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

In response to the COVID-19 pandemic, the President of the United States signed into law the CARES Act in March 2020. The CARES Act adjusted a number of provisions of the tax code, including interest deduction limitations, the treatment of net operating losses, and tax credits. The enactment of the CARES Act did not result in any material adjustments to the Company’s current year income tax provision.

	For the Year Ended
	December 31,
	2020			2019
	(In thousands)
Current taxes:
Federal	$	(5	)	$	—
State		(110	)		50
Total current income tax benefit (expense)		(115	)		50
Deferred taxes:
Federal		—			—
State		—			—
Total deferred income tax benefit (expense)		—			—
Total income tax benefit (expense)	$	(115	)	$	50

The actual income tax benefit (expense) differs from the expected amount computed by applying the federal statutory corporate tax rate of 21% in 2020 and in 2019 as follows:

	For the Year Ended
	December 31,
	2020			2019
	(In thousands)
Expected tax benefit (expense) at federal statutory rate	$	97,423		$	7,402
State income tax benefit (expense), net of federal benefit		