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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES: Income tax expense (benefit) provided on earnings from continuing operations consisted of:
| For the Years Ended December 31,
| 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |
U.S. Federal | $ | (51,243 | ) |  | $ | (130,003 | ) |  | $ | (31,791 | )
U.S. State | (113 | ) |  | — |  |  | (1,838 | )
| (51,356 | ) |  | (130,003 | ) |  | (33,629 | )
Deferred: |  |  |  |  |
U.S. Federal | 47,717 |  |  | 319,813 |  |  | (166,112 | )
U.S. State | 31,375 |  |  | 25,747 |  |  | 23,283 |
| 79,092 |  |  | 345,560 |  |  | (142,829 | )
Total Income Tax Expense (Benefit) | $ | 27,736 |  |  | $ | 215,557 |  |  | $ | (176,458 | )
The components of the net deferred taxes are as follows:
| December 31,
| 2019 |  | 2018
Deferred Tax Assets: |  |  |
Net Operating Loss- Federal | $ | 202,913 |  |  | $ | 124,341 |
Net Operating Loss - State | 130,430 |  |  | 110,339 |
Alternative Minimum Tax | 51,241 |  |  | 102,482 |
Foreign Tax Credit | 43,194 |  |  | 43,194 |
Interest Limitation | 25,734 |  |  | 32,147 |
Gas Well Closing | 17,888 |  |  | 10,140 |
Equity Compensation | 9,308 |  |  | 13,096 |
Salary Retirement | 9,236 |  |  | 9,434 |
Finance Lease | 1,209 |  |  | 1,624 |
Other | 10,030 |  |  | 13,714 |
Total Deferred Tax Assets | 501,183 |  |  | 460,511 |
Valuation Allowance | (125,054 | ) |  | (94,455 | )
Net Deferred Tax Assets | 376,129 |  |  | 366,056 |
Deferred Tax Liabilities: |  |  |
Property, Plant and Equipment | (593,401 | ) |  | (606,342 | )
Investment in Partnership | (145,424 | ) |  | (125,253 | )
Gas Derivatives | (105,721 | ) |  | (26,160 | )
Advance Gas Royalties | (3,337 | ) |  | (3,384 | )
Other | (4,354 | ) |  | (3,599 | )
Total Deferred Tax Liabilities | (852,237 | ) |  | (764,738 | )
Net Deferred Tax Liability | $ | (476,108 | ) |  | $ | (398,682 | )
Deferred taxes are recorded for certain tax benefits, including net operating losses and tax credit carry-forwards, if management assesses the utilization of those assets to be more likely than not. A valuation allowance is required when it is not more likely than not that all or a portion of a deferred tax asset will be realized. All available evidence, both positive and negative, must be considered in determining the need for a valuation allowance. For the years ended December 31, 2019 and 2018, positive evidence considered included financial earnings generated over the past three years for certain subsidiaries, reversals of financial to tax temporary differences and the implementation of and/or ability to employ various tax planning strategies. Negative evidence includes financial and tax losses generated in prior periods and the inability to achieve forecasted results for those periods. As of December 31, 2019, the Company has a deferred tax asset related to federal net operating losses of $202,913, which expire at various times between 2034 and 2038. However, because of the Tax Cuts and Jobs Act (the “Act”) enacted on December 22, 2017, the anticipated federal net operating losses generated in 2018 and 2019 do not expire but may only offset 80% of taxable income in any given year. The Act preserved the deductibility of intangible drilling costs for federal income tax purposes, which allows the Company to deduct a portion of drilling costs in the year incurred and minimizes current year taxes payable in periods of taxable income. The Act also repealed the corporate alternative minimum tax (AMT) for tax years beginning January 1, 2018 and provides that existing AMT credits can be utilized to offset current federal taxes owed in tax years 2018 through 2020. In addition, 50% of any unused AMT credits are refundable during these years with any remaining AMT credit carryforward being fully refunded in 2021. The Company has reclassified $51,241 in 2019 and $102,482 in 2018 from Deferred Income Taxes to Recoverable Income Taxes in the Consolidated Balance Sheets in anticipation of the AMT refunds expected to be received in 2020 and received in 2019. The Company has a deferred tax asset relating to federal AMT credits of $51,241 and $102,482, as of December 31, 2019 and 2018, respectively, a decrease of $51,241 from the prior year that resulted from the anticipated and actual refund of the AMT credits. During 2018, the valuation allowance relating to federal AMT credits decreased by $12,413 as the Internal Revenue Service (IRS) announced that refunds of AMT credits are no longer subject to government sequestration. A valuation allowance on foreign tax credits of $43,194 has also been recorded at December 31, 2019 and 2018. The foreign tax credits expire at various times between 2021 and 2023. A valuation allowance on charitable contribution carry-forwards of $658 and $3,297 has been recorded as of December 31, 2019 and 2018, respectively. The Company's valuation allowance for charitable contributions decreased by $2,639 in 2019 due to expiration of the carry forward period. The remaining charitable contribution carry-forwards expire at various times between 2020 and 2024. CNX continues to report, on an after federal tax basis, a deferred tax asset related to state operating losses of $130,430 with a related valuation allowance of $81,202 at December 31, 2019. The deferred tax asset related to state operating losses, on an after-tax adjusted basis, was $110,339 with a related valuation allowance of $47,964 at December 31, 2018. A review of positive and negative evidence regarding these state tax benefits concluded that the valuation allowances for various CNX subsidiaries was warranted. These NOLs expire at various times between 2020 and 2039. Management will continue to assess the potential for realized deferred tax assets based upon income forecast data and the feasibility of future tax planning strategies and may record adjustments to valuation allowances against deferred tax assets in future periods, as appropriate, that could materially impact net income. The following is a reconciliation, stated as a percentage of pretax income, of the United States statutory federal income tax rate to CNX's effective tax rate:
| For the Years Ended December 31,
| 2019 |  | 2018 |  | 2017
| Amount |  | Percent |  | Amount |  | Percent |  | Amount |  | Percent
Statutory U.S. Federal Income Tax Rate | $ | 12,534 |  |  | 21.0 | % |  | $ | 230,721 |  |  | 21.0 | % |  | $ | 41,503 |  |  | 35.0 | %
Net Effect of State Income Taxes | 1,333 |  |  | 2.2 |  |  | 60,814 |  |  | 5.6 |  |  | 15,538 |  |  | 13.1 |
Non-Controlling Interest | (23,662 | ) |  | (39.6 | ) |  | (18,181 | ) |  | (1.7 | ) |  | — |  |  | — |
Uncertain Tax Positions | — |  |  | — |  |  | (4,265 | ) |  | (0.4 | ) |  | 27,359 |  |  | 23.1 |
Effect of Spin on Federal NOL's | — |  |  | — |  |  | — |  |  | — |  |  | 24,942 |  |  | 21.0 |
Accrual to Tax Return Reconciliation | 603 |  |  | 1.0 |  |  | 3,028 |  |  | 0.3 |  |  | (1,147 | ) |  | (1.0 | )
Effect of Equity Compensation | 8,771 |  |  | 14.7 |  |  | — |  |  | — |  |  | — |  |  | — |
Effect of Change in State Valuation Allowance | 33,238 |  |  | 55.6 |  |  | (22,684 | ) |  | (2.1 | ) |  | (430 | ) |  | (0.4 | )
Effect of Change in Federal Valuation Allowance | (2,640 | ) |  | (4.4 | ) |  | (18,110 | ) |  | (1.7 | ) |  | (145,772 | ) |  | (122.9 | )
Other Deferred Adjustments | (1,691 | ) |  | (2.8 | ) |  | 5,957 |  |  | 0.6 |  |  | 7,616 |  |  | 6.4 |
Effect of Federal and State Rate Reductions | (3,842 | ) |  | (6.4 | ) |  | (27,429 | ) |  | (2.5 | ) |  | (131,784 | ) |  | (111.1 | )
Effect of Federal Tax Credits | 2,881 |  |  | 4.8 |  |  | 1,208 |  |  | 0.1 |  |  | (19,081 | ) |  | (16.1 | )
Other | 211 |  |  | 0.4 |  |  | 4,498 |  |  | 0.4 |  |  | 4,798 |  |  | 4.0 |
Income Tax Expense (Benefit) / Effective Rate | $ | 27,736 |  |  | 46.5 | % |  | $ | 215,557 |  |  | 19.6 | % |  | $ | (176,458 | ) |  | (148.9 | )%
The effective tax rate for the year ended December 31, 2019 was higher than the U.S. federal statutory rate primarily due to state taxes, equity compensation, and the increase in certain state valuation allowances as a result of a higher than projected net operating loss generated in 2018 partially offset by the benefit from non-controlling interest. As a result of the Midstream Acquisition on January 3, 2018 as discussed in Note 6 - Acquisitions and Dispositions, the Company obtained a controlling interest in CNX Gathering LLC and, through CNX Gathering's ownership of the general partner, control over CNXM. The financial results for 2019 and 2018 reflect full consolidation of CNXM’s assets and liabilities. The effective tax rates for the years ended December 31, 2019 and 2018 reflect a $23,662 and $18,181 reduction in income tax expense, respectively, due to the non-controlling interest in CNXM’s earnings. The effective tax rate for the year ended December 31, 2018 was lower than the U.S. federal statutory rate primarily due to the effect of the filing of a Federal NOL carryback for 2017 and 2016 resulting in a financial statement benefit of $23,483 through the realization of the Federal NOLs at a 35% tax rate as a carryback versus the current 21% tax rate as a carryforward, the reversal of the AMT credit sequestration valuation allowance, and the release of certain state valuation allowances as a result of a corporate reorganization during the year. The federal NOL carryback claims for 2016 and 2017 are under review by the IRS and the Joint Committee on Taxation. The Act, which, among other things, lowered the U.S. Federal corporate income tax rate from 