Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

(13) Income Taxes

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

	Year Ended December 31,
	2021		2022		2023
Current income tax expense	$	216		847		1,587
Deferred income tax expense (benefit)		(74,293)		447,845		74,407
Total income tax expense (benefit)	$	(74,077)		448,692		75,994

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,
	2021		2022		2023
Federal income tax expense (benefit)	$	(47,919)		519,679		87,746
State income tax expense (benefit), net of federal effect		(6,576)		12,461		3,512
Change in state tax rate, net of federal effect		(30,910)		(52,747)		11,417
Equity-based compensation		1,117		(9,717)		(772)
Dividends received deduction		(3,832)		(1,749)		(3,186)
Noncontrolling interests		(7,862)		(27,347)		(21,525)
Change in valuation allowance		4,606		7,070		(2,567)
Nondeductible loss on 2026 Convertible Notes equitizations and inducement		12,174		36		81
Other		5,125		1,006		1,288
Total income tax expense (benefit)	$	(74,077)		448,692		75,994

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 deferred income tax assets and liabilities is as follows (in thousands):

	December 31,
	2022		2023
Deferred income tax assets:
NOL carryforwards	$	282,829		281,217
Interest expense carryforwards		—		25,258
Equity-based compensation		3,362		7,056
Investment in Antero Midstream		254,164		234,423
Unrealized losses on derivative instruments		83,269		51,025
Lease liabilities		740,254		644,622
Asset retirement obligations and other		15,859		17,093
Total deferred income tax assets		1,379,737		1,260,694
Valuation allowance		(57,375)		(54,805)
Deferred income tax assets, net		1,322,362		1,205,889
Deferred income tax liabilities:
Oil and gas properties		1,295,847		1,338,442
Lease right-of-use assets		740,254		644,870
Investment in Martica		45,507		55,759
2026 Convertible Notes and other		615		1,086
Total deferred income tax liabilities		2,082,223		2,040,157
Deferred tax liability, net	$	(759,861)		(834,268)

In assessing the realizability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will be realized based on a more-likely-than-not standard of judgment. The ultimate realization of deferred income 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 income 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 income 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 $57 million and $55 million as of December 31, 2022 and 2023, respectively. The valuation allowance for each of the years ended December 31, 2022 and 2023, relates primarily to Colorado, Oklahoma and West Virginia state NOL carryforwards and are the result of expected future reduced income tax apportionment in those states. The amount of the deferred income 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 has no unrecognized tax benefit balances through December 31, 2023.

As of December 31, 2023, the Company has U.S. federal and state NOL carryforwards of $1.0 billion and $1.9 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 2036 and 2037. For tax years 2018 and thereafter, U.S. federal and West Virginia NOL carryforwards generated in these jurisdictions have no expiration date. The Colorado NOL carryforwards generated in tax years prior to 2018 or in 2021 expire between 2025 and 2041. The Colorado NOL Carryforwards generated in tax years 2018 through 2020 have no expiration date.

Tax years 2020 through 2023 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 2019 through 2023.