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INCOME TAXES | 12 Months Ended
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Dec. 31, 2018
INCOME TAXES |
INCOME TAXES | 13. INCOME TAXES Income tax benefit (provision) for the indicated periods is comprised of the following (in thousands):
|  | Successor |  |  | Predecessor
|  |  |  |  |  |  | Period from |  |  | Period from
|  |  |  |  |  |  | September 10, 2016 |  |  | January 1, 2016
|  | Years Ended December 31, |  | through |  |  | through
|  | 2018 |  | 2017 |  | December 31, 2016 |  |  | September 9, 2016
Current: |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  | $ | 5,000 |  | $ | (5,000) |  |  | $ | 8,666
State |  |  | — |  |  | — |  |  | 256 |  |  |  | —
|  |  | — |  |  | 5,000 |  |  | (4,744) |  |  |  | 8,666
Deferred: |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (95,791) |  |  | — |  |  | 52,223 |  |  |  | (22,491)
State |  |  | — |  |  | — |  |  | (52,223) |  |  |  | 22,491
|  |  | — |  |  | — |  |  | — |  |  |  | —
Total income tax benefit (provision) |  | $ | (95,791) |  | $ | 5,000 |  | $ | (4,744) |  |  | $ | 8,666
The actual income tax benefit (provision) differs from the expected income tax benefit (provision) as computed by applying the United States federal corporate income tax rate of 21% for the year ended December 31, 2018 and 35% for each of the prior periods, as follows (in thousands):
|  | Successor |  |  | Predecessor
|  |  |  |  |  |  | Period from |  |  | Period from
|  |  |  |  |  |  | September 10, 2016 |  |  | January 1, 2016
|  | Years Ended December 31, |  | through |  |  | through
|  | 2018 |  | 2017 |  | December 31, 2016 |  |  | September 9, 2016
Expected tax benefit (provision) |  | $ | (29,767) |  | $ | (185,740) |  | $ | 166,057 |  |  | $ | (1,152)
State income tax expense, net of federal benefit |  |  | — |  |  | (2,587) |  |  | 6,243 |  |  |  | (43)
Stock-based compensation |  |  | (350) |  |  | — |  |  | — |  |  |  | (14,803)
Net operating loss limitation under IRC Section 382 |  |  | — |  |  | — |  |  | (161,704) |  |  |  | —
TMS Divestiture |  |  | — |  |  | — |  |  | (157,767) |  |  |  | —
Adjustments attributable to reorganization |  |  | — |  |  | — |  |  | — |  |  |  | 275,460
Change in state rate |  |  | — |  |  | (10,121) |  |  | — |  |  |  | —
Debt related costs |  |  | — |  |  | — |  |  | — |  |  |  | (4,089)
Cancellation of indebtedness income |  |  | — |  |  | — |  |  | — |  |  |  | 103,268
Increase (reduction) in deferred tax asset |  |  | (201,903) |  |  | 95,907 |  |  | — |  |  |  | 14,645
Change in valuation allowance and related items |  |  | 136,432 |  |  | 392,846 |  |  | 202,592 |  |  |  | (263,211)
IRC section 108 attribute reduction |  |  | — |  |  | — |  |  | (56,483) |  |  |  | (101,342)
Tax Cuts and Jobs Act of 2017 |  |  | — |  |  | (280,874) |  |  | — |  |  |  | —
Permanent adjustments |  |  | (203) |  |  | — |  |  | — |  |  |  | —
Other |  |  | — |  |  | (4,431) |  |  | (3,682) |  |  |  | (67)
Total income tax benefit (provision) |  | $ | (95,791) |  | $ | 5,000 |  | $ | (4,744) |  |  | $ | 8,666
The components of net deferred income tax assets (liabilities) recognized are as follows (in thousands):
|  | December 31, 2018 |  | December 31, 2017
Deferred noncurrent income tax assets: |  |  |  |  |  |
Net operating loss carry-forwards |  | $ | 204,751 |  | $ | 205,570
Built in loss adjustment Section 382 |  |  | 88,835 |  |  | 90,897
Stock-based compensation expense |  |  | 8,509 |  |  | 5,501
Asset retirement obligations |  |  | 1,011 |  |  | 963
Book-tax differences in property basis |  |  | — |  |  | 125,309
Unrealized hedging transactions |  |  | — |  |  | 5,901
Disallowed interest Section 163(j) |  |  | 3,370 |  |  | —
Other |  |  | 1,917 |  |  | —
Gross deferred noncurrent income tax assets |  |  | 308,393 |  |  | 434,141
Valuation allowance |  |  | (290,333) |  |  | (426,765)
Deferred noncurrent income tax assets |  | $ | 18,060 |  | $ | 7,376
Deferred noncurrent income tax liabilities: |  |  |  |  |  |
Basis difference in debt |  | $ | (5,507) |  | $ | (6,366)
Book-tax differences in property basis |  |  | (96,414) |  |  | —
Unrealized hedging transactions |  |  | (11,930) |  |  | —
Other |  |  | — |  |  | (1,010)
Deferred noncurrent income tax liabilities |  | $ | (113,851) |  | $ | (7,376)
Net noncurrent deferred income tax assets (liabilities) |  | $ | (95,791) |  | $ | —
On December 22, 2017, the Tax Cuts and Job Act of 2017 (the Act) was signed into law making significant changes to the Internal Revenue Code of 1986, as amended (the IRC). Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, imposes significant additional limitations on the deductibility of interest and net operating losses, allows for the expensing of certain capital expenditures, and limits the deductibility of certain types of executive compensation. The Company for the year ended December 31, 2017 calculated its best estimate of the impact of the Act in its year-end income statement provision in accordance with its understanding of the Act and guidance available as of the date of this filing and as a result have recorded a $280.9 million income tax provision primarily related to the decrease in the corporate tax rate offset by a corresponding decrease in the Company’s valuation allowance for no net overall impact to the Company’s income tax provision for the year ended December 31, 2017. On December 22, 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that the $280.9 million income tax provision and corresponding decrease in the Company’s valuation allowance