XML 33 R17.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
 
The following table summarizes the Company's income tax expense (benefit).
 Years Ended December 31,
 202320222021
 (Thousands)
Current:   
Federal$(10,894)$651 $911 
State(4,818)18,457 (1,478)
Subtotal(15,712)19,108 (567)
Deferred:
Federal450,091 527,539 (316,364)
State(65,425)7,073 (111,106)
Subtotal384,666 534,612 (427,470)
Total income tax expense (benefit)$368,954 $553,720 $(428,037)
 
For the year ended December 31, 2023, the current income tax benefit related primarily to 2014 – 2017 audit settlement interest and reduction in prior year state income tax liabilities. For the year ended December 31, 2022, the current income tax expense related primarily to state income tax liabilities. For the year ended December 31, 2021, the current income tax benefit related primarily to the sale of state research and development credits.

On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (IRA). The IRA establishes a 15% corporate alternative minimum tax for certain corporations and a 1% excise tax on stock repurchases made by publicly traded U.S. corporations. The IRA also includes new and renewed options for energy credits. These changes are effective for tax years beginning after December 31, 2022. The impact of these changes did not have a material impact on the Company's financial statements and disclosures.
The table below summarizes the reasons for income tax expense (benefit) differences from amounts computed at the federal statutory rate of 21% on pre-tax income.
 Years Ended December 31,
 202320222021
Amount RateAmountRateAmountRate
 (Thousands)(Thousands)(Thousands)
Income (loss) before income taxes$2,103,498 $2,334,662 $(1,569,538)
Tax at statutory rate$441,735 21.0 %$490,279 21.0 %$(329,603)21.0 %
State income taxes50,263 2.4 %48,970 2.1 %(100,026)6.4 %
Valuation allowance(81,483)(3.9)%12,685 0.5 %9,616 (0.6)%
Convertible debt repurchase premium— — %35,957 1.5 %— — %
State law change(21,670)(1.0)%(49,511)(2.1)%(8,496)0.5 %
Federal and state tax credits(4,715)(0.2)%(4,319)(0.2)%(3,079)0.2 %
Other(15,176)(0.7)%19,659 0.8 %3,551 (0.2)%
Income tax expense (benefit)$368,954 17.5 %$553,720 23.7 %$(428,037)27.3 %
 
The Company's effective tax rate for the year ended December 31, 2023 was lower compared to the U.S. federal statutory rate due primarily to the release of valuation allowances limiting certain state deferred tax assets and net state deferred tax benefit related to a rate reduction from a Pennsylvania tax law change enacted on July 8, 2022 (the Pennsylvania Tax Legislation) and the Tug Hill and XcL Midstream Acquisition. The Pennsylvania Tax Legislation lowered the corporate net income tax rate from 9.99% to 8.99% in 2023 and by 0.5% annually thereafter until the corporate net income tax rate reaches 4.99% in 2031.

The Company's effective tax rate for the year ended December 31, 2022 was higher compared to the U.S. federal statutory rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits and nondeductible repurchase premiums on the Convertible Notes, partly offset by state tax benefits related to the Pennsylvania Tax Legislation. Included in the state law change was a decrease in state net operating loss (NOL) carryforwards of $214.1 million and a decrease in state valuation allowance on NOL carryforwards of $198.5 million.

The Company's effective tax rate for the year ended December 31, 2021 was higher compared to the U.S. federal statutory rate due primarily to state taxes, partly offset by valuation allowances that limit certain federal and state tax benefits as well as the West Virginia tax legislation enacted on April 13, 2021 that changed the way taxable income is apportioned in West Virginia for tax years beginning on or after January 1, 2022.
The following table summarizes the source and tax effects of temporary differences between financial reporting and tax bases of assets and liabilities.
 December 31,
 20232022
 (Thousands)
Deferred tax assets:
NOL carryforwards$740,802 $580,188 
Net unrealized losses— 171,697 
Federal and state capital loss carryforward99,632 99,837 
Federal tax credits92,730 88,015 
Alternative minimum tax carryforward— 81,237 
Interest disallowance limitation59,668 304 
Other1,156 5,697 
Incentive compensation and deferred compensation plans16,854 14,586 
Deferred tax assets1,010,842 1,041,561 
Valuation allowance(290,812)(365,140)
Net deferred tax asset720,030 676,421 
Deferred tax liabilities:
Property, plant and equipment(2,457,946)(2,118,827)
Net unrealized losses(166,905)— 
Deferred tax liabilities(2,624,851)(2,118,827)
Net deferred tax liability$(1,904,821)$(1,442,406)
 
During 2023, net deferred tax liability increased by $462.4 million compared to 2022 due primarily to current year book income impact to NOLs, partly offset by the release of valuation allowance on certain state NOLs.

The following table presents the expiration periods of the NOL carryforward deferred tax assets and associated valuation allowance by jurisdiction.
 December 31,
 20232022
 (Thousands)
NOL carryforwards:
Federal (expires between 2035 and 2037)$67,958 $62,931 
Federal (indefinite expiration)323,598 202,711 
State (expires between 2027 and 2037)332,153 299,933 
State (indefinite expiration)17,093 14,613 
Total NOL carryforwards$740,802 $580,188 
Valuation allowance on NOL carryforwards:
Federal$(24,927)$(23,626)
State(156,700)(241,638)
Total valuation allowance on NOL carryforwards$(181,627)$(265,264)

The Company recognizes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized. All available evidence, both positive and negative, is considered when determining the need for a valuation allowance. To determine whether a valuation allowance is required, the Company uses judgement to estimate future taxable income and considers the tax consequences in the jurisdiction where such taxable income is generated as well as evidence including the Company's current financial position, actual and forecasted results of operations, the reversal of deferred tax liabilities and tax planning strategies in addition to the current and forecasted business economics of the oil and gas industry.
For 2023 and 2022, positive evidence considered included the reversals of financial-to-tax temporary differences, the implementation of and/or ability to employ various tax planning strategies and the Company's estimation of future taxable income. Negative evidence considered included historical pre-tax book losses of the Company, the uncertainty of future commodity prices and inability to generate capital gains. A review of positive and negative evidence regarding these tax benefits resulted in the conclusion that valuation allowances for certain NOLs and capital loss carryforwards were warranted as it was more likely than not that the Company would not use them prior to expiration.

During 2023, the Company concluded that the positive evidence, including the Company's change in its cumulative income position from loss to income and its forecasted income, more likely than not outweighed the negative evidence regarding the realization of the Company's deferred tax asset (DTA) for certain state tax NOL carryforwards. As a result, the Company recorded a state deferred tax benefit of $84.9 million related to its valuation allowance for its state NOL carryforwards in the Statement of Consolidated Operations.

The Company retained a valuation allowance related to its NOLs for certain entities and jurisdictions in which it is more likely than not that the benefit from the related DTA will not be realized as well as a valuation allowance against the portion of its federal and state DTAs, such as capital losses, which may expire before being fully utilized due to the limitation to offset only capital gains.

The remaining valuation allowance not presented in the table above is related primarily to the capital loss carryforward realized with the sale of the Company's investment in Equitrans Midstream, which was a capital asset for tax purposes. Any capital losses from the sale of the investment can only be utilized to offset capital gains and are limited to being carried back 3 years and forward 5 years for potential utilization. In 2022, the Company sold the remaining portion of its investment in Equitrans Midstream, which generated a capital loss that can only be carried forward for potential future utilization. In 2021, the Company incurred an unrealized gain when adjusting its investment in Equitrans Midstream to fair value and sold a portion of such investment, which generated a capital loss that can be partly carried back to offset capital gains recognized in an earlier year, with the remainder carried forward.

As of December 31, 2023, the Company had a valuation allowance related to the capital loss carryforward of $52.8 million for federal income tax and $46.8 million for state income tax purposes due to the limitations on future potential utilization. As of December 31, 2022, the Company had a valuation allowance related to the capital loss carryforward of $52.7 million for federal income tax and $47.1 million for state income tax purposes due to the limitations on future potential utilization.

The following table reconciles the beginning and ending amount of reserve for uncertain tax positions, excluding interest and penalties.
 202320222021
 (Thousands)
Balance at January 1$204,035 $182,032 $175,213 
Additions for tax positions taken in current year11,986 9,612 4,969 
(Reductions) additions for tax positions taken in prior years(883)12,391 1,850 
Reductions for tax positions settled with tax authorities(125,941)— — 
Balance at December 31$89,197 $204,035 $182,032 

The following table presents specific line items that were included in the reserve for uncertain tax positions.
December 31,
202320222021
(Thousands)
If recognized, effect to the effective tax rate$83,669 $117,341 $97,783 
Recorded in the Consolidated Balance Sheet as reduction of related deferred tax asset for general business credit carryforwards and NOLs$77,013 $110,744 $97,160 
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company recorded interest and penalties (income) expense of approximately $(19.8) million, $6.7 million and $4.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Interest and penalties of $2.3 million and $22.2 million were included in the Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company believed that, as a result of potential settlements with relevant taxing authorities, it is reasonably possible that a decrease of $29.6 million in unrecognized tax benefits related to federal tax positions may be necessary within twelve months.

In January 2023, the Company settled its consolidated U.S. federal income tax liability with the IRS through 2017 for amounts included in the reserve for uncertain tax positions as of December 31, 2022 with minimal impact to the effective tax rate. The settlement resulted in a reduction of liabilities and deferred tax assets of $81.2 million and forgone research and development tax credits of $44.7 million, which are reflected in the table above. The incremental refundable alternative minimum tax credits realized with the settlement were included in the income tax receivable in the Consolidated Balance Sheet as of December 31, 2023. Periodically, the Company is also the subject of various state income tax examinations. As of December 31, 2023, with few exceptions, the Company is no longer subject to state examinations by tax authorities for years prior to 2016.

There were no material changes to the Company's methodology for accounting for unrecognized tax benefits during 2023.