XML 29 R13.htm IDEA: XBRL DOCUMENT

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

6. Income Taxes:

Consolidated loss before income taxes includes losses from foreign operations of $260,000 and $322,000 in 2018 and 2017, respectively.

The net deferred tax assets/liabilities in the December 31, 2018 and 2017 consolidated balance sheets include the following components:

(in thousands)	2018	2017
Deferred tax assets:
Loss carryovers	$12,432	$12,178
Investment in Mineral Property	1,669	1,952
Capitalized Exploration Costs	877	1,205
Stock option compensation expense	150	13
Royalty	-	989
Unrealized loss on derivative securities	60	28
Other	135	135
Valuation allowance	(15,099)	(16,249)
Total deferred tax assets	224	251
Deferred tax liabilities:
Unrealized gain on derivative securities	-	-
Unrealized gains on marketable equity securities	209	230
Other	15	21
Total deferred tax liabilities	224	251
Net deferred tax liabilities	$ -	$ -

A reconciliation of expected federal income taxes on income (loss) from continuing operations at statutory rates, with the expense for income taxes is as follows:

(in thousands)	2018	2017
Expected income tax benefit	$(756)	$(355)
Equity based compensation	-	-
Foreign tax rate differences	(27)	17
State income tax	(143)	(27)
Impact of Tax Legislation	-	4,494
Adjustment to Deferred Taxes	2,058	-
Change in Tax Rate	53	-
Change in valuation allowance	(1,164)	(4,120)
Permanent differences and other	(21)	(9)
Income tax (benefit) expense	$ -	$ -

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. In accordance with ASC 740, Income Taxes, the impact of a change in tax law is recorded in the period of enactment. Consequently, Solitario recorded a decrease to its net deferred tax assets of $4,494,000 with a corresponding net adjustment to the valuation allowance for the year ended December 31, 2017.

While the Tax Act provides for a territorial tax system, beginning in 2018, it includes two new U.S. tax base erosion provisions, the global intangible low-taxed income (“GILTI”) provisions and the base-erosion and anti-abuse tax (“BEAT”) provisions.

The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company currently has no profitable foreign subsidiaries. Therefore, this provision currently has no impact on the Company.

The BEAT provisions in the Tax Act eliminates the deduction of certain base-erosion payments made to related foreign corporations and impose a minimum tax if greater than regular tax. The Company does not expect it will be subject to this tax and therefore has not included any tax impacts of BEAT in its consolidated financial statements for the years ended December 31, 2018 and 2017.

As a result of the acquisition of Zazu during the year ended December 31, 2017, Solitario acquired deferred tax assets totaling $10,366,000 primarily related to US federal and state net operating losses, mineral properties and exploration costs, and Canadian net operating losses. These deferred tax assets were fully offset by a valuation allowance. Solitario does not believe it is more likely than not that the assets will be utilized in the future. As a result of the ownership change of Zazu Metals (Alaska) Corp, utilization of its United States Federal and State of Alaska net operating losses will be limited due to the annual limitation provided by Section 382 of the Internal Revenue Code.

During 2018, the valuation allowance decreased primarily due to the adjustments to deferred taxes that were part of the Zazu acquisition and the disposition of royalties that were part of the Yanacocha sale. During 2017, the valuation allowance was increased primarily due to the acquisition of Zazu and the impact of the Tax Act.

At December 31, 2018, Solitario has unused US NOL carryovers of $15,404,000 and unused US State NOL carryovers of $15,980,000 which begin expiring in 2027. Solitario has unused Capital Loss carryovers of $11,132,000 for US Federal and US State purposes which begin expiring in 2019. Solitario has Canadian loss carryforwards of $9,205,000 which begin expiring in 2027. Other foreign loss carryforwards for which Solitario has provided a full valuation allowance related to Solitario’s exploration activities in Peru. The Peru losses do not expire.

Solitario adopted ASC 740, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 requires that Solitario recognize in its consolidated financial statements, only those tax positions that are “more-likely-than-not” of being sustained as of the adoption date, based on the technical merits of the position. As a result of the implementation of ASC 740, Solitario performed a comprehensive review of its material tax positions in accordance with recognition and measurement standards established by ASC 740. The provisions of ASC 740 had no effect on Solitario’s financial position, cash flows or results of operations at December 31, 2018 or December 31, 2017, or for the years then ended as Solitario had no unrecognized tax benefits.

Solitario and its subsidiaries are subject to the following material taxing jurisdictions: United States Federal, State of Colorado, State of Alaska, Canada and Peru. Solitario’s United States federal, Canada and State of Alaska returns for years 2016 and forward and Solitario’s Peru and State of Colorado returns for tax years 2014 and forward are subject to examination. Solitario’s policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. Solitario has no accrued interest or penalties related to uncertain tax positions as of December 31, 2018, or December 31, 2017 or for the years then ended.