XML 34 R15.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES:
Income tax expense (benefit) provided on earnings consisted of:
For the Years Ended December 31,
202320222021
Current:
U.S. Federal
$— $— $— 
U.S. State
4,777 6,188 17 
4,777 6,188 17 
Deferred:
U.S. Federal
455,224 (40,649)(157,626)
U.S. State
42,208 (35,409)19,739 
497,432 (76,058)(137,887)
Total Income Tax Expense (Benefit)$502,209 $(69,870)$(137,870)

The components of the net deferred taxes are as follows:
December 31,
20232022
Deferred Tax Assets:
Net Operating Loss- Federal
$160,405 $187,154 
Section 174 Expenses92,414 26,397 
Net Operating Loss - State
76,259 82,189 
Federal Tax Credits45,619 34,317 
Interest Limitation36,451 14,618 
Operating Lease Liabilities36,297 45,427 
Gas Well Closing24,652 25,045 
State Deferred Tax Adjustment15,983 — 
   Gas Derivatives14,466 461,952 
Salary Retirement8,488 8,167 
Equity Compensation5,419 4,474 
Convertible Note Amortization3,628 5,080 
Foreign Tax Credit— 7,738 
Other
6,089 8,396 
Total Deferred Tax Assets
526,170 910,954 
Valuation Allowance
(39,264)(84,609)
Net Deferred Tax Assets
486,906 826,345 
Deferred Tax Liabilities:
Property, Plant and Equipment
(1,177,773)(850,095)
   Operating Lease Right-of-Use Assets(35,321)(44,238)
Investment in Partnerships(2,303)(163,483)
   Advance Gas Royalties(404)(286)
Other
(559)(523)
Total Deferred Tax Liabilities
(1,216,360)(1,058,625)
Net Deferred Tax Liability
$(729,454)$(232,280)
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. 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.

On December 31, 2023, the Company made a state law conversion of a subsidiary from a corporation to a limited liability company. The conversion effectively terminates the tax partnership treatment of CNX Midstream Partners LP for federal and state income tax purposes. As such as of December 31, 2023, the deferred tax assets and liabilities are separately stated in the underlying deferred tax asset and liability categories, primarily Property, Plant and Equipment.

As of December 31, 2023, the Company has a deferred tax asset related to federal net operating losses of $160,405. The pre-2018 federal net operating losses will expire at various times between 2035 and 2037. Because of the Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017 and the Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted on March 27, 2020, the federal net operating losses (NOLs) generated in 2018 - 2021 do not expire but may only offset 80% of taxable income in any tax years beginning after 2020.

As of December 31, 2023 and 2022, the Company has $45,619 and $34,317, respectively, of Federal Tax Credits available to offset future federal tax. These credits expire between 2032 and 2043.

A valuation allowance on foreign tax credits of $7,738 was recorded at December 31, 2022. The valuation allowance was decreased by $7,738 in 2023 due to the expiration of the remaining foreign tax credits.

CNX has, on an after federal tax basis, a deferred tax asset related to state operating losses of $76,259 with a related valuation allowance of $39,264 at December 31, 2023. The deferred tax asset related to state operating losses, on an after-tax adjusted basis, was $82,189 with a related valuation allowance of $76,871 at December 31, 2022. A review of positive and negative evidence regarding these state tax attributes concluded that the valuation allowances for various CNX subsidiaries was warranted.

West Virginia enacted legislation in March 2023 for public companies which allows for a deduction for the deferred tax adjustment as of January 1, 2022 resulting from the change in state apportionment methodology from three factor to single sales factor and elimination of the throw-out rule if the change results in an aggregate increase in net deferred tax liabilities, decrease in net deferred tax assets, or change from a net deferred tax asset to a net deferred tax liability. The deduction is available over a ten year period beginning with the first tax year on or after January 1, 2033. The Company has recorded an income tax benefit of $15,983 in the Consolidated Statements of Income to reflect the recent legislative change resulting in a decrease to deferred tax liabilities in the Consolidated Balance Sheets.

