Income Taxes

12 Months Ended

Dec. 31, 2019

The Company’s income tax benefit consists of the following:


	Year Ended December 31,
	2019		2018		2017

	(In thousands)
Current:
Federal	$	(43)	$	(70)	$	(420)
State	27		93		—
	(16)		23		(420)
Deferred:
Federal	(28,148)		(3,553)		(199,370)
State	(4,551)		(2,313)		(3,514)
	(32,699)		(5,866)		(202,884)
Total income tax benefit	$	(32,715)	$	(5,843)	$	(203,304)

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, 2019, 2018 and 2017, is set forth below:


	Year Ended December 31,
	2019						2018						2017

	(%)		(In thousands)		(%)		(In thousands)		(%)		(In thousands)
U.S. federal tax statutory rate	21.00	%	$	(25,906)	21.00	%	$	(5,322)	35.00	%	$	(26,550)
State income taxes, net of federal income tax benefit	2.90	%	(3,573)		2.08	%	(527)		2.59	%	(1,966)
Effects of non-controlling interest	6.40	%	(7,895)		13.09	%	(3,317)		1.68	%	(1,278)
Non-deductible executive compensation	(1.70)	%	2,094		(9.50)	%	2,408		1.05	%	(792)
Equity-based compensation windfall (shortfall)	(1.75)	%	2,163		(3.68)	%	932		0.87	%	(659)
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	(0.33)	%	402		0.41	%	(104)		(0.15)	%	111
Annual effective tax benefit	26.52	%	$	(32,715)	23.05	%	$	(5,843)	268.01	%	$	(203,304)

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2019 and 2018, were as follows:


	Year Ended December 31,
	2019		2018

	(In thousands)
Deferred tax assets
Net operating loss carryforward	$	191,022	$	177,745
Bonus and equity-based compensation	8,799		8,436
Derivative instruments	3,946		—
Other tax attribute carryovers	1,643		856
Total deferred tax assets	205,410		187,037
Less: Valuation allowance	(2,915)		(2,863)
Total deferred tax assets, net	$	202,495	$	184,174
Deferred tax liabilities
Oil and gas properties	$	426,130	$	423,270
Derivative instruments	—		22,834
Investment in partnerships	38,015		22,450
Other deferred tax liabilities	5,707		15,675
Total deferred tax liabilities	$	469,852	$	484,229
Total deferred tax liabilities, net	$	267,357	$	300,055

As of December 31, 2019, the Company had federal net operating loss carryforwards of $800.5 million, which expire between 2030 and 2039, and $642.0 million of state net operating loss carryforwards, which expire between 2020 and 2039. 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, 2019 and 2018, the Company’s valuation allowance balance was $2.9 million for both years, against Montana net operating loss carryforwards and certain other tax attribute carryforwards as the benefit for those attributes is not expected to be realized prior to their expiration due to their short carryover periods, current economic conditions and expectations for the future. 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, 2019 and 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, 2019 will expire in 2023. The Company’s earliest open year in its key jurisdictions is 2016 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.