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Income Taxes | 12 Months Ended
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Dec. 31, 2018
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes On December 22, 2017, the U.S. government enacted the Tax Act, which made broad and complex changes to the U.S. tax code. Due to the complexities involved in the accounting for the enactment of the new law, the SEC issued SAB 118, which provides guidance on the accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, the Company was able to make reasonable estimates on certain effects of the Tax Act in the consolidated financial statements for the year ended December 31, 2017. During the third quarter of 2018, the Company completed the accounting under the Tax Act and ASC 740. Based on additional guidance issued by the Internal Revenue Service regarding the grandfather provisions related to certain performance-based compensation awards outstanding as of November 2, 2017, the Company wrote off $1.9 million of deferred tax assets for which the Company will not receive a future tax deduction. The Company’s income tax benefit consists of the following:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (In thousands)
Current: |  |  |  |  |
Federal | $ | (70 | ) |  | $ | (420 | ) |  | $ | — |
State | 93 |  |  | — |  |  | — |
| 23 |  |  | (420 | ) |  | — |
Deferred: |  |  |  |  |
Federal | (3,553 | ) |  | (199,370 | ) |  | (117,781 | )
State | (2,313 | ) |  | (3,514 | ) |  | (10,757 | )
| (5,866 | ) |  | (202,884 | ) |  | (128,538 | )
Total income tax benefit | $ | (5,843 | ) |  | $ | (203,304 | ) |  | $ | (128,538 | )
The reconciliation of income taxes calculated at the U.S. federal tax statutory rate to the Company’s effective tax rate for the years ended December 31, 2018, 2017 and 2016, is set forth below:
| Year Ended December 31,
| 2018 |  | 2017 |  | 2016
| (%) |  | (In thousands) |  | (%) |  | (In thousands) |  | (%) |  | (In thousands)
U.S. federal tax statutory rate | 21.00 | % |  | $ | (5,322 | ) |  | 35.00 | % |  | $ | (26,550 | ) |  | 35.00 | % |  | $ | (130,044 | )
State income taxes, net of federal income tax benefit | 2.08 | % |  | (527 | ) |  | 2.59 | % |  | (1,966 | ) |  | 2.27 | % |  | (8,435 | )
Effects of non-controlling interest | 13.09 | % |  | (3,317 | ) |  | 1.68 | % |  | (1,278 | ) |  | — | % |  | — |
Non-deductible executive compensation | (9.50 | )% |  | 2,408 |  |  | 1.05 | % |  | (792 | ) |  | (0.21 | )% |  | 796 |
Equity-based compensation windfall (shortfall) | (3.68 | )% |  | 932 |  |  | 0.87 | % |  | (659 | ) |  | (1.83 | )% |  | 6,808 |
State deferred tax rate change | 13.73 | % |  | (3,479 | ) |  | 0.36 | % |  | (270 | ) |  | — | % |  | — |
Change in valuation allowance | (6.74 | )% |  | 1,707 |  |  | — | % |  | — |  |  | — | % |  | — |
Impact of U.S. tax reform | (7.34 | )% |  | 1,859 |  |  | 226.61 | % |  | (171,900 | ) |  | — | % |  | — |
Other | 0.41 | % |  | (104 | ) |  | (0.15 | )% |  | 111 |  |  | (0.64 | )% |  | 2,337 |
Annual effective tax benefit | 23.05 | % |  | $ | (5,843 | ) |  | 268.01 | % |  | $ | (203,304 | ) |  | 34.59 | % |  | $ | (128,538 | )
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017, were as follows:
| Year Ended December 31,
| 2018 |  | 2017
| (In thousands)
Deferred tax assets |  |  |
Net operating loss carryforward | $ | 177,745 |  |  | $ | 182,633 |
Bonus and equity-based compensation | 8,436 |  |  | 10,100 |
Derivative instruments | — |  |  | 30,397 |
Other tax attribute carryovers | 856 |  |  | 1,099 |
Total deferred tax assets | 187,037 |  |  | 224,229 |
Less: Valuation allowance | (2,863 | ) |  | (1,159 | )
Net deferred tax assets | 184,174 |  |  | 223,070 |
Deferred tax liabilities |  |  |
Oil and natural gas properties | 423,270 |  |  | 485,132 |
Derivative instruments | 22,834 |  |  | — |
Investment in partnerships | 22,450 |  |  | 25,490 |
Other deferred tax liabilities | 15,675 |  |  | 18,369 |
Total deferred tax liabilities | 484,229 |  |  | 528,991 |
Total net deferred tax liabilities | $ | 300,055 |  |  | $ | 305,921 |
As of December 31, 2018, the Company had federal net operating loss carryforwards of $744.2 million, which expire between 2033 and 2037, and $600.2 million of state net operating loss carryforwards, which expire between 2020 and 2037. The tax benefits of carryforwards are recorded as an asset to the extent that management assesses the utilization of such carryforwards to be more likely than not, and when the future utilization of some portion of the carryforwards is determined not to be more likely than not a valuation allowance is provided to reduce the recorded tax benefits from such assets. As of December 31, 2018 and 2017, the Company’s valuation allowance balance was $2.9 million and $1.2 million, respectively, against Montana net operating loss carryforwards and certain other tax attribute carryforwards as the benefit for those is not expected to be realized prior to their expiration due to their short carryover periods, current economic conditions and expectations for the future. The net increase of $1.7 million of valuation allowance in 2018 is primarily related to additional valuation allowance on deferred tax assets for Montana net operating loss carryforwards. No valuation allowances are required for U.S. federal and North Dakota tax net operating loss carryforwards as they are expected to be fully utilized before their expiration. Due to the adoption of ASU 2016-09, unrealized excess tax benefits of $10.6 million were realized in the cumulative-effect adjustment to retained earnings on the Company’s Condensed Consolidated Balance Sheet in the first quarter of 2017 and increased the deferred tax asset. Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2018, the Company had no unrecognized tax benefits. With respect to income taxes, the Company’s policy is to account for interest charges as interest expense and any penalties as tax expense in its Consolidated Statements of Operations. The Company files income tax returns in the U.S. federal jurisdiction and in North Dakota, Montana and Texas. The statute of limitation for the year ended December 31, 2018 will expire in 2022. The Company’s earliest open year in its key jurisdictions is 2015 for both the U.S. federal jurisdiction and various U.S. states, however, net operating losses originating in 2010 and all subsequent periods are subject to examination when utilized.

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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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