Pennsylvania enacted legislation in July 2022 that, among other things, gradually reduced the corporate net income tax rate over the next several years beginning in 2023 to 8.99% to ultimately 4.99% in 2031. In 2022, the Company revised the deferred state income tax rates and apportionment factors for several states to reflect, among other things, the recent PA rate reduction resulting in a benefit to deferred tax expense in the Consolidated Statements of Income. Deferred taxes also include changes relating to valuation allowance assertions against various state net operating losses due to the tax accounting treatment of unrealized gains and losses on commodity derivatives.

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,
 202320222021
 AmountPercentAmountPercentAmountPercent
Statutory U.S. Federal Income Tax Rate$466,814 21.0 %$(44,509)21.0 %$(133,668)21.0 %
Net Effect of State Income Taxes83,379 3.8 (5,817)2.8 (36,300)5.7 
Uncertain Tax Positions17,673 0.8 14,440 (6.8)35,914 (5.6)
Effect of Equity Compensation1,036 — 2,254 (1.1)2,465 (0.4)
Effect of Change in Valuation Allowance(37,607)(1.7)(35,427)16.7 28,704 (4.5)
Deferred Adjustments(837)— 2,481 (1.2)(4,408)0.7 
Effect of State Rate Changes297 — 10,025 (4.7)22,458 (3.5)
Effect of Federal Tax Credits(28,974)(1.3)(15,723)7.4 (53,269)8.3 
Other428 — 2,406 (1.1)234 — 
Income Tax Expense (Benefit) / Effective Rate$502,209 22.6 %$(69,870)33.0 %$(137,870)21.7 %

The effective tax rate for the year ended December 31, 2023 differs from the U.S. federal statutory rate primarily due to federal income tax credits, offset by uncertain tax positions, state taxes (West Virginia tax law change), equity compensation, and the decrease in certain state valuation allowance assertions as a result of a higher-than-expected unrealized gain on commodity derivative instruments generated during 2023.

The effective tax rate for the year ended December 31, 2022 differs from the U.S. federal statutory rate primarily due to federal income tax credits, offset by uncertain tax positions, state taxes, equity compensation, and the decrease in certain state valuation allowance assertions as a result of a reduction in the Pennsylvania corporate income tax rate applied to deferred taxes and a higher-than-expected unrealized loss on commodity derivative instruments generated during 2022.

The effective tax rate for the year ended December 31, 2021 differs from the U.S. federal statutory rate primarily due to federal income tax credits, offset by uncertain tax positions, state taxes, equity compensation, and the increase in certain state valuation allowance assertions as a result of a higher-than-expected unrealized loss on commodity derivative instruments generated during 2021.
A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:
For the Years Ended
December 31,
20232022
Balance at Beginning of Period$82,245 $67,805 
Increase in Unrecognized Tax Benefits Resulting from Tax Positions Taken During Current Period11,229 — 
Increase in Unrecognized Tax Benefits Resulting from Tax Positions Taken During Prior Periods
6,444 14,440 
Balance at End of Period$99,918 $82,245 

If these unrecognized tax benefits were recognized, $99,918 and $82,245 would affect CNX's effective income tax rate for 2023 and 2022, respectively.

In 2023 and 2022, CNX recognized an increase in unrecognized tax benefits of $6,444 and $14,440, respectively, for tax benefits resulting from tax positions taken on our 2022 and 2021 federal tax returns for additional federal tax credits. CNX also recognized an increase in unrecognized tax benefits in 2023 of $11,229 for tax benefits resulting from tax positions expected to be taken on our 2023 federal tax returns for additional federal tax credits.

CNX recognizes accrued interest related to unrecognized tax benefits in its interest expense. As of December 31, 2023 and 2022, the Company reported no accrued liability relating to interest in Other Liabilities in the Consolidated Balance Sheets. During the years ended December 31, 2023 and 2022, 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, 2023 and 2022.
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, or local income tax examinations by tax authorities for the years before 2020.