XML 80 R15.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | Income taxes Prior to the Effective Date, Berry LLC was a limited liability company treated as a disregarded entity for federal and state income tax purposes, with the exception of the state of Texas. Limited liability companies are subject to Texas margin tax. As such, with the exception of the state of Texas, Berry LLC was not a taxable entity, it did not directly pay federal and state income taxes and recognition was not given to federal and state income taxes for the operations of Berry LLC. Upon emergence from bankruptcy, Berry Corp. acquired the assets of Berry LLC in a taxable asset acquisition as part of the restructuring. Consequently, we are now taxed as a corporation and have no net operating loss carryforwards for the periods prior to February 28, 2017. On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Act”) made significant changes to the Internal Revenue Code of 1986, including lowering the maximum federal corporate income tax rate from 35% to 21% and imposing limitations on the use of net operating losses arising in taxable years ending after December 31, 2017. The SEC permitted the recognition of provisional amounts based on a reasonable estimate, subject to adjustments in a one-year measurement period. For the ten months ended December 31, 2017, we recorded provisional estimates for the remeasurement of our net deferred tax asset before valuation allowance of $2.7 million for the reduction in the corporate tax rate and a $1.9 million increase in the valuation allowance as a result of the Act. During 2018, we completed our accounting related to the income tax effects of the Act, resulting in no significant adjustments to the provisional amounts recorded. The key contributor to the change in our effective rate from 23% in the year ended December 31, 2018 to (523)% for the year ended December 31, 2019 is due to the recognition of US federal general business credits in 2019 and are related to the 2017 and 2018 tax periods. These credits are available to offset future federal income tax liabilities. Income tax expense (benefit) consisted of the following:
| Berry Corp. (Successor) |  |  | Berry LLC (Predecessor)
| Year Ended December 31, 2019 |  | Year Ended December 31, 2018 |  | Ten Months Ended December 31, 2017 |  |  | Two Months Ended February 28, 2017
| (in thousands)
Current taxes: |  |  |  |  |  |  |  |
Federal | $ | — |  |  | $ | (465 | ) |  | $ | 465 |  |  |  | $ | — |
State | 227 |  |  | (446 | ) |  | 450 |  |  |  | 221 |
Total current taxes | 227 |  |  | (911 | ) |  | 915 |  |  |  | 221 |
Deferred taxes: |  |  |  |  |  |  |  |
Federal | (36,756 | ) |  | 33,227 |  |  | 1,888 |  |  |  | — |
State | (21 | ) |  | 10,719 |  |  | — |  |  |  | 9 |
Total deferred taxes | (36,777 | ) |  | 43,946 |  |  | 1,888 |  |  |  | 9 |
Total current and deferred taxes | $ | (36,550 | ) |  | $ | 43,035 |  |  | $ | 2,803 |  |  |  | $ | 230 |
A reconciliation of the federal statutory tax rate to the effective tax rate is as follows:
| Berry Corp. (Successor) |  |  | Berry LLC (Predecessor)
| Year Ended December 31, 2019 |  | Year Ended December 31, 2018 |  | Ten Months Ended December 31, 2017 |  |  | Two Months Ended February 28, 2017
Federal statutory rate | 21.0 | % |  | 21.0 | % |  | 35.0 | % |  |  | 35.0 | %
State, net of federal tax benefit | 8.9 | % |  | 6.3 | % |  | 7.2 | % |  |  | — | %
Effect of permanent differences | 0.2 | % |  | (0.6 | )% |  | (0.4 | )% |  |  | — | %
Tax credits and federal return to provision | (546.4 | )% |  | — | % |  | — | % |  |  | — | %
State return to provision | (6.6 | )% |  | — | % |  | — | % |  |  | — | %
Tax reform—rate change(1) | — | % |  | — | % |  | (14.7 | )% |  |  | — | %
Income excluded from nontaxable entities | — | % |  | — | % |  | — | % |  |  | (35.0 | )%
Change in valuation allowance | — | % |  | (4.1 | )% |  | (42.4 | )% |  |  | — | %
Effective tax rate | (522.9 | )% |  | 22.6 | % |  | (15.3 | )% |  |  | — | %
__________
(1) | For the ten months ended December 31, 2017, includes the tax rate reduction. The impact of the rate change is fully offset in the “Change in valuation allowance” item.
Significant components of the deferred tax assets and liabilities are as follows:
| Berry Corp. (Successor)
| December 31, 2019 |  | December 31, 2018
| (in thousands)
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 14,542 |  |  | $ | 14,310 |
Accruals | 12,218 |  |  | 2,993 |
Asset retirement obligations | 41,382 |  |  | 26,383 |
Tax credits and federal return to provision | 47,803 |  |  | — |
Interest limitation carryforward | 13,892 |  |  | 7,486 |
Other | 5,154 |  |  | 2,033 |
Total deferred tax assets | 134,991 |  |  | 53,205 |
Deferred tax liabilities: |  |  |
Book tax differences in property basis | (143,896 | ) |  | (95,348 | )
Derivative instruments | (152 | ) |  | (3,692 | )
Total deferred tax liabilities | (144,048 | ) |  | (99,040 | )
Net deferred tax asset (liability) | $ | (9,057 | ) |  | $ | (45,835 | )
As of December 31, 2019, the Company had approximately $56 million of federal net operating loss (“NOL”) carryforwards and $33 million of state net operating loss carryforwards. The federal net operating loss carryovers have no expiration date. State net operating loss carry forwards will expire in varying amounts beginning after taxable year ended 2027. In addition, as of December 31, 2019, the Company had US federal general business tax credit carryforwards totaling $48 million, which, if unused, will expire after taxable years ended 2037. The Act signed into law in 2017 imposed new limitations on the ability to deduct interest paid or accrued. As of December 2019, we recorded a deferred tax asset related to the $66 million tax benefit of interest expense that was not currently deductible in tax years 2018 and 2019. This attribute can be carried forward indefinitely but utilized subject to certain annual limitations. We assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. As of December 31, 2019, due to the positive evidence of cumulative income since the Effective Date and the reversal of existing federal and state temporary differences, we determined there is sufficient positive evidence to conclude that it is more likely than not that our deferred tax assets are realizable.
| Berry Corp. (Successor)
| December 31, 2019 |  | December 31, 2018
| (in thousands)
Unrecognized tax benefits - January 1 | $ | — |  |  | $ | — |
Prior year - increase | 6,720 |  |  | — |
Current year - increase | 7,172 |  |  | — |
Unrecognized tax benefits - December 31 | $ | 13,892 |  |  | $ | — |
The $13.9 million of unrecognized tax benefits as of December 31, 2019 do not affect the effective tax rate if recognized. We believe it is reasonably possible that the total unrecognized benefits may significantly decrease within the next 12 months as new guidance and regulations related to the Act are issued. No penalties or interest expense have been accrued on unrecognized tax benefits as of December 31, 2019. We are subject to taxation in the United States and various state jurisdictions. We are not currently under audit by any federal or state income tax authority. The 2017, 2018, and 2019 federal and state tax returns remain open to examination under the respective statute of limitations.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration