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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
8. Income Taxes
The components of the provision for income taxes for the years ended December 31, 2022 and 2021 are as follows:
 
    
Years Ended
December 31,
  
(Thousands of dollars)
   
2022
     
2021
  
Current:
                  
Federal
    $ 8,330      $ 81  
State
      774        59  
    
 
 
     
 
 
  
Total current
      9,104        140  
Deferred:
                  
Federal
      886        1,802  
State
      339        574  
    
 
 
     
 
 
  
Total deferred
      1,225        2,376  
    
 
 
     
 
 
  
Total income tax provision
    $ 10,329      $ 2,516  
    
 
 
     
 
 
  
 
    
At December 31,
  
(Thousands of dollars)
   
2022
     
2021
  
Deferred Tax Assets:
                  
Accrued liabilities
    $ 353      $ 80  
Allowance for doubtful accounts
      77        85  
Derivative Contracts
      223        1,272  
Partnership basis difference
      90        98  
State Net operating loss carry-forwards
      283        470  
    
 
 
     
 
 
  
Total deferred tax assets
      1,026        2,005  
Deferred Tax Liabilities:
                  
Depletion and depreciation
      40,994        40,748  
    
 
 
     
 
 
  
Total deferred tax liabilities
      40,994        40,748  
    
 
 
     
 
 
  
Net deferred tax liabilities
    $ 39,968      $ 38,743  
    
 
 
     
 
 
  
The total provision for income taxes for the years ended December 31, 2022 and 2021 varies from the federal statutory tax rate as a result of the following:
 
    
Years Ended
December 31,
  
(Thousands of dollars)
   
2022
     
2021
  
Expected tax expense
    $ 12,389      $ 975  
Net changes in deferred assets and liabilities
      1,225        2,376  
Permanent differences
      870        (677 ) 
State income tax, net of federal benefit
      612        47  
Provision to return adjustment
      (4,765 )       744  
Tax Credits
      —          (948 ) 
Other, net
      (2 )       (1 ) 
    
 
 
     
 
 
  
Total income tax provision
    $ 10,329      $ 2,516  
    
 
 
     
 
 
  
Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.
 
The Company is entitled to percentage depletion on certain of its wells, which is calculated without reference to the basis of the property. To the extent that such depletion exceeds a property’s basis, it creates a permanent difference, which lowers the Company’s effective rate. The availability of the percentage depletion deduction is phased out as an entity’s production exceeds certain levels, and based on the Company’s increasing production the percentage depletion deduction is becoming less significant.
The Company is allowed a credit against the Texas Franchise Tax based on net operating losses incurred in prior periods. The credits allowed are $89 thousand in the years 2020 through 2026. Any credits not utilized in a given year due to the allowable credit exceeding the tax liability may be carried forward. No credit may be carried forward past 2026. The value of the credit is calculated net of the federal income tax effect.
The Company has not recorded any provision for uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The 2004, 2005, 2006, 2009 and 2017 federal income tax returns have been audited by the Internal Revenue Service. Returns for unexamined earlier years may be examined and adjustments made to the amount of percentage depletion and AMT credit carryforwards flowing from those years into an open tax year, although in general no assessment of income tax may be made for those years on which the statute has closed. Federal and State returns for the years 2020 through 2022 remain open for examination by the relevant taxing authorities.
Enactment of the Inflation Reduction Act of 2022
. On August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (the “IRA”), which includes, among other things, a corporate alternative minimum tax (the “CAMT”). Under the CAMT, a 15 percent minimum tax will be imposed on certain adjusted financial statement income of “applicable corporations,” which is effective for tax years beginning after December 31, 2022. The CAMT generally treats a corporation as an “applicable corporation” in any taxable year in which the “average annual adjusted financial statement income” of the corporation and certain of its subsidiaries and affiliates for a three taxable-year period ending prior to such taxable year exceeds $1 billion. The IRA also establishes a one percent excise tax on stock repurchases made by publicly traded U.S. corporations. The excise tax is effective for any stock repurchases after December 31, 2022. The IRA did not impact the Company’s current year tax provision or the Company’s consolidated financial statements, but the new provisions could impact future periods.
Enactment of the Consolidated Appropriations Act, 2021
. On December 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 (the “Act”). The Act includes many tax provisions, including the extension of various expiring provisions, extensions and expansions of certain earlier pandemic tax relief provisions, among other things. The Act did not have a material impact on the Company’s tax provisions or the Company’s consolidated financial statements.
Enactment of the Coronavirus Aid, Relief and Economic Security Act.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Under the CARES Act the refundable portion of AMT credits was increased to 100% therefore the Company received a full refund of such credits in 2020.