NOTE 12. INCOME TAXES

Effective June 4, 2018, pursuant to the Plan, the Successor became a corporation subject to federal and state income taxes. Prior to the Plan being effective, the Predecessor was a limited partnership and organized as a pass-through entity for federal and most state income tax purposes. As a result, the Predecessor’s limited partners were responsible for federal and state income taxes on their share of taxable income. The Predecessor was subject to the Texas margin tax for partnership activity in the state of Texas. Tax obligations of the Predecessor and Successor are recorded as “Income taxes” in the unaudited condensed consolidated statements of operations.

The Company’s income tax provision consists of the following:


	Successor
	Three Months		Three Months
	Ended		Ended
	September 30, 2019		September 30, 2018
Current tax position:
Federal	$	—	$	—
State		—		—
Total income tax provision	$	—	$	—


	Successor				Predecessor
	Nine Months		Four Months		Five Months
	Ended		Ended		Ended
	September 30, 2019		September 30, 2018		May 31, 2018
Current tax position:
Federal	$	—	$	—	$	—
State		—		—		166
Total income tax provision	$	—	$	—	$	166

Management assesses the available positive and negative evidence to estimate whether it is more likely than not that sufficient future taxable income will be generated to realize the Company’s deferred tax assets. In making this determination, Management considers all available positive and negative evidence and makes certain assumptions. Management considers, among other things, its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends and its outlook for future years. Due to significant negative evidence, the Company has established a full valuation allowance against its net deferred tax assets at December 31, 2018. As of September 30, 2019, the Company continued to record a full valuation allowance against its net deferred tax assets. The Company will continue to assess the valuation allowance against deferred tax assets considering all available information obtained in future reporting periods.