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INCOME TAXES | 12 Months Ended
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Dec. 31, 2020
INCOME TAXES |
INCOME TAXES | 14. INCOME TAXES Income tax benefit (provision) for the indicated periods is comprised of the following (in thousands):
|  | Successor |  |  | Predecessor
|  |  |  |  | Period from |  |  | Period from |  |  |
|  |  |  | October 2, 2019 |  |  | January 1, 2019 |  |
|  | Year Ended |  | through |  |  | through |  | Year Ended
|  | December 31, 2020 |  | December 31, 2019 |  |  | October 1, 2019 |  | December 31, 2018
Current: |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  | $ | — |  |  | $ | — |  | $ | —
State |  |  | — |  |  | — |  |  |  | — |  |  | —
|  |  | — |  |  | — |  |  |  | — |  |  | —
Deferred: |  |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  | — |  |  |  | 95,791 |  |  | (95,791)
State |  |  | — |  |  | — |  |  |  | — |  |  | —
|  |  | — |  |  | — |  |  |  | 95,791 |  |  | (95,791)
Total income tax benefit (provision) |  | $ | — |  | $ | — |  |  | $ | 95,791 |  | $ | (95,791)
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, 2020 (Successor), the period from October 2, 2019 through December 31, 2019 (Successor), the period from January 1, 2019 through October 1, 2019 (Predecessor) and the year ended December 31, 2018 (Predecessor), as follows (in thousands):
|  | Successor |  |  | Predecessor
|  |  |  |  | Period from |  |  | Period from |  |  |
|  |  |  | October 2, 2019 |  |  | January 1, 2019 |  |
|  | Year Ended |  | through |  |  | through |  | Year Ended
|  | December 31, 2020 |  | December 31, 2019 |  |  | October 1, 2019 |  | December 31, 2018
Expected tax benefit (provision) |  | $ | 48,238 |  | $ | 2,196 |  |  | $ | 262,888 |  | $ | (29,767)
Stock-based compensation |  |  | — |  |  | — |  |  |  | (6,093) |  |  | (350)
Capital loss |  |  | — |  |  | — |  |  |  | 271,248 |  |  | —
Increase (reduction) in deferred tax asset |  |  | — |  |  | — |  |  |  | (9,287) |  |  | (201,903)
Change in valuation allowance and related items |  |  | (10,849) |  |  | (1,506) |  |  |  | (186,851) |  |  | 136,432
Attribute reduction |  |  | (37,985) |  |  | — |  |  |  | (229,385) |  |  | —
Permanent adjustments |  |  | 577 |  |  | (690) |  |  |  | (7,241) |  |  | (203)
Other |  |  | 19 |  |  | — |  |  |  | 512 |  |  | —
Total income tax benefit (provision) |  | $ | — |  | $ | — |  |  | $ | 95,791 |  | $ | (95,791)
The components of net deferred income tax assets (liabilities) recognized are as follows (in thousands):
|  | Successor
|  | December 31, 2020 |  | December 31, 2019
Deferred noncurrent income tax assets: |  |  |  |  |  |
Net operating loss carry-forwards |  | $ | 94,742 |  | $ | 46,382
Built in loss adjustment Section 382 |  |  | 98,416 |  |  | 142,285
Capital loss carryforward |  |  | 74,848 |  |  | 74,848
Stock-based compensation expense |  |  | 1,448 |  |  | —
Asset retirement obligations |  |  | 2,347 |  |  | 2,224
Book-tax differences in property basis |  |  | 199,170 |  |  | 200,478
Unrealized hedging transactions |  |  | 2,908 |  |  | 1,618
Disallowed interest Section 163(j) |  |  | 13,579 |  |  | 7,722
Basis difference in debt |  |  | 1,687 |  |  | 2,142
Operating lease liability |  |  | 85 |  |  | 666
Other |  |  | 374 |  |  | 991
Gross deferred noncurrent income tax assets |  |  | 489,604 |  |  | 479,356
Valuation allowance |  |  | (489,539) |  |  | (478,690)
Deferred noncurrent income tax assets |  | $ | 65 |  | $ | 666
Deferred noncurrent income tax liabilities: |  |  |  |  |  |
Lease right of use |  | $ | (65) |  | $ | (666)
Deferred noncurrent income tax liabilities |  | $ | (65) |  | $ | (666)
Net noncurrent deferred income tax assets (liabilities) |  | $ | — |  | $ | —
The amount of U.S. consolidated Net Operating Losses (NOLs) available as of December 31, 2020 (Successor) after attribute reduction is estimated to be approximately $905.2 million, but the amount after attribute reduction and the Section 382 limitation is $451.0 million. Of this amount, $105.6 million is subject to the 20 year carryforward period and will expire in 2037. The remaining $345.4 million may be carried forward indefinitely but is in part subject to a Section 382 limitation. 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, 2020 (Successor), 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, 2020 (Successor) of $489.5 million, an increase of $10.8 million from December 31, 2019 (Successor). 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. The Company emerged from Chapter 11 Bankruptcy on October 8, 2019. 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 bankruptcy may exclude CODI from taxable income but must first reduce its tax attributes by the amount 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 $524.8 million, which reduced the value of the Company’s net operating losses and capital losses on January 1, 2020. The deferred tax balances disclosed above reflect the estimated impact of the attribute reduction on January 1, 2020. 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 $454.2 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 (Predecessor). 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 resulted in a $95.8 million deferred tax expense placing the Company in a net deferred tax liability position. 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 year ended December 31, 2020 (Successor), the period of October 2, 2019 through December 31, 2019 (Successor), the period of January 1, 2019 through October 1, 2019 (Predecessor) and the year ended December 31, 2018 (Predecessor). Generally, the Company’s income tax years 2017 through 2020 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” in its consolidated statements of operations. For the year ended December 31, 2020 (Successor), the period of October 2, 2019 through December 31, 2019 (Successor), the period of January 1, 2019 through October 1, 2019 (Predecessor) and the year ended December 31, 2018 (Predecessor), the Company recognized no interest and penalties. During 2020, the CARES Act and the Consolidated Appropriations Act of 2021 (the CAA) were signed into law. The CARES Act provides relief to corporate taxpayers by permitting a five-year carryback of 2018 to 2020 NOLs, removing the 80% limitation on the utilization of those NOLs, increasing the Section 163(j) 30% limitation on interest expense deductibility to 50% of adjusted taxable income for 2019 and 2020, and accelerates refunds for minimum tax credit carryforwards, as well as other provisions. The CAA extends various expiring tax provisions, clarifies that debt forgiven under the Paycheck Protection Program (PPP) is not included in gross income, clarifies that certain business expenses paid with forgiven PPP funds are tax deductible, as well as other tax provisions. Both the CARES Act and CAA did not have a material impact to the Company’s consolidated financial statements and related disclosures.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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