Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 17. Income Tax

Amplify Energy is a corporation and, as a result, is subject to U.S. federal, state, and local income taxes.

The components of income tax benefit (expense) are as follows:

	For the Year Ended
	December 31,
	2023		2022
	(In thousands)
Current taxes:
Federal	$	(4,286)	$	—
State		(531)		(111)
Total current income tax benefit (expense)		(4,817)		(111)
Deferred taxes:
Federal		232,351		—
State		21,445		—
Total deferred income tax benefit (expense)		253,796		—
Total income tax benefit (expense)	$	248,979	$	(111)

The actual income tax benefit (expense) differs from the expected amount computed by applying the federal statutory corporate tax rate of 21% in 2023 and in 2022 as follows:

	For the Year Ended
	December 31,
	2023		2022
	(In thousands)
Expected tax benefit (expense) at federal statutory rate	$	(30,192)	$	(12,177)
Changes in valuation allowances		284,927		12,267
Federal prior year adjustments		—		1,673
Fines & penalties		—		(1,939)
State income tax benefit (expense), net of federal benefit		(2,430)		(1,859)
State rate change, net of federal benefit		(2,541)		1,532
State prior year adjustment		(380)		(234)
Other		(405)		626
Total income tax benefit (expense)	$	248,979	$	(111)

The Company’s deferred income tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Significant components of the deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2023		2022
Deferred income tax assets:
Property, plant & equipment	$	69,895	$	82,152
Net operating loss carryforward		179,627		183,050
Derivatives		—		4,800
Disallowed interest expense		5,580		7,467
Accrued liabilities		2,180		2,008
Other		4,093		7,103
Total deferred income tax assets:		261,375		286,580
Valuation allowance		—		(284,928)
Net deferred income tax assets		261,375		1,652
Deferred income tax liabilities:
Derivatives	$	6,319	$	—
Other		1,260		1,652
Total deferred income tax liabilities		7,579		1,652
Net deferred income taxes	$	253,796	$	—

Net Operating Loss Carryforward. In connection with the merger with Midstates in 2019, the Company was subject to IRC §382 loss limitations on pre-merger net operating loss (“NOL”) and tax attributes. As of December 31, 2023, the Company’s federal NOL carryforward of $787.6 million is subject to §382 loss limitations, of which $20.6 million will expire in 2037 and $767.0 million have no expiration. Post-merger NOLs are not subject to §382 loss limitations and do not expire.

As of December 31, 2023, the Company had approximately $432.0 million of state net operating loss carryovers, of which $401.5 million have no expiration period and the remaining will expire in varying amounts beginning in 2037.

Valuation Allowance. In assessing deferred tax assets, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. The assessment considers all available information including historical and forecasted taxable income and operating history. The three months ended March 31, 2023, marked the first time that the Company had achieved three years of cumulative book income. Furthermore, management determined that the Company’s ability to maintain long-term profitability despite near-term changes in commodity prices and capital and operating costs demonstrated that there is sufficient positive evidence to conclude that it is more likely than not that all net deferred tax assets are realizable. As a result of the Company’s assessment, the Company released substantially all its valuation allowance previously recorded. The result of the valuation allowance release for the year ended December 31, 2023 was a tax benefit of $284.9 million.

Uncertain Income Tax Position. The Company must recognize the tax effects of any uncertain tax positions that the Company may adopt if the position taken by us is more likely than not sustainable based on its technical merits. 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 had no unrecognized tax benefits as of December 31, 2023.

Tax Audits and Settlements. The Company’s income tax years 2020 through 2022 remain open and subject to examination by the Internal Revenue Service (IRS). For state and local jurisdictions where the Company conducts operations, the Company’s 2019 through 2022 tax years remain open and subject to examination. In certain jurisdictions where the Company operates through more than one legal entity, each of which may have different open years subject to examination.