was a provisional amount and a reasonable estimate at December 31, 2017. Any subsequent adjustments to these amounts will be recorded to current tax benefit (provision) in the quarter of 2018 when the analysis is complete. The accounting is now complete and there were no material changes. The Company emerged from chapter 11 bankruptcy on September 9, 2016. Under the Plan, a substantial portion of the Company’s pre-petition debt securities were extinguished. Absent an exception, a debtor recognizes cancellation of indebtedness income (CODI) upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The IRC provides that a debtor in a bankruptcy case may exclude CODI from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued. As a result of the market value of equity upon emergence from chapter 11 bankruptcy proceedings, U.S. CODI was approximately $844.7 million, which reduced the value of the Company’s U.S. net operating losses (NOLs) and other assets on January 1, 2017. The Company also had various state NOL carryforwards that were subject to reduction as a result of the CODI being excluded from taxable income. IRC Section 382 provides an annual limitation with respect to the ability of a corporation to utilize its tax attributes, as well as certain built-in-losses, against future U.S. taxable income in the event of a change in ownership. The Company's emergence from chapter 11 bankruptcy proceedings is considered a change in ownership for purposes of IRC Section 382. The limitation under the IRC is based on the value of the corporation as of the emergence date. The ownership changes and resulting annual limitation resulted in the expiration of approximately $750.0 million of net operating losses generated prior to the emergence date. The expiration of these tax attributes was fully offset by a corresponding decrease in the Company's U.S. valuation allowance, which results in no net tax provision. An additional ownership change was experienced in December 2018. This ownership change and resulting annual limitation generated the estimated expiration of approximately $891.5 million of net operating loss. The expiration of these tax attributes was partially offset by a corresponding decrease in the Company’s U.S. valuation allowance, which results in a $95.8 million deferred tax expense as the Company is now in a net deferred tax liability position. The amount of U.S. consolidated NOLs available as of December 31, 2018 after attribute reduction and Section 382 limitation is estimated to be approximately $975 million. Of this amount, $129.3 million is subject to the 20 year carryforward period and will expire in 2037. The remaining $845.7 million may be carried forward indefinitely but subject to a Section 382 limitation. The Company has recognized a tax benefit for approximately $81.6 million of the NOL’s based on the expected reversal of existing temporary differences and amount of the annual Section 382 limit. The Company assesses the recoverability of its deferred tax assets each period by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. The Company evaluated possible sources of taxable income that may be available to realize the benefit of deferred tax assets, including projected future taxable income, the reversal of existing temporary differences, taxable income in carryback years and available tax planning strategies in making this assessment. As a result of the Company’s analysis, it was concluded that as of December 31, 2018, a valuation allowance should continue to be applied against the Company’s net deferred tax asset. The Company recorded a valuation allowance as of December 31, 2018 of $290.3 million, a decrease of $136.4 million from December 31, 2017. The Company will continue to monitor facts and circumstances in the reassessment of the likelihood that operating loss carryforwards, credits and other deferred tax assets will be utilized. ASC 740, Income Taxes (ASC 740) prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. For those benefits to be recognized, an income tax position must be more‑likely‑than‑not to be sustained upon examination by taxing authorities. The Company has no unrecognized tax benefits for the years ended December 31, 2018 and 2017, the period of September 10, 2016 through December 31, 2016, the period of January 1, 2016 through September 9, 2016. Generally, the Company’s income tax years 2015 through 2018 remain open for federal purposes and are subject to examination by Federal tax authorities. The Company's income tax returns are also subject to audit by the tax authorities in Louisiana, Mississippi, North Dakota, Oklahoma, Texas, Pennsylvania, Ohio and certain other state taxing jurisdictions where the Company has, or previously had, operations. In certain jurisdictions the Company operates through more than one legal entity, each of which may have different open years subject to examination. The open years for state purposes can vary from the normal three year statue expiration period for federal purposes. The Company recognizes interest and penalties accrued to unrecognized benefits in “Interest expense and other, net” in its consolidated statements of operations. For the years ended December 31, 2018 and 2017, the period of September 10, 2016 through December 31, 2016, and the period of January 1, 2016 through September 9, 2016, the Company recognized no interest and penalties.

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- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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