(9) Income Taxes

The following is an analysis of the consolidated income tax provision (benefit):

	For the Years Ended December 31,
	2014			2015			2016
	(In thousands)
Current - Federal	$	—		$	—		$	—
- State		(12	)		804			64

Deferred - Federal		(27,652	)		(149,171	)		—
- State		2,975			(6,078	)		7,105
	$	(24,689	)	$	(154,445	)	$	7,169

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates. The difference between the Company's effective tax rate and the 35% federal statutory rate is caused by non-deductible stock compensation, state taxes and the establishment of a valuation allowance on deferred taxes. The impact of these items varies based upon the Company's full year loss and the jurisdictions that are expected to generate the projected losses.

In recording deferred income tax assets, the Company considers whether it is more likely than not that some portion or all of its deferred income tax assets will be realized in the future. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible. The Company believes that after considering all the available objective evidence, historical and prospective, with greater weight given to historical evidence, management is not able to determine that it is more likely than not that all of its deferred tax assets will be realized. As a result, the Company established valuation allowances for its deferred tax assets and U.S. federal and state net operating loss carryforwards that are not expected to be utilized due to the uncertainty of generating taxable income prior to the expiration of the carryforward periods.

The valuation allowances recognized and the related tax effect for 2014, 2015 and 2016 are as follows:

	For the Years Ended December 31,
	2014		2015		2016
	(In thousands)
Federal taxes:
Valuation allowance	$	—	$	775,304	$	132,482
Tax effect		—		271,356		46,369

State taxes:
Valuation allowance		213,066		264,188		434,561
Tax effect		11,099		12,228		23,521

The Company will continue to assess the valuation allowances against deferred tax assets considering all available information obtained in future periods.

The difference between the Company's customary rate of 35% and the effective tax rate on losses is due to the following:

	For the Years Ended December 31,
	2014			2015			2016
	(In thousands)
Tax benefit at statutory rate	$	(28,630	)	$	(420,544	)	$	(44,788	)
Tax effect of:
Nondeductible compensation		756			539			73
State taxes, net of federal tax benefit		(8,121	)		(18,218	)		(18,860	)
Valuation allowance on deferred tax assets		11,099			283,585			69,890
Other		207			193			854
Total	$	(24,689	)	$	(154,445	)	$	7,169

	For the Years Ended December 31,
	2014			2015			2016
Statutory rate		35.0	%		35.0	%		35.0	%
Tax effect of:
Nondeductible compensation		(0.9	)		—			(0.1	)
State taxes, net of federal tax benefit		9.9			1.4			14.7
Valuation allowance on deferred tax assets		(13.6	)		(23.5	)		(54.6	)
Other		(0.2	)		—			(0.6	)
Effective tax rate		30.2	%		12.9	%		(5.6	%)

The tax effects of significant temporary differences representing the net deferred tax liability at December 31, 2015 and 2016 were as follows:

	2015			2016
	(In thousands)
Deferred tax assets:
Property and equipment	$	58,993		$	15,164
Net operating loss carryforwards		255,571			339,914
Alternative minimum tax carryforward		20,435			20,435	Alternative minimum tax carryforward
Unrealized hedging loss		—			2,110
Gain on debt exchange		—			20,194
Other		7,895			8,523
		342,894			406,340
Valuation allowance on deferred tax assets		(330,372	)		(398,120	)
Deferred tax assets		12,522			8,220

Deferred tax liabilities:
Property and equipment		(9,047	)		(9,203	)
Unrealized hedging income		(506	)		—
Original issue discount		—			(4,025	)
Other		(4,934	)		(4,118	)
Deferred tax liabilities		(14,487	)		(17,346	)
Net deferred tax liability	$	(1,965	)	$	(9,126	)

At December 31, 2016, Comstock had the following carryforwards available to reduce future income taxes:

Types of Carryforward	Years of Expiration Carryforward	Amount
		(In thousands)
Net operating loss - U.S. federal	2017 – 2036	$	745,190
Net operating loss – state taxes	2020 – 2036	$	1,521,847
Alternative minimum tax credits	Unlimited	$	20,435

At December 31, 2016, the Company had $745.2 million in U.S. federal net operating loss carryforwards and $1.5 billion in certain state net operating loss carryforwards. A valuation allowance has been established against all of the federal loss carryforwards and $1.4 billion of the state loss carryforwards due to the uncertainty of generating future taxable income prior to the expiration of the net operating loss carryforward periods.

Future use of the Company's federal and state net operating loss carryforwards may be limited in the event that a cumulative change in the ownership of Comstock's common stock by more than 50% occurs within a three-year period. Such a change in ownership would result in a substantial portion of Comstock's net operating loss carryforwards being eliminated or becoming restricted, and the Company would need to recognize additional valuation allowances reflecting the restricted use of the net operating loss carryforwards in the period when such an ownership change occurred. It is highly likely that a change in ownership that would result from conversion of the Company’s convertible notes would result in limits on the future use of its net operating loss carryforwards.

The Company's federal income tax returns for the years subsequent to December 31, 2012 remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for the year ended December 31, 2008 and for various periods subsequent to December 31, 2010. A state tax return in one state jurisdiction is currently under review. The Company has evaluated the preliminary findings in this jurisdiction and believes it is more likely than not that the ultimate resolution of these matters will not have a material impact on its financial statements. The Company currently believes that its significant filing positions are highly certain and that all of its other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on the consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions. Interest and penalties resulting from audits by tax authorities have been immaterial and are included in the provision for income taxes in the consolidated statements of operations.