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Income Taxes | 12 Months Ended
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Dec. 31, 2017
Income Taxes [Abstract] |
Income Taxes | 13. INCOME TAXES VAALCO and its domestic subsidiaries file a consolidated United States income tax return. Certain subsidiaries’ operations are also subject to foreign income taxes. On December 22, 2017, the United States government enacted the Tax Cuts and Jobs Act, commonly referred to as the Tax Reform Act. The Tax Reform Act includes significant changes to the U.S. income tax system including but not limited to: a federal corporate rate reduction from 35% to 21%; limitations on the deductibility of interest expense and executive compensation; repeal of the Alternative Minimum Tax (“AMT”); full expensing provisions related to business assets; creation of new minimum taxes such as the base erosion anti-abuse tax (“BEAT”) and Global Intangible Low Taxed Income (“GILTI”) tax; and the transition of U.S. international taxation from a worldwide tax system to a modified territorial tax system, which will result in a one time U.S. tax liability on those earnings which have not previously been repatriated to the U.S. (the “Transition Tax”). The provisional impacts of this legislation are outlined below:
| · |  | Beginning January 1, 2018, the U.S. corporate income tax rate will be 21%. The Company is required to recognize the impacts of this rate change on its deferred tax assets and liabilities in the period enacted. However, as the Company has a full valuation allowance on its net deferred tax asset, any deferred tax recognized due to the change in rate will be offset with a change in the valuation allowance. Therefore, there was no overall impact to the Financial Statements in 2017 due to this change in rate.
| · |  | The Tax Reform Act also repealed the corporate AMT for tax years beginning on or after January 1, 2018 and provides for existing alternative minimum tax credit carryovers to be refunded beginning in 2018. The Company has approximately $1.4 million in refundable credits, and it expects that a substantial portion will be refunded between 2018 and 2021. As such, most of the valuation allowance in place at the end of 2017 related to these credits has been released and a deferred tax asset of $1.3 million is reflected related to the expected benefit in future years.
| · |  | The Transition Tax on unrepatriated foreign earnings is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of the Company's foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, among other factors, the amount of post-1986 E&P of its foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. Based on the Company’s reasonable estimate of the Transition Tax, there is no provisional Transition Tax expense. The Company has not completed our accounting for the income tax effects of the transition tax and is continuing to evaluate this provision of the Tax Act.
| · |  | The Tax Reform Act creates a new requirement that GILTI income earned by foreign subsidiaries must be included currently in the gross income of the U.S. shareholder. Due to the complexity of the new GILTI tax rules, the Company is continuing to evaluate this provision of the Tax Act. Under U.S. GAAP, the Company is permitted to make an accounting policy election to either treat taxes due on future inclusions in U.S. taxable income related to GILTI as a current period expense when incurred or to factor such amounts into the Company's measurement of its deferred taxes. The Company has not yet completed its analysis of the GILTI tax rules and is not yet able to reasonably estimate the effect of this provision of the Tax Act or make an accounting policy election for the accounting treatment whether to record deferred taxes attributable to the GILTI tax. The Company has not recorded any amounts related to potential GILTI tax in the Company’s Financial Statements.
Other provisions in the legislation, such as interest deductibility and changes to executive compensation plans are not expected to have material implications to the Company’s Financial Statements. The income tax effects recorded in the Company’s Financial Statements as a result of the Tax Reform Act are provisional in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin number 118 “(SAB 118”) as the Company has not yet completed its evaluation of the impact of the new law. SAB 118 allows for a measurement period of up to one year after the enactment date of the Tax Reform Act to finalize the recording of the related tax impacts. The Company does not believe potential adjustments in future periods would materially impact the Company’s financial condition or results of operations. Additionally, the Tax Reform Act may further limit the Company’s ability to utilize foreign tax credits in the future. The Tax Reform Act introduces a new credit limitation basket for foreign branch income. Income from foreign branches would now be allocated to this specific tax credit limitation basket which cannot offset income in other baskets of foreign income. Under the Tax Reform Act, foreign taxes imposed on the foreign branch profits will not offset U.S. non-branch related foreign source income. Additional guidance is needed to determine how this will impact the Company and any future utilization of foreign tax credit carryforwards. In April 2017, the Company w as notified by the U.S. Internal Revenue Service (“IRS”) that they would be conducting an audit of its 2014 U.S. federal tax return. The audit was concluded in 2018, and there were no significant findings as a result. Provision for income taxes related to income (loss) from continuing operations consists of the following: ﻿
