Note 7. Income Taxes

Our income tax provision (benefit) is as follows:



	Year Ended December 31,
In thousands	2018			2017			2016
Current income tax expense (benefit)
Federal	$	(17,885	)	$	(19,485	)	$	—
State	1,884			(1,388		)	(785		)
Total current income tax benefit	(16,001		)	(20,873		)	(785		)

Deferred income tax expense (benefit)
Federal	93,395			(113,863		)	(521,519		)
State	9,839			18,084			(21,866		)
Total deferred income tax expense (benefit)	103,234			(95,779		)	(543,385		)
Total income tax expense (benefit)	$	87,233		$	(116,652	)	$	(544,170	)

At December 31, 2018, we had no federal net operating loss carryforwards (“NOLs”), tax effected business interest expense carryforward totaling $9.0 million, state NOLs and tax credits totaling $52.4 million (before provision for valuation allowance), an estimated $57.8 million of enhanced oil recovery credits to carry forward related to our tertiary operations, an estimated $21.6 million of research and development credits, and $18.1 million of alternative minimum tax credits. Under the Tax Cut and Jobs Act (“the Act”) enacted in December 2017, all of our alternative minimum tax credits are fully refundable by 2021 and are recorded as a receivable on the balance sheet. We considered our assessment of the recorded tax benefit associated with the impacts of the Act to be substantially complete as of December 31, 2017, which is reflected in the table reconciling income tax expense below. Federal and state regulatory guidance of the Act are continuing to be issued and could result in further tax effects but are not expected to be material to our financial statements. Our business interest expense carryforward does not expire. Our state NOLs expire in various years, starting in 2019, although most do not begin to expire until 2024. Our enhanced oil recovery credits and research and development credits begin to expire in 2024 and 2031, respectively.

Deferred income taxes reflect the available tax carryforwards and the temporary differences based on tax laws and statutory rates in effect at the December 31, 2018 and 2017 balance sheet dates. As of December 31, 2018, we had $51.1 million of deferred tax assets associated with State of Louisiana and Mississippi net operating losses and tax credits. A tax valuation allowance was recorded in 2015 to reduce the carrying value of our Louisiana deferred tax assets as the result of a tax law enacted in the State of Louisiana, which limits a company’s utilization of certain deductions, including our net operating loss carryforwards. As of December 31, 2018, tax valuation allowances totaling $41.9 million were recorded for our State of Louisiana deferred tax assets. Based on losses from falling commodity prices and lower future forecasted income related to our Mississippi deferred tax assets, we concluded it was not more-likely-than-not that the deferred tax assets would be realized. Accordingly, we recorded a valuation allowance against our Mississippi deferred tax assets in 2017. As of December 31, 2018, tax valuation allowances totaling $9.2 million were recorded for our State of Mississippi deferred tax assets. The valuation allowances will remain until the realization of future deferred tax benefits are more likely than not to become utilized. The decrease in our valuation allowance was due to a utilization of a portion of our net operating loss carryforwards, offset by the generation of additional state tax credit carryforwards.

As of December 31, 2018, we had an unrecognized tax benefit of $5.4 million related to an uncertain tax position. The unrecognized tax benefit was recorded during 2015 as a direct reduction of the associated deferred tax asset and, if recognized, would not materially affect our annual effective tax rate. The tax benefit from an uncertain tax position will only be recognized if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based upon the technical merits of the position. We currently do not expect a material change to the uncertain tax position within the next 12 months. Our policy is to recognize penalties and interest related to uncertain tax positions in income tax expense; however, no such amounts were accrued related to the uncertain tax position as of December 31, 2018.

Significant components of our deferred tax assets and liabilities as of December 31, 2018 and 2017 are as follows:



	December 31,
In thousands	2018			2017
Deferred tax assets
Loss carryforwards – federal	$	—		$	18,581
Loss and tax credit carryforwards – state	52,366			53,367
Tax credit carryover	—			20,270
Business credit carryforwards	79,528			73,057
Derivative contracts	—			23,024
Unrecognized gain and original issue discount on debt exchange	73,937			85,951
Accrued liabilities and other reserves	25,231			2,673
Other	32,257			29,681
Valuation allowance	(51,093		)	(51,134		)
Total deferred tax assets	212,226			255,470

Deferred tax liabilities
Property and equipment	(492,214		)	(450,629		)
Derivative contracts	(23,127		)	—
Other	(6,643		)	(2,940		)
Total deferred tax liabilities	(521,984		)	(453,569		)
Total net deferred tax liability	$	(309,758	)	$	(198,099	)

Our reconciliation of income tax expense computed by applying the U.S. federal statutory rate and the reported effective tax rate on income from continuing operations is as follows:



	Year Ended December 31,
In thousands	2018			2017			2016
Income tax provision (benefit) calculated using the federal statutory income tax rate	$	86,086		$	16,275		$	(532,121	)
State income taxes, net of federal income tax benefit	11,968			2,764			(25,351		)
Tax shortfall (windfall) on stock-based compensation deduction	(1,565		)	5,567			9,557
Valuation allowance	(42		)	5,562			2,910
Enhanced oil recovery tax credits generated	(10,818		)	(11,307		)	—
Re-measurement of deferreds related to federal tax rate change	—			(132,224		)	—
Other	1,604			(3,289		)	835
Total income tax expense (benefit)	$	87,233		$	(116,652	)	$	(544,170	)

We file consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state jurisdictions. The statutes of limitation for our income tax returns for tax years ending prior to 2015 have lapsed and therefore are not subject to examination by respective taxing authorities. We have not paid any significant interest or penalties associated with our income taxes.