Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

(14) Income Taxes

The Company’s income tax benefit consisted of the following (in thousands):

	Year Ended December 31,
	2019		2020		2021
Current income tax expense (benefit)	$	5,048		(209)		216
Deferred income tax benefit		(79,158)		(397,273)		(74,293)
Total income tax benefit	$	(74,110)		(397,482)		(74,077)

Income tax expense (benefit) differs from the amount that would be computed by applying the U.S. statutory federal income tax rate of 21% to income or loss before taxes as a result of the following (in thousands):

	Year Ended December 31,
	2019		2020		2021
Federal income tax expense (benefit)	$	(77,122)		(348,158)		(47,919)
State income tax expense (benefit), net of federal benefit		(8,826)		(50,584)		(6,576)
Change in state tax rate, net of federal effect		24,041		2,291		(30,910)
Nondeductible equity-based compensation		6,920		4,490		1,117
Dividends received deduction		(4,201)		(4,013)		(3,832)
Noncontrolling interest		(10,998)		(1,801)		(7,862)
Deconsolidation adjustment		(6,626)		—		—
Change in valuation allowance		1,325		789		4,606
Nondeductible loss on 2026 Convertible Notes equitization		—		—		12,174
Other		1,377		(496)		5,125
Total income tax benefit	$	(74,110)		(397,482)		(74,077)

Deferred income taxes reflect the impact of temporary differences between assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The tax effect of the temporary differences giving rise to net deferred tax assets and liabilities is as follows (in thousands):

	December 31,
	2020		2021
Deferred tax assets:
NOL carryforwards	$	565,433		569,523
Equity-based compensation		8,445		2,462
Investment in Antero Midstream		330,301		297,893
Unrealized losses on derivative instruments		—		158,779
Asset retirement obligations and other		17,206		15,051
Total deferred tax assets		921,385		1,043,708
Valuation allowance		(46,013)		(50,304)
Net deferred tax assets		875,372		993,404
Deferred tax liabilities:
Unrealized gains on derivative instruments		13,189		—
Oil and gas properties		1,188,599		1,254,182
Investment in Martica		59,586		51,166
2026 Convertible Notes and other		26,250		6,182
Total deferred tax liabilities		1,287,624		1,311,530
Net deferred tax liabilities	$	(412,252)		(318,126)

In assessing the realizability of deferred tax assets, management considers whether some portion or all of the deferred tax assets will be realized based on a more-likely-than-not standard of judgment. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the Company’s temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning

strategies in making this assessment. Based upon the projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will not realize the benefits of certain of these deductible differences and has recorded a valuation allowance of approximately $46 million and $50 million as of December 31, 2020 and 2021, respectively. The valuation allowance as of December 31, 2020 and 2021, relates to Colorado, Oklahoma and West Virginia state NOL carryforwards and is primarily the result of expected future reduced income tax apportionment in those states. The amount of the deferred tax asset considered realizable could be further reduced in the near term if estimates of future taxable income during the carryforward period are revised.

The calculation of the Company’s tax liabilities involves uncertainties in the application of complex tax laws and regulations. The Company gives financial statement recognition to those tax positions that it believes are more-likely-than-not to be sustained upon examination by the Internal Revenue Service or state revenue authorities. The Company monitors potential uncertain tax positions but does not anticipate any changes in 2022. The Company has no unrecognized tax benefit balances through December 31, 2021.

As of December 31, 2021, the Company has U.S. federal and state NOL carryforwards of $2.3 billion and 2.0 billion, respectively, exclusive of the valuation allowances discussed above. The U.S. federal and West Virginia NOL carryforwards generated in tax years prior to 2018 expire between 2032 and 2037. The Colorado NOL carryforwards generated in tax years prior to 2018 expire between 2025 and 2041. For tax years 2018 and thereafter, NOL carryforwards generated in these jurisdictions have no expiration date. The Pennsylvania NOL carryforwards expire between 2024 and 2041.

Tax years 2018 through 2021 remain open to examination by the U.S. Internal Revenue Service. The Company and its subsidiaries file tax returns with various state taxing authorities and those returns remain open to examination for tax years 2017 through 2021.