﻿ |  |  |  |  |  |  |  |  |
﻿ |  | Year Ended December 31,
﻿(in thousands) |  | 2017 |  | 2016 |  | 2015
﻿U.S. Federal: |  |  |  |  |  |  |  |  |
﻿Current |  | $ | — |  | $ | — |  | $ | —
﻿Deferred |  |  | (1,260) |  |  | — |  |  | 1,349
﻿Foreign: |  |  |  |  |  |  |  |  |
﻿Current |  |  | 11,638 |  |  | 9,248 |  |  | 13,238
﻿Deferred |  |  | — |  |  | — |  |  | —
﻿Total |  | $ | 10,378 |  | $ | 9,248 |  | $ | 14,587
﻿ |  |  |  |  |  |  |  |  |
﻿ ﻿ The primary differences between the financial statement and tax bases of assets and liabilities resulted in deferred tax assets associated with continuing operations at December 31, 2017 and 2016 are as follows: ﻿
﻿ |  |  |  |  |  |
﻿ |  | As of December 31,
﻿(in thousands) |  | 2017 |  | 2016
﻿Deferred tax assets: |  |  |  |  |  |
﻿Basis difference in fixed assets |  | $ | 46,929 |  | $ | 89,016
﻿Foreign tax credit carryforward |  |  | 48,071 |  |  | 50,339
﻿Alternative minimum tax credit carryover |  |  | 1,349 |  |  | 1,349
﻿U.S. federal net operating losses |  |  | 22,490 |  |  | 30,230
﻿Foreign net operating losses |  |  | 26,371 |  |  | 25,543
﻿Asset retirement obligations |  |  | 4,234 |  |  | 6,514
﻿Basis difference in receivables |  |  | 1,331 |  |  | 1,824
﻿Other |  |  | 3,690 |  |  | 6,952
﻿Total deferred tax assets |  |  | 154,465 |  |  | 211,767
﻿Valuation allowance |  |  | (153,205) |  |  | (211,767)
﻿Net deferred tax assets |  | $ | 1,260 |  | $ | —
﻿ |  |  |  |  |  |
Foreign tax credits will expire between the years 2018 and 2024. The alternative minimum tax credits do not expire, and foreign net operating losses (“NOLs”) are not subject to expiry dates. The NOL for our United Kingdom subsidiary can be carried forward indefinitely, while the NOLs for our Gabon subsidiaries are included in the respective subsidiaries’ cost oil accounts, which will be offset against future taxable revenues. The U.S federal NOL will expire between 203 5 and 2037. The ability to utilize NOLs and other tax attributes could be subject to a limitation if the Company were to undergo an ownership change as defined in Section 382 of the Tax Code. Management assesses the available positive and negative evidence to estimate if existing deferred tax assets will be utilized. We do not anticipate utilization of the foreign tax credits prior to expiration nor do we expect to generate sufficient taxable income to utilize other deferred tax assets. On the basis of this evaluation, valuation allowances of $153.2 million, $211.8 million and $210.7 million have been recorded as of December 31, 2017, 2016 and 2015, respectively. Valuation allowances reduce the deferred tax asset s to the amount that is more likely than not to be realized. As a result of the 2017 tax legislation enacted in the U.S., we expect to realize the benefit from our AMT credit carryforwards. The valuation allowance recorded related to AMT credits in previous periods was reversed in 2017 with the exception for a reserve for the possible sequestration of the credits. The $1.3 million reversal was recorded as a deferred income tax benefit during the fourth quarter of 2017. The Company recognizes the financial statement benefit of a tax position only after determining that they are more likely than not to sustain the position following an audit. The Company believes that its income tax positions and deductions will be sustained on audit and therefore no reserves for uncertain tax positions have been established. Accordingly, no interest or penalties have been accrued as of December 31, 2017 and 2016. The Company’s policy is to include interest and penalties related to unrecognized tax benefits as a component of income tax expense. Income (loss) from continuing operations before income taxes is attributable as follows: ﻿
﻿ |  |  |  |  |  |  |  |  |
﻿ |  | Year Ended December 31,
﻿(in thousands) |  | 2017 |  | 2016 |  | 2015
﻿United States |  | $ | (9,453) |  | $ | (9,893) |  | $ | (15,177)
﻿Foreign |  |  | 30,103 |  |  | 874 |  |  | (90,790)
﻿ |  | $ | 20,650 |  | $ | (9,019) |  | $ | (105,967)
The reconciliation of income tax expense attributable to income (loss) from continuing operations to income tax on income (loss) from continuing operations at the U.S. statutory rate is as follows: ﻿
﻿ |  |  |  |  |  |  |  |  |
﻿ |  | Year Ended December 31,
﻿(in thousands) |  | 2017 |  | 2016 |  | 2015
﻿Tax provision computed at U.S. statutory rate |  | $ | 7,228 |  | $ | (3,156) |  | $ | (37,089)
﻿Foreign taxes not offset in U.S. by foreign tax credits |  |  | 6,775 |  |  | 6,319 |  |  | (394)
﻿Impact of Tax Reform Act |  |  | 52,449 |  |  | — |  |  | —
﻿Effect of change in foreign statutory rates |  |  | — |  |  | 2,394 |  |  | 3,014
﻿Permanent differences |  |  | 309 |  |  | 4,505 |  |  | 1,803
﻿Foreign tax credit adjustments |  |  | 2,394 |  |  | — |  |  | —
﻿Increase/(decrease) in valuation allowance |  |  | (58,777) |  |  | (802) |  |  | 47,253
﻿Other |  |  | — |  |  | (12) |  |  | —
﻿Total income tax expense |  | $ | 10,378 |  | $ | 9,248 |  | $ | 14,587
﻿ |  |  |  |  |  |  |  |  |
At December 31, 2017, 2016 and 2015, we were subject to foreign and U.S. federal taxes only, with no allocations made to state and local taxes. The following table summarizes the tax years that remain subject to examination by major tax jurisdictions: ﻿ ﻿ ﻿
﻿ |  |
﻿ |  |
﻿Jurisdiction |  | Years
﻿United States |  | 2008-2017
﻿Gabon |  | 2013-2017
﻿ ﻿

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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