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Note 6 - Income Taxes | 12 Months Ended
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Dec. 31, 2020
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 6: Income Taxes Major components of our income tax (provision) benefit for the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (868 | ) |  | $ | (701 | ) |  | $ | (454 | )
Foreign |  |  | (6,355 | ) |  |  | (7,289 | ) |  |  | (4,382 | )
Total current income tax provision |  |  | (7,223 | ) |  |  | (7,990 | ) |  |  | (4,836 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  |  | 4,392 |  |  |  | 15,243 |  |  |  | 7,147 |
Foreign |  |  | 2,696 |  |  |  | 16,848 |  |  |  | 4,390 |
Total deferred income tax benefit |  |  | 7,088 |  |  |  | 32,091 |  |  |  | 11,537 |
Total income tax (provision) benefit |  | $ | (135 | ) |  | $ | 24,101 |  |  | $ | 6,701 |
Domestic and foreign components of (loss) income before income taxes for the years ended December 31, 2020, 2019 and 2018 are as follows (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Domestic |  | $ | (2,104 | ) |  | $ | (49,874 | ) |  | $ | (44,513 | )
Foreign |  |  | (14,551 | ) |  |  | (73,784 | ) |  |  | 11,249 |
Total |  | $ | (16,655 | ) |  | $ | (123,658 | ) |  | $ | (33,264 | )
The annual tax (provision) benefit 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):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Computed “statutory” benefit (provision) |  | $ | 3,498 |  |  |  | 21 | % |  | $ | 25,968 |  |  |  | 21 | % |  | $ | 6,986 |  |  |  | 21 | %
Percentage depletion |  |  | 5,327 |  |  |  | 32 |  |  |  | 3,030 |  |  |  | 2 |  |  |  | 3,158 |  |  |  | 10 |
Change in valuation allowance |  |  | 786 |  |  |  | 5 |  |  |  | 686 |  |  |  | 1 |  |  |  | (2,304 | ) |  |  | (7 | )
State taxes, net of federal tax benefit |  |  | (1,164 | ) |  |  | (7 | ) |  |  | 2,648 |  |  |  | 2 |  |  |  | (849 | ) |  |  | (3 | )
Foreign currency remeasurement of monetary assets and liabilities |  |  | (4,824 | ) |  |  | (29 | ) |  |  | (8,629 | ) |  |  | (7 | ) |  |  | 6,747 |  |  |  | 20 |
Rate differential on foreign earnings |  |  | 991 |  |  |  | 6 |  |  |  | 3,947 |  |  |  | 3 |  |  |  | (469 | ) |  |  | (1 | )
Compensation |  |  | (458 | ) |  |  | (3 | ) |  |  | (1,056 | ) |  |  | (1 | ) |  |  | (970 | ) |  |  | (3 | )
Foreign withholding taxes |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 278 |  |  |  | 1 |
Mining and other taxes |  |  | (3,572 | ) |  |  | (22 | ) |  |  | (1,242 | ) |  |  | (1 | ) |  |  | (3,501 | ) |  |  | (11 | )
Other |  |  | (719 | ) |  |  | (4 | ) |  |  | (1,251 | ) |  |  | (1 | ) |  |  | (2,375 | ) |  |  | (7 | )
Total (provision) benefit |  | $ | (135 | ) |  |  | (1 | )% |  | $ | 24,101 |  |  |  | 19 | % |  | $ | 6,701 |  |  |  | 20 | %
At December 31, 2020 and 2019, the net deferred tax liability was approximately $129.6 million and $134.7 million, respectively. The individual components of our net deferred tax assets and liabilities are reflected in the table below (in thousands).
|  | December 31, |
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued reclamation costs |  | $ | 32,938 |  |  | $ | 30,038 |
Deferred exploration |  |  | 11,623 |  |  |  | 13,762 |
Foreign net operating losses |  |  | 13,303 |  |  |  | 12,013 |
Domestic net operating losses |  |  | 198,438 |  |  |  | 175,024 |
Pension and benefit obligation |  |  | 12,341 |  |  |  | 13,866 |
Foreign exchange loss |  |  | 19,808 |  |  |  | 21,719 |
Foreign tax credit carryforward |  |  | 3,358 |  |  |  | 4,149 |
Miscellaneous |  |  | 18,385 |  |  |  | 30,871 |
Total deferred tax assets |  |  | 310,194 |  |  |  | 301,442 |
Valuation allowance |  |  | (77,210 | ) |  |  | (86,634 | )
Total deferred tax assets |  |  | 232,984 |  |  |  | 214,808 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Miscellaneous |  |  | (2,551 | ) |  |  | (904 | )
Properties, plants and equipment |  |  | (359,996 | ) |  |  | (348,649 | )
Total deferred tax liabilities |  |  | (362,547 | ) |  |  | (349,553 | )
Net deferred tax liability |  | $ | (129,563 | ) |  | $ | (134,745 | )
As discussed in Note 16, we acquired Klondex in July 2018. With this acquisition, we acquired a U.S. consolidated tax group (the "Nevada 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 $59.5 million. In 2020, 2019 and 2018, we recorded deferred tax benefits of $4.4 million, $15.2 million and $6.3 million, respectively, in the Nevada 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 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, 2020 and 2019, the balances of our valuation allowances were approximately $77 million and $87 million, respectively, primarily related to net operating losses. Due to the changes to tax laws under the Tax Cuts and Jobs Act enacted in December 2017 ("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, 2020. 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, 2020, a $72.5 million valuation allowance remains in U.S. jurisdictions, $2.6 million in Canadian jurisdictions and $2.1 million in Mexican jurisdictions. The changes in the valuation allowance for the years ended December 31, 2020, 2019 and 2018, are as follows (in thousands):
|  | 2020 |  |  | 2019 |  |  | 2018 |
Balance at beginning of year |  | $ | (86,634 | ) |  | $ | (94,981 | ) |  | $ | (78,684 | )
Valuation allowance on deferred tax assets acquired with the Klondex acquisition |  |  | — |  |  |  | 5,905 |  |  |  | (11,470 | )
Decrease related to non-recognition of deferred tax assets due to uncertainty of recovery and (increase) related to non-utilization of net operating loss carryforwards |  |  | 786 |  |  |  | 686 |  |  |  | (5,700 | )
Decrease related to utilization and expiration of deferred tax assets, other |  |  | 8,638 |  |  |  | 1,756 |  |  |  | 873 |
Balance at end of year |  | $ | (77,210 | ) |  | $ | (86,634 | ) |  | $ | (94,981 | )
As of December 31, 2020, for U.S. income tax purposes, we have federal and state net operating loss carryforwards of $788.2 million and $477.9 million, 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 2021. U.S. net operating loss carryforwards of $292.9 million arising in 2018 and future periods have an indefinite carryforward period. We have foreign and provincial net operating loss carryforwards of approximately $53.5 million each, which expire between 2031 and 2040. 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, 2020, no change in control has occurred in the Hecla U.S. group. Net operating losses acquired with the Nevada U.S. Group 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 losses. We file income tax returns in the U.S. federal jurisdiction, and 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 2001, or examinations by foreign tax authorities for years prior to 2015. 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, 2020 or 2019. 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 unrecognized tax benefits. 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.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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