35% to 21%, repealed the corporate AMT for tax years beginning January 1, 2018, and provided for a refund of previously accrued AMT credits. As discussed above, CNX has credits that are to be refunded between 2019 and 2021 because of the Act and monetization opportunities under current law in 2018. The Company recorded a net tax benefit to reflect the impact of the Act as of December 31, 2017, as it is required to reflect the change in the period in which the law is enacted. Largely, the benefits recorded in the period ending December 31, 2017 related to the Act are in recognition of the revaluation of deferred tax assets and liabilities, a benefit of $115,291. The Company's effective tax rate for 2018 and 2017 reflects the release of previously recorded valuation allowances against AMT credit carry-forwards of $12,413 and $154,385, respectively, as those credits will now be able to be monetized under the Act and, according to an IRS announcement, are no longer subject to government sequestration. The Act is also a comprehensive tax reform bill containing a number of other provisions that either currently or in the future could impact CNX. The effect of certain limitations effective for the tax year 2018 and forward, specifically related to the deductibility of executive compensation, have been evaluated. The Company anticipates U.S. regulatory agencies will issue further regulations which may alter these estimates. The IRS issued rules pertaining to the application of limitations for executive compensation related to contracts existing prior to November 2, 2017, and provisions in the Act addressing the deductibility of interest expense after January 1, 2018. The Company will continue to refine its estimates to incorporate new or better information as it comes available. Under the provisions of Staff Accounting Bulletin 118 (SAB 118), as of December 31, 2017, we had not completed our accounting for all of the enactment-date income tax effects of the Act under ASC 740, Income Taxes, for the remeasurement of deferred tax assets and liabilities. As of December 31, 2018, CNX completed its accounting for all of the enactment-date income tax effects of the Act. A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:
| For the Years Ended
| December 31,
| 2019 |  | 2018
Balance at Beginning of Period | $ | 31,516 |  |  | $ | 37,813 |
Increase in Unrecognized Tax Benefits Resulting from Tax Positions Taken During Prior Periods | — |  |  | 2,140 |
Reduction in Unrecognized Tax Benefits Because of the Lapse of the Applicable Statute of Limitations | — |  |  | (8,437 | )
Balance at End of Period | $ | 31,516 |  |  | $ | 31,516 |
If these unrecognized tax benefits were recognized, $31,516 would affect CNX's effective income tax rate for 2019 and 2018. In 2018, CNX recognized an increase in unrecognized tax benefits of $2,140 for tax benefits resulting from a revision to our tax position taken on our 2017 federal tax return for the marginal well credit. CNX recognized a reduction to unrecognized tax benefits of $8,437 from a position taken on a state tax return. CNX recognizes accrued interest related to unrecognized tax benefits in its interest expense. As of December 31, 2019 and 2018, the Company reported no accrued liability relating to uncertain tax positions in Other Liabilities in the Consolidated Balance Sheets. The accrued interest liability includes interest income of $644 and interest expense of $337 recorded in the Company's Consolidated Statements of Income for the year ended December 31, 2018. During the years ended December 31, 2019 and 2018, CNX paid no interest related to income tax deficiencies. CNX recognizes penalties accrued related to uncertain tax positions in its income tax expense. CNX had no accrued liabilities for tax penalties as of December 31, 2019 and 2018. CNX and its subsidiaries file federal income tax returns with the United States and income tax returns within various states. With few exceptions, the Company is no longer subject to United States federal, state, local or non-U.S. income tax examinations by tax authorities for the years before 2016. The Joint Committee on Taxation is in the process of reviewing the NOL carryback returns for tax years 2016 and 2017. The review is expected to be completed in 2020. The Joint Committee on Taxation concluded its review of the audit of tax year 2015 on March 21, 2018. The audit resulted in a $108,651 reduction to CNX’s NOL, primarily due to a reduction in the depreciation as an offset to the bonus depreciation taken in the 2010-2013 IRS audit. There was no current cash tax impact from the audit.

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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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