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Note 6 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 6: Income Taxes Major components of our income tax benefit (provision) for the years ended December 31, 2018, 2017 and 2016 are as follows (in thousands):
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  |  |  |  |  | Revised |  |  | Revised |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (454 | ) |  | $ | 22,171 |  |  | $ | (10,702 | )
Foreign |  |  | (4,382 | ) |  |  | (22,526 | ) |  |  | (13,713 | )
Total current income tax benefit (provision) |  |  | (4,836 | ) |  |  | (355 | ) |  |  | (24,415 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  |  | 7,147 |  |  |  | (30,766 | ) |  |  | 7,480 |
Foreign |  |  | 4,390 |  |  |  | 10,158 |  |  |  | (11,155 | )
Total deferred income tax benefit (provision) |  |  | 11,537 |  |  |  | (20,608 | ) |  |  | (3,675 | )
Total income tax benefit (provision) |  | $ | 6,701 |  |  | $ | (20,963 | ) |  | $ | (28,090 | )
Domestic and foreign components of (loss) income before income taxes for the years ended December 31, 2018, 2017 and 2016 are as follows (in thousands):
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  |  |  |  |  | Revised |  |  | Revised |
Domestic |  | $ | (44,513 | ) |  | $ | (7,920 | ) |  | $ | 41,014 |
Foreign |  |  | 11,249 |  |  |  | 363 |  |  |  | 48,645 |
Total |  | $ | (33,264 | ) |  | $ | (7,557 | ) |  | $ | 89,659 |
The annual tax benefit (provision) is different from the amount that would be provided by applying the statutory federal income tax rate to our pretax (loss) income. The reasons for the difference are (in thousands):
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  |  |  |  |  |  |  |  |  | Revised |  |  | Revised |
Computed “statutory” benefit (provision) |  | $ | 6,986 |  |  |  | (21 | )% |  | $ | 2,645 |  |  |  | 35 | % |  | $ | (31,381 | ) |  |  | 35 | %
Percentage depletion |  |  | 3,158 |  |  |  | (10 | ) |  |  | 5,174 |  |  |  | 68 |  |  |  | 8,114 |  |  |  | (9 | )
Change in valuation allowance |  |  | (2,304 | ) |  |  | 7 |  |  |  | 24,464 |  |  |  | 324 |  |  |  | 11,336 |  |  |  | (13 | )
Federal rate change |  |  | — |  |  |  | — |  |  |  | (37,546 | ) |  |  | (497 | ) |  |  | — |  |  |  | — |
State taxes, net of federal taxes |  |  | (849 | ) |  |  | 3 |  |  |  | 1,112 |  |  |  | 15 |  |  |  | (565 | ) |  |  | — |
Foreign currency remeasurement of monetary assets and liabilities |  |  | 6,747 |  |  |  | (20 | ) |  |  | (12,812 | ) |  |  | (169 | ) |  |  | (7,820 | ) |  |  | 9 |
Rate differential on foreign earnings |  |  | (3,970 | ) |  |  | 12 |  |  |  | (1,438 | ) |  |  | (19 | ) |  |  | (6,853 | ) |  |  | 8 |
Compensation |  |  | (970 | ) |  |  | 3 |  |  |  | (661 | ) |  |  | (9 | ) |  |  | (1,517 | ) |  |  | 2 |
Foreign withholding taxes |  |  | 278 |  |  |  | (1 | ) |  |  | (278 | ) |  |  | (4 | ) |  |  | — |  |  |  | — |
Expiration of U.S. foreign tax credits |  |  | — |  |  |  | — |  |  |  | (2,300 | ) |  |  | (30 | ) |  |  | — |  |  |  | — |
Other |  |  | (2,375 | ) |  |  | 7 |  |  |  | 677 |  |  |  | 9 |  |  |  | 596 |  |  |  | (1 | )
Total benefit (provision) |  | $ | 6,701 |  |  |  | (20 | )% |  | $ | (20,963 | ) |  |  | (277 | )% |  | $ | (28,090 | ) |  |  | 31 | %
On January 1, 2017 we adopted ASU No. 2015 - 17 Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740 ). Accordingly, all deferred income tax assets and liabilities are classified as non-current in the consolidated balance sheet. Upon adoption, we classified, as non-current, previously reported current deferred tax assets of $12.3 million and current deferred tax liabilities of $1.3 million. At December 31, 2018 and 2017, the net deferred tax liability was approximately $172 million and $123 million, respectively. The individual components of our net deferred tax assets and liabilities are reflected in the table below (in thousands).
