XML 22 R10.htm IDEA: XBRL DOCUMENT v3.21.2
Income Taxes
 6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the three and six months ended June 30, 2021, the Company utilized a discrete period method to calculate taxes, as it does not believe that the annual effective tax rate method represents a reliable estimate given the current uncertainty surrounding the current CBA contract negotiations with the UMWA, the COVID-19 pandemic, the Chinese ban on Australian coal and other potentially disruptive factors and its impact on the Company's annual guidance. For the three and six months ended June 30, 2021, the Company had an income tax benefit of $6.6 million and an income tax expense of $17.0 million, respectively. The income tax benefit of $6.6 million is primarily due to a pre-tax operating loss combined with the Internal Revenue Code ("IRC") Section 45I Marginal Well Credit. The Marginal Well Credit is a production-based tax credit that provides a credit for qualified natural gas production. The credit is phased out when natural gas prices exceed certain levels.
The $17.0 million income tax expense for the six months ended June 30, 2021 is primarily due to the establishment of a non-cash $47.8 million state deferred income tax asset valuation allowance, discussed below, offset partially by a net non-cash income tax benefit of $22.9 million due to the remeasurement of state deferred income tax assets and liabilities and $7.9 million of net income tax benefit due to a pre-tax operating loss, the IRC Section 45I Marginal Well Credit, depletion and other adjustments. The Company had income tax benefit of $4.4 million and $1.2 million for the three and six months ended June 30, 2020, respectively.

On February 12, 2021, the Alabama Governor signed into law Alabama House Bill 170, now Act 2021-1 (the "Act").
The Act makes several changes to the state’s business tax structure. Among the provisions of the Act, is the repeal of the so-called corporate income tax “throwback rule.” That rule required all sales originating in Alabama and delivered to a jurisdiction where the seller was not subject to tax, to be included in the seller’s Alabama income tax base. Thus, prior to repeal of the throwback rule, the Company had to rely on its Alabama NOL carryforwards to shelter taxes imposed under such throwback rule. As a result of the now repealed throwback rule, effective January 1, 2021, all such sales should now be excluded from Alabama taxable income without the need to utilize Alabama NOLs. As a result of the repeal of the throwback rule, in the first quarter of 2021, the Company remeasured its Alabama deferred income tax assets and liabilities and recorded the non-cash income tax benefit noted above of $22.9 million. Additionally, the Company determined that it is not more likely than not that the Company would have sufficient taxable income to utilize all of the Company’s Alabama deferred income tax assets prior to expiration. Therefore, in the first quarter of 2021, the Company established a non-cash valuation allowance of $47.8 million against such deferred income tax assets.
The following table shows the balance of our state deferred income tax asset valuation allowance and the associated activity during the six months ended June 30, 2021:
 June 30, 2021
Beginning balance$— 
Addition - current tax expense47,787 
Ending balance$47,787