Income Taxes

12 Months Ended

Dec. 31, 2019

NOTE T— INCOME TAXES

We evaluate our deferred tax assets periodically to determine if valuation allowances are required. Ultimately, the realization of deferred tax assets is dependent upon generation of future taxable income during those periods in which temporary differences become deductible and/or credits can be utilized. To this end, management considers the level of historical taxable income, the scheduled reversal of deferred tax liabilities, tax-planning strategies and projected future taxable income. Based on these considerations, and the carry-forward availability of a portion of the deferred tax assets, management believes it is more likely than not that we will realize the benefit of the deferred tax assets.

Income tax benefit (in thousands) consisted of the following for the years ended December 31, 2019, 2018 and 2017:



	Year ended December 31,
	2019			2018			2017
Current:
Federal	$	—		$	1,076		$	(10,754	)
State	(1,188		)	(2,496		)	(1,167		)
Foreign	(1,343		)	(518		)	—
	(2,531		)	(1,938		)	(11,921		)
Deferred:
Federal	90,457			25,578			22,641
State	11,225			5,492			(2,040		)
Foreign	—			—			—
	101,682			31,070			20,601
Income tax benefit	$	99,151		$	29,132		$	8,680

Income tax benefit (in thousands) differed from the amount that would be provided by applying the U.S. federal statutory rate for the years ended December 31, 2019, 2018 and 2017 due to the following:



	Year ended December 31,
	2019			2018			2017
Income tax (expense) benefit computed at U.S. federal statutory rate	$	90,070		$	48,290		$	(47,784	)
Decrease (increase) resulting from:
Statutory depletion	4,679			12,090			20,259
Goodwill impairment	—			(29,157		)	—
Prior year tax return reconciliation	3,121			530			219
State income taxes, net of federal benefit	9,486			2,592			(2,267		)
Adjustment to deferred taxes from the Tax Act rate reduction	—			—			35,772
Equity compensation	(6,440		)	(653		)	2,602
Other, net	(1,765		)	(4,560		)	(121		)
Income tax benefit	$	99,151		$	29,132		$	8,680

The largest permanent item in computing both our effective tax rate and taxable income is the deduction allowed for statutory percentage depletion. The deduction for statutory percentage depletion does not necessarily change proportionately to changes in income before income taxes. For the year ended December 31, 2018, the tax effect of the goodwill impairment described in Note I - Goodwill and Intangible Assets is a significant permanent item in the effective tax rate calculation.

Deferred tax assets and liabilities are recognized for the estimated future tax effects, based on enacted tax laws, of temporary differences between the values of assets and liabilities recorded for financial reporting and for tax purposes and of net operating loss and other carry forwards.

The tax effects of the types of temporary differences and carry forwards that gave rise to deferred tax assets and liabilities (in thousands) at December 31, 2019 and 2018 consisted of the following:



	December 31,
	2019			2018
Gross deferred tax assets:
Net operating loss carry forward and state tax credits	$	32,173		$	11,089
Pension and post-retirement benefit costs	13,976			13,303
Alternative minimum tax credit carry forward	7,895			15,971
Property, plant and equipment	7,179			5,474
Accrued expenses	15,336			27,025
Inventories	6,507			774
Third-party products liability	236			231
Stock-based compensation expense	2,390			8,199
Note payable	109			3,724
Interest expense limitation	22,324			—
Lease obligation liability	29,604			—
Other	5,191			8,116
Total deferred tax assets	142,920			93,906
Gross deferred tax liabilities:
Land and mineral property basis difference	(124,182		)	(165,002		)
Fixed assets and depreciation	(44,314		)	(55,596		)
Intangibles	(12,541		)	(10,346		)
Other	(468		)	(201		)
Total deferred tax liabilities	(181,505		)	(231,145		)
Net deferred tax liabilities	$	(38,585	)	$	(137,239	)

We have federal net operating loss carry forwards of approximately $122.3 million at December 31, 2019. The losses will expire in years 2028 through 2037. The losses are subject to an annual limitation under Internal Revenue Code Section 382, but are expected to be fully realized. Under the Tax Act, net operating loss (NOL) deductions arising in tax years beginning after December 31, 2017 can only offset up to 80 percent of future taxable income. The Act also prohibits NOL carrybacks, but allows indefinite carryforwards for NOLs arising in tax years beginning after December 31, 2017. Net operating losses arising before January 1, 2018 are accounted for under the previous tax rules that imposed no limit on the amount of the taxable income that can be set off using NOLs (except for a 90 percent limit for AMT carryforwards) and that can be carried back 2 years and carried forward 20 years.

At December 31, 2019 and 2018, we have an alternative minimum tax credit carry forward of approximately $16.2 million and $16.0 million, respectively. The Tax Act repeals the corporate alternative minimum tax (AMT), effective for tax years beginning after December 31, 2017, but allows an entity to claim portions of any unused AMT credits over the next four years to offset its regular tax liability. An entity with unused AMT credits as of December 31, 2017 can first use these credits to offset its regular tax for 2017 and can then claim up to 50 percent of the remaining AMT credits in 2018, 2019, and 2020, with all remaining AMT credits refundable in 2021. Based on the Tax Act repeal of AMT, $8.1 million was reclassified from deferred tax assets to other receivables. See Note F - Accounts Receivable.

At the end of each reporting period as presented, there were no material amounts of interest and penalties recognized in the statement of operations or balance sheets. We have no material unrecognized tax benefits or any known material tax contingencies at December 31, 2019 or December 31, 2018 and do not expect this to change significantly within the next twelve months. Tax returns filed with the IRS for the years 2016 through 2018 along with tax returns filed with numerous state entities remain subject to examination.