|  | December 31, |
|  | 2018 |  |  | 2017 |
|  |  |  |  |  | Revised |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued reclamation costs |  | $ | 29,064 |  |  | $ | 21,812 |
Deferred exploration |  |  | 16,500 |  |  |  | 17,426 |
Foreign net operating losses |  |  | 13,231 |  |  |  | 1,003 |
Domestic net operating losses |  |  | 152,320 |  |  |  | 130,186 |
AMT credit carryforwards |  |  | — |  |  |  | 584 |
Pension and benefit obligation |  |  | 12,345 |  |  |  | 12,584 |
Foreign exchange loss |  |  | 24,849 |  |  |  | 18,112 |
Foreign tax credit carryforward |  |  | 4,149 |  |  |  | 4,983 |
Miscellaneous |  |  | 26,290 |  |  |  | 25,411 |
Total deferred tax assets |  |  | 278,748 |  |  |  | 232,101 |
Valuation allowance |  |  | (94,981 | ) |  |  | (78,684 | )
Total deferred tax assets |  |  | 183,767 |  |  |  | 153,417 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Miscellaneous |  |  | (5,234 | ) |  |  | (4,978 | )
Properties, plants and equipment |  |  | (350,083 | ) |  |  | (271,282 | )
Total deferred tax liabilities |  |  | (355,317 | ) |  |  | (276,260 | )
Net deferred tax liability |  | $ | (171,550 | ) |  | $ | (122,843 | )
For the year 2017, we recorded a liability of $0.3 million related to withholding taxes on unremitted earnings at Minera Hecla S.A. de C.V., our wholly-owned subsidiary which owns our San Sebastian mine and other interests in Durango, Mexico. Due to the changes to tax laws under the TCJ Act, we are no longer required to accrue taxes on remitted earnings and the liability was reversed. For the year 2016, we had no unremitted foreign earnings. Foreign net operating losses carried forward are shown above as a deferred tax asset, with a valuation allowance as discussed below. As discussed in Note 16 , we acquired Klondex Mines Ltd. ("Klondex") in July 2018. With the acquisition of Klondex, we acquired a U.S. consolidated tax group (the "Klondex U.S. Group") that did not join the existing consolidated U.S. tax group of Hecla Mining Company and subsidiaries (“Hecla U.S.”). Under acquisition accounting, we recorded a net deferred tax liability of $69.4 million. In 2018, we recorded a tax benefit of $6.3 million on a net tax loss of $30.0 million in the Klondex U.S. Group. Net operating losses acquired as of the acquisition date are subject to limitation under Internal Revenue Code Section 382. However, the annual limitation is not expected to have a material impact on our ability to utilize the benefit of these losses. We evaluated the positive and negative evidence available to determine the amount of valuation allowance required on our deferred tax assets. At December 31, 2018 and 2017, the balances of our valuation allowances were approximately $95 million and $79 million, respectively, primarily related to net operating losses. Due to the changes to tax laws under the TCJ Act, at December 31, 2017 we determined it is more likely than not that we will not realize our net deferred tax assets in our Hecla U.S. consolidated group. Accordingly, we applied a valuation allowance which remains in place on those net deferred tax assets at December 31, 2018. A portion of the valuation allowance relating to exploration and other deferred tax assets in Mexico was released in 2017 as we determined that it was more likely than not that the benefit would be realized as a result of operating activities at San Sebastian. As of December 31, 2018, a $92.0 million valuation allowance remains in U.S. jurisdictions, $1.3 million in Hecla Canada Ltd. and $1.7 million in Minera Hecla S.A. de C.V. There is no valuation allowance at Hecla Quebec, Inc. The changes in the valuation allowance for the years ended December 31, 2018, 2017 and 2016, are as follows (in thousands):
|  | 2018 |  |  | 2017 |  |  | 2016 |
Balance at beginning of year |  | $ | (78,684 | ) |  | $ | (99,602 | ) |  | $ | (115,806 | )
Valuation allowance on deferred tax assets acquired with the Klondex acquisition |  |  | (11,470 | ) |  |  | — |  |  |  | — |
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery |  |  | (5,700 | ) |  |  | (14,964 | ) |  |  | (2,868 | )
Decrease related to utilization and expiration of deferred tax assets, other |  |  | 873 |  |  |  | 35,882 |  |  |  | 19,072 |
Balance at end of year |  | $ | (94,981 | ) |  | $ | (78,684 | ) |  | $ | (99,602 | )
As of December 31, 2018, for U.S. income tax purposes, we have federal and state net operating loss carryforwards of $605.9 million and $383.3million, respectively. U.S. net operating loss carryforwards for periods arising before December 31, 2017 have a 20 -year expiration period, the earliest of which could expire in 2020. U.S. net operating loss carryforwards arising in 2018 and future periods have an indefinite carryforward period. We have foreign and provincial net operating loss carryforwards of approximately $50.0 million each, which expire between 2028 and 2038. Our utilization of U.S. net operating loss carryforwards may be subject to annual limitations if there is a change in control as defined under Internal Revenue Code Section 382. As of December 31, 2018, no change in control has occurred in the Hecla U.S. group. In 2017, we adopted ASU 2016 - 09 Stock Compensation: Improvements to Employee Share-Based Payment Accounting. As a result, the deferred tax asset related to our NOL increased by $5 million due to the inclusion of additional NOLs related to excess tax benefits. The increase in the deferred tax asset was fully offset by a valuation allowance, resulting in no change to our recognized net deferred tax assets. We file income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions. We are no longer subject to income tax examinations by U.S. federal and state tax authorities for years prior to 2000, or examinations by foreign tax authorities for years prior to 2012. We are currently under examination in certain local tax jurisdictions. However, we do not anticipate any material adjustments. We had no unrecognized tax benefits as of December 31, 2018 or 2017. Due to the net operating loss carryover provision, coupled with the lack of any unrecognized tax benefits, we have not provided for any interest or penalties associated with any uncertain tax positions. If interest and penalties were to be assessed, our policy is to charge interest to interest expense, and penalties to other operating expense. It is not anticipated that there will be any significant changes to unrecognized tax benefits within the next 12 months. On December 22, 2017, the United States enacted the TCJ Act resulting in significant modifications to existing law. We completed the accounting for the effects of the Act during the quarter ended December 31, 2017. Our financial statements for the year ended December 31, 2017, reflect certain effects of the TCJ Act which include a reduction in the corporate tax rate from 35% to 21% as well as other changes. As a result of the changes to tax laws and tax rates under the TCJ Act, we incurred incremental income tax expense of $30 million during the year ended December 31, 2017, which consisted primarily of the remeasurement of deferred tax assets and liabilities from 35% to 21% and application of a full valuation allowance. We have not accrued a one -time transition tax on unrepatriated foreign earnings due to an estimated net deficit in foreign earnings from all foreign jurisdictions.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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