by a corresponding decrease in valuation allowance.

Upon our emergence from Chapter 11, we underwent an ownership change, as defined in the IRC, which we expect will result in future annual limitations on the usage of our remaining domestic net operating losses. The majority of our remaining domestic net operating losses will begin to expire in 2030, while losses generated after 2017 are carried forward indefinitely but are limited in usage to 80% of taxable income beginning in 2021. The majority of our foreign net operating losses are carried forward indefinitely, but losses generated after 2016 are carried forward for 12 years and will begin to expire in 2029.

We provide a valuation allowance when it is more likely than not that some portion of our deferred tax assets will not be realized. We evaluated the impact of the reorganization, including the change in control, resulting from our bankruptcy emergence and determined it is more likely than not that we will not fully realize future income tax benefits related to our domestic net deferred tax assets based on the annual limitations discussed above, historical results, and expected market conditions known on the date of measurement.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act contains numerous corporate income tax provisions, some of which impact our calculation of income taxes, including providing for the carryback of certain net operating losses, modifications to the net interest deduction limitations, refundable payroll tax credits, and deferment of employer social security payments. However, the provisions did not have a material impact on our Predecessor or Successor financial statements.