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Note 7 - Income and Mining Taxes | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 7: Income and Mining Taxes Major components of our income and mining tax benefit (provision) for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  |  | Revised |  |  | Revised |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  | $ | (7,073 | ) |  | $ | (7,246 | ) |  | $ | (3,065 | )
Foreign |  |  | (6,316 | ) |  |  | (8,745 | ) |  |  | (9,427 | )
Total current income and mining tax provision |  |  | (13,389 | ) |  |  | (15,991 | ) |  |  | (12,492 | )
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Domestic |  |  | 43,708 |  |  |  | 5,096 |  |  |  | 13,962 |
Foreign |  |  | (750 | ) |  |  | 2,696 |  |  |  | 16,848 |
Total deferred income and mining tax benefit |  |  | 42,958 |  |  |  | 7,792 |  |  |  | 30,810 |
Total income and mining tax benefit (provision) |  | $ | 29,569 |  |  | $ | (8,199 | ) |  | $ | 18,318 |
Domestic and foreign components of income (loss) before income and mining taxes for the years ended December 31, 2021, 2020 and 2019 are as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  |  | Revised |  |  | Revised |
Domestic |  | $ | 38,003 |  |  | $ | (1,400 | ) |  | $ | (51,165 | )
Foreign |  |  | (32,477 | ) |  |  | 142 |  |  |  | (62,062 | )
Total |  | $ | 5,526 |  |  | $ | (1,258 | ) |  | $ | (113,227 | )
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 income (loss). The reasons for the difference are (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  |  |  |  |  |  | Revised |  |  | Revised |
Computed “statutory” benefit (provision) |  | $ | (1,161 | ) |  |  | 21 | % |  | $ | 264 |  |  |  | 21 | % |  | $ | 23,778 |  |  |  | 21 | %
Percentage depletion |  |  | 8,076 |  |  |  | (146 | ) |  |  | 5,327 |  |  |  | 423 |  |  |  | 3,030 |  |  |  | 3 |
Change in valuation allowance |  |  | 38,058 |  |  |  | (689 | ) |  |  | 786 |  |  |  | 62 |  |  |  | 686 |  |  |  | — |
State taxes, net of federal tax benefit |  |  | (5,844 | ) |  |  | 106 |  |  |  | (1,164 | ) |  |  | (93 | ) |  |  | 2,648 |  |  |  | 2 |
Foreign currency remeasurement of monetary assets and liabilities |  |  | (3,625 | ) |  |  | 66 |  |  |  | (4,824 | ) |  |  | (383 | ) |  |  | (8,629 | ) |  |  | (8 | )
Rate differential on foreign earnings |  |  | 2,445 |  |  |  | (44 | ) |  |  | 2,362 |  |  |  | 188 |  |  |  | 3,999 |  |  |  | 4 |
Compensation |  |  | 1,094 |  |  |  | (20 | ) |  |  | (458 | ) |  |  | (36 | ) |  |  | (1,056 | ) |  |  | (1 | )
Mining and other taxes |  |  | (6,990 | ) |  |  | 126 |  |  |  | (9,245 | ) |  |  | (735 | ) |  |  | (4,887 | ) |  |  | (4 | )
Other |  |  | (2,484 | ) |  |  | 45 |  |  |  | (1,247 | ) |  |  | (99 | ) |  |  | (1,251 | ) |  |  | (1 | )
Total benefit (provision) |  | $ | 29,569 |  |  |  | (535 | ) % |  | $ | (8,199 | ) |  |  | (652 | ) % |  | $ | 18,318 |  |  |  | 16 | %
At December 31, 2021 and 2020, the net deferred tax liability was approximately 104.1 million and $153.2 million, respectively. The individual components of our net deferred tax assets and liabilities are reflected in the table below (in thousands).
|  | December 31, |
|  | 2021 |  |  | 2020 |
|  |  |  |  |  | Revised |
Deferred tax assets: |  |  |  |  |  |  |  |
Accrued reclamation costs |  | $ | 31,558 |  |  | $ | 32,938 |
Deferred exploration |  |  | 17,959 |  |  |  | 11,623 |
Foreign net operating losses |  |  | 18,152 |  |  |  | 13,303 |
Domestic net operating losses |  |  | 213,637 |  |  |  | 198,438 |
Pension and benefit obligation |  |  | 1,824 |  |  |  | 12,341 |
Foreign exchange loss |  |  | 19,542 |  |  |  | 19,808 |
Foreign tax credit carryforward |  |  | 2,493 |  |  |  | 3,358 |
Miscellaneous |  |  | 29,505 |  |  |  | 18,385 |
Total deferred tax assets |  |  | 334,670 |  |  |  | 310,194 |
Valuation allowance |  |  | (39,152 | ) |  |  | (77,210 | )
Total deferred tax assets |  |  | 295,518 |  |  |  | 232,984 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Miscellaneous |  |  | (2,751 | ) |  |  | (2,551 | )
Properties, plants and equipment |  |  | (396,911 | ) |  |  | (383,612 | )
Total deferred tax liabilities |  |  | (399,662 | ) |  |  | (386,163 | )
Net deferred tax liability |  | $ | (104,144 | ) |  | $ | (153,179 | )
As part of the Klondex acquisition in July 2018, 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. Group”). Under acquisition accounting, we recorded a net deferred tax liability of $55.2 million. 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, 2021, the balance of our valuation allowances was approximately $39.2 million, following release of $58.4 million of Hecla U.S. Group valuation allowance, reflecting our estimate of future taxable income in the Hecla U.S. Group and our ability to utilize net operating losses and other deferred tax assets in future periods. Several factors support the release of the U.S. Group valuation allowance in 2021, including (i) a history of positive earnings and a clear upward trend over the last three years, (ii) the end of a labor strike and return to full production at a significant U.S. mine, the Lucky Friday mine, and (iii) scheduling of deferred tax liabilities and forecast of future taxable income to support utilization of the majority of deferred tax assets, with the exception of $8.9 million of valuation allowance retained on a portion of loss carryforward, foreign tax credit carryforward and certain state tax attributes. Our long-range planning and forecast process, which is finalized in the fourth quarter, is required to evaluate a forecast of future taxable income; thus, the fourth quarter was the appropriate time to lift the valuation allowance. In the Nevada U.S. Group, the scheduling of reversing deferred tax assets and liabilities determined that existing tax loss carryforwards subject to the limitation of eighty percent reduction of taxable income may be limited in the future. A valuation allowance was recorded for $19.4 million. Due to cessation of operations in Mexico at the end of 2020, we are uncertain when a source of taxable income will be available in that jurisdiction. Therefore, a valuation allowance was recognized on deferred tax assets in Mexico for $7.7 million. As of December 31, 2021, a $3.2 million valuation allowance remains in Canadian jurisdictions. The changes in the valuation allowance for the years ended December 31, 2021, 2020 and 2019, are as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Balance at beginning of year |  | $ | (77,210 | ) |  | $ | (86,634 | ) |  | $ | (94,981 | )
Valuation allowance on deferred tax assets acquired with the Klondex acquisition |  |  | — |  |  |  | — |  |  |  | 5,905 |
(Increase) 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 |  |  | (20,304 | ) |  |  | 786 |  |  |  | 686 |
Decrease related to either or a combination of (i) utilization, (ii) release due to future benefit, and (iii) expiration of deferred tax assets as applicable |  |  | 58,362 |  |  |  | 8,638 |  |  |  | 1,756 |
Balance at end of year |  | $ | (39,152 | ) |  | $ | (77,210 | ) |  | $ | (86,634 | )
As of December 31, 2021, for U.S. income tax purposes, we have federal and state net operating loss carryforwards of $869.2 million and $470.6 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 2022. U.S. net operating loss carryforwards of $381.2 million arising in 2018 and future periods have an indefinite carryforward period. We have foreign and provincial net operating loss carryforwards of approximately $69.7 million each, which expire between 2031 and 2041. 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, 2021, 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 2005, 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, 2021 or 2020. 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=121826272&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=122134291&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=121826272&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=122134291&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=121826272&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 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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