Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

Our income tax provision (benefit) is as follows:

	Successor		Predecessor
	Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020		Year Ended December 31,
In thousands					2019		2018
Current income tax expense (benefit)
Federal	$	—	$	(6,407)	$	2,645	$	(17,885)
State	30		(853)		1,236		1,884
Total current income tax expense (benefit)	30		(7,260)		3,881		(16,001)
Deferred income tax expense (benefit)
Federal	—		(319,011)		89,950		93,395
State	(2,556)		(89,858)		10,521		9,839
Total deferred income tax expense (benefit)	(2,556)		(408,869)		100,471		103,234
Total income tax expense (benefit)	$	(2,526)	$	(416,129)	$	104,352	$	87,233

At December 31, 2020, we had no federal net operating loss carryforwards (“NOLs”), tax effected business interest expense carryforward, or tax credits, as the Company’s federal tax attributes were fully reduced in accordance with the attribute reduction and ordering rules of Section 108 of the Internal Revenue Code of 1986 pertaining to discharge of indebtedness. At December 31, 2020, we had $0.6 million of alternative minimum tax credits, which under the Tax Cut and Jobs Act passed in 2017 will be fully refundable by 2021, and are recorded as a receivable on the balance sheet, and state NOLs and tax credits totaling $56.0 million (before provision for valuation allowance) related to all our state operations, which continue as carryforwards for the Successor. Our state NOLs expire in various years, starting in 2025.

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, 2020 and 2019 balance sheet dates.  As of December 31, 2020, we had $75.1 million of net state deferred tax assets associated with operations in Louisiana, Mississippi, Montana, North Dakota and Alabama, which were fully offset with valuation allowances. The valuation allowances will remain until the realization of future deferred tax benefits are more likely than not to become utilized. The changes in our valuation allowance are detailed below:

	Successor		Predecessor
	Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020		Year Ended
In thousands					Dec. 31, 2019		Dec. 31, 2018
Beginning balance	$	129,840	$	77,215	$	51,093	$	51,134
Charges	2,269		77,138		26,122		—
Deductions	(2,701)		(24,513)		—		(41)
Ending balance	$	129,408	$	129,840	$	77,215	$	51,093

As of December 31, 2020, we had no unrecognized tax benefits recorded related to an uncertain tax position.

Significant components of our deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows:

	Successor		Predecessor
In thousands	December 31, 2020		December 31, 2019
Deferred tax assets
Property and equipment	$	59,207	$	—
Loss and tax credit carryforwards – state	55,979		52,917
Accrued liabilities and other reserves	15,632		29,788
Derivative contracts	13,090		—
Lease liabilities	6,354		10,841
Business interest expense carryforward	—		24,513
Business credit carryforwards	—		71,555
Unrecognized gain and original issue discount on debt exchange	—		41,556
Other	4,092		15,664
Valuation allowances	(129,408)		(77,215)
Total deferred tax assets	24,946		169,619
Deferred tax liabilities
CO2 and other contracts	(20,030)		—
Operating lease right-of-use assets	(6,190)		(7,780)
Property and equipment	—		(569,254)
Derivative contracts	—		(1,120)
Other	—		(1,695)
Total deferred tax liabilities	(26,220)		(579,849)
Total net deferred tax liability	$	(1,274)	$	(410,230)

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:

	Successor		Predecessor
	Period from Sept. 19, 2020 through Dec. 31, 2020		Period from Jan. 1, 2020 through Sept. 18, 2020		Year Ended December 31,
In thousands					2019		2018
Income tax provision calculated using the federal statutory income tax rate	$	(11,169)	$	(388,228)	$	67,475	$	86,086
State income taxes, net of federal income tax benefit	(2,532)		(86,937)		7,435		11,968
Tax shortfall (windfall) on stock-based compensation deduction	—		(1,502)		1,912		(1,565)
Valuation allowance	9,653		19,344		26,122		(42)
Tax attributes reduction – net of CODI exclusion	—		31,667		—		—
Enhanced oil recovery tax credits generated	—		—		—		(10,818)
Other	1,522		9,527		1,408		1,604
Total income tax expense (benefit)	$	(2,526)	$	(416,129)	$	104,352	$	87,233

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 2017 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.