Note 7 - Income Taxes

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(7)     INCOME TAXES

Our income tax is different than the expected amount computed using the applicable federal statutory income tax rate of 21%. The reasons for and effects of such differences for the years ended December 31 are below (in thousands):

	2023			2022
Expected amount	$	10,344		$	4,171
State income taxes, net of federal benefit		1,246			391
Percentage depletion		(3,348	)		(2,081	)
Change in valuation allowance		(3,681	)		(970	)
Stock-based compensation		(844	)		—
Return to provision adjustments		159			153
Other		589			92
Total income tax expense	$	4,465		$	1,756

The deferred tax assets and liabilities resulting from temporary differences between book and tax basis are comprised of the following at December 31 (in thousands):

	2023			2022
Deferred tax assets:
Net operating loss	$	20,029		$	26,570
Power contracts		23,302			34,233
Compensation		2,287			1,344
Accrued liabilities		570			556
Other		2,016			471
Total deferred tax assets		48,204			63,174
Valuation allowance		—			(3,681	)
Deferred tax assets, net of valuation allowance		48,204			59,493
Deferred tax liabilities:
Coal properties		(25,764	)		(27,700	)
Power properties		(31,126	)		(35,702	)
Investment partnerships		(549	)		(494	)
Other		—			(203	)
Total deferred tax liabilities		(57,439	)		(64,099	)
Net deferred tax liability	$	(9,235	)	$	(4,606	)

Our effective tax rate (“ETR”) for 2023 and 2022 was approximately 9%. The tax rate for the years ended December 31, 2023 and 2022 are not predictive of future tax rates. Our ETR differs from the statutory rate due to statutory depletion in excess of tax basis, return to provision adjustments, stock-based compensation and changes in the valuation allowance. The deduction for statutory depletion does not necessarily change proportionately to changes in income before income taxes.

We recognize deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. Due to historical cumulative earnings over the prior three years as well as projected earnings into the future, we believe that it is more likely than not that the benefit from certain federal and state deferred tax assets will be realized. As such, we released the valuation allowance as of December 31, 2023. 

The federal NOLs generated in pre-2018 years and remaining of $13.4 million can offset 100% of future years' taxable income. The federal NOLs generated in post 2017 years of $60.7 million can offset 80% of future years' taxable income. The pre-2018 federal NOLs will expire in varying amounts from 2035 to 2037 if they are not utilized. Indiana NOLs have a 20-year carryforward period and will expire in the years 2034 to 2041 if they are not utilized. 

We have analyzed our filing positions in all of the federal and state jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions, to determine whether the positions will be more likely than not be sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are not recorded as a tax benefit or expense in the current year. We identified our federal tax return and our Indiana state tax return as “major” tax jurisdictions. We believe that our income tax filing positions and deduction will be sustained on audit and do not anticipate any adjustments that will result in a material change to its consolidated financial position. While not material, we record any penalties and interest as general and administrative expense. Tax returns filed with the Internal Revenue Service and state entities generally remain subject to examination for three years after filing.