Income Taxes

12 Months Ended

Dec. 31, 2018

Net Deferred Tax Assets And Liabilities [Abstract]

NOTE 14. INCOME TAXES

The provision for income taxes differs from that which would be expected by applying statutory Canadian income tax rates.

A reconciliation of the difference for the years ended December 31, is as follows:

		2018				2017
Loss before income taxes	$		(323,596	)	$		(232,057	)
Federal and provincial statutory rates			27	%			27	%
Tax at statutory rates	$		(87,371	)	$		(62,655	)
Adjusted for the effect of:
Non-deductible expenses			49,455				2,672
Non-taxable capital gains			(845	)			(175	)
Income taxed at lower rates			—				(42,334	)
Impact of foreign tax rates			4,861				(2,814	)
Withholding taxes			1,061				1,165
Taxes related to prior years			3,803				(618	)
Other			(290	)			4,738
Income tax recovery	$		(29,326	)	$		(100,021	)

On December 22, 2017, the United States government enacted new tax legislation which affects the taxation of Precision’s U.S. subsidiaries. In additional to changing certain U.S. federal income tax laws, this new tax legislation reduced the U.S. federal income tax rate from 35% to 21% effective January 1, 2018. For the period ending December 31, 2017 Precision recorded a $15.8 million deferred income tax expense on the revaluation of its U.S. subsidiaries net deferred income tax assets which incorporates the reduction in the U.S. federal income tax rate and the expected impact of other applicable provisions within the new U.S tax legislation. The Corporation has also recognized a $2.4 million long-term receivable for the recovery of its U.S. subsidiaries alternative minimum tax carryforward balance.

The net deferred tax liability is comprised of the tax effect of the following temporary differences:

		2018				2017
Deferred income tax liability:
Property, plant and equipment and intangibles	$		467,109		$		454,613
Debt issue costs			3,534				3,352
Partnership deferrals			1,730				—
Other			5,722				6,709
			478,095				464,674
Offsetting of assets and liabilities			(405,316	)			(345,763	)
			72,779				118,911

Deferred income tax assets:
Losses (expire from time to time up to 2037)			423,595				368,133
Partnership deferrals			—				335
Long-term incentive plan			6,849				7,935
Other			11,752				11,182
			442,196				387,585
Offsetting of assets and liabilities			(405,316	)			(345,763	)
			36,880				41,822

Net deferred income tax liability	$		35,899		$		77,089

Included in the deferred income tax assets is $33.2 million (2017 – $38.8 million) of tax-effected temporary differences related to the Corporation’s U.S. operations.

The Corporation has certain loss carryforwards in U.S. and international locations for which it is unlikely that sufficient future taxable income will be available. Accordingly, the Corporation has not recognized a deferred income tax asset on these losses totaling $37.1 million.

The movement in temporary differences is as follows:

		Property, Plant and Equipment and Intangibles				Partnership Deferrals				Other Deferred Income Tax Liabilities				Losses				Debt Issue Costs				Long-Term Incentive Plan				Other Deferred Income Tax Assets				Net Deferred Income Tax Liability
Balance, December 31, 2016	$		629,967		$		(16,447	)	$		6,159		$		(418,253	)	$		4,215		$		(18,270	)	$		(12,753	)	$		174,618
Recognized in net loss			(149,489	)			16,112				545				24,124				(863	)			9,651				1,230				(98,690	)
Effect of foreign currency exchange differences			(25,865	)			—				5				25,996				—				684				341				1,161
Balance, December 31, 2017	$		454,613		$		(335	)	$		6,709		$		(368,133	)	$		3,352		$		(7,935	)	$		(11,182	)	$		77,089
Recognized in net loss			(9,667	)			2,065				(1,005	)			(30,660	)			182				1,325				(139	)			(37,899	)
Effect of foreign currency exchange differences			22,163				—				18				(24,802	)			—				(239	)			(431	)			(3,291	)
Balance, December 31, 2018	$		467,109		$		1,730		$		5,722		$		(423,595	)	$		3,534		$		(6,849	)	$		(11,752	)	$		35,899

On December 31, 2018, Precision had $2.0 million (2017 – $2.0 million) of unrecognized tax benefits that, if recognized, would have a favourable impact on Precision’s effective income tax rate in future periods. Precision classifies interest accrued on unrecognized tax benefits and income tax penalties as income tax expense. Included in the unrecognized tax benefit, as at December 31, 2018 was interest and penalties of $0.5 million (2017 – $0.5 million).

Reconciliation of Uncertain Tax Positions

		2018			2017
Unrecognized tax benefits, beginning of year	$		1,980	$		1,923
Additions:
Prior year’s tax positions			60			57
Reductions:
Prior year’s tax positions			—			—
Unrecognized tax benefits, end of year	$		2,040	$		1,980

It is anticipated that approximately $2.0 million (2017 – $nil) of unrecognized tax positions that relate to prior year activities will be realized during the next 12 months. Subject to the results of audit examinations by taxing authorities and/or legislative changes by taxing jurisdictions, Precision does not anticipate further adjustments of unrecognized tax positions during the next 12 months that would have a material impact on the financial statements.