Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes is comprised of the following:

	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Current
Federal	$	(59,452)	$	187,134	$	239,566
State	(5,391)		29,547		40,788
Foreign	9,423		3,805		(10,080)
Deferred
Federal	(64,836)		77,916		46,434
State	(52,872)		26,073		27,845
Foreign	(59,019)		(25,323)		2,690
	$	(232,147)	$	299,152	$	347,243

The statutory federal income tax rate applied to pre-tax book income reconciles to income tax expense (benefit) as follows:

	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Tax computed at statutory rate	$	(156,880)	$	246,013	$	320,138
Effect of the Tax Cuts and Jobs Act	—		—		(7,800)
State income taxes, net of federal tax benefit	(41,566)		47,259		56,936
Noncontrolling interest in net income	(21,799)		(25,494)		(20,215)
CARES Act benefits	(19,837)		—		—
Foreign rate differential	(14,294)		—		—
Effect of nondeductible goodwill impairment charge	16,573		32,069		—
Other	5,656		(695)		(1,816)
	$	(232,147)	$	299,152	$	347,243

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Our deferred income tax assets and liabilities as of December 31, 2020 and 2019 are as follows:

	December 31, 2020
	Assets		Liabilities		Total
	(In thousands)
Deferred income taxes
Properties, plants and equipment (due primarily to tax in excess of book depreciation)	$	—	$	(712,339)	$	(712,339)
Lease obligation	94,447		—		94,447
Accrued employee benefits	21,819		—		21,819
Accrued post-retirement benefits	11,646		—		11,646
Accrued environmental costs	27,200		—		27,200
Hedging instruments	—		(903)		(903)
Inventory differences	—		(24,271)		(24,271)
Deferred turnaround costs	—		(85,326)		(85,326)
Net operating loss and tax credit carryforwards	51,227		—		51,227
Investment in HEP	—		(94,982)		(94,982)
Valuation allowance	—		(8,577)		(8,577)
Other	6,356		—		6,356
Total	$	212,695	$	(926,398)	$	(713,703)

	December 31, 2019
	Assets		Liabilities		Total
	(In thousands)
Deferred income taxes
Properties, plants and equipment (due primarily to tax in excess of book depreciation)	$	—	$	(809,966)	$	(809,966)
Lease obligation	120,435		—		120,435
Accrued employee benefits	13,635		—		13,635
Accrued post-retirement benefits	11,027		—		11,027
Accrued environmental costs	28,708		—		28,708
Hedging instruments	—		(2,439)		(2,439)
Inventory differences	—		(43,500)		(43,500)
Deferred turnaround costs	—		(135,920)		(135,920)
Net operating loss and tax credit carryforwards	22,912		—		22,912
Investment in HEP	—		(95,037)		(95,037)
Valuation allowance	—		(4,600)		(4,600)
Other	5,475		—		5,475
Total	$	202,192	$	(1,091,462)	$	(889,270)

We have Kansas income tax credits of $12.8 million and Oklahoma income tax credits of $5.5 million that can be carried forward 16 and 19 tax years, respectively. We also have net operating losses of $61.8 million in Luxembourg and $27.6 million in Canada. We have reflected a valuation allowance of $8.6 million in 2020 and $4.6 million in 2019 with respect to these net operating carry forwards that primarily relate to the losses in Luxembourg.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	Years Ended December 31,
	2020		2019		2018
			(In thousands)
Balance at January 1	$	56,621	$	53,752	$	53,752
Additions for tax positions of prior years	6		2,893		—
Reductions for tax positions of prior years	(1,500)		(24)		—
Lapse of statute of limitations	(228)		—		—
Balance at December 31	$	54,899	$	56,621	$	53,752

At December 31, 2020, 2019 and 2018, there were $54.9 million, $56.6 million, and $53.8 million, respectively, of unrecognized tax benefits that, if recognized, would affect our effective tax rate. Unrecognized tax benefits are adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amount recorded.

Approximately $53.7 million of the unrecognized tax benefits relates to claims filed with the IRS on the federal income tax treatment of refundable biodiesel/ethanol blending tax credits for certain prior years. The issues related to the claims are complex and uncertain, and we cannot conclude that it is more likely than not that we will sustain the claims. Therefore, no tax benefit has been recognized for the filed claims. During the next 12 months, it is reasonably possible that an ultimate resolution regarding these claims could reduce unrecognized tax benefits (due to possible court rulings in favor of the IRS).

We recognize interest and penalties relating to liabilities for unrecognized tax benefits as an element of tax expense. We have not recorded any penalties related to our uncertain tax positions as we believe that it is more likely than not that there will not be any assessment of penalties.

We are subject to U.S. and Canadian federal income tax, Oklahoma, Kansas, New Mexico, Iowa, Arizona, Utah, Colorado and Nebraska income tax and to income tax of multiple other state jurisdictions. We have substantially concluded all state and local income tax matters for tax years through 2015. Other than the federal claim noted above, we have materially concluded all U.S. federal income tax matters for tax years through December 31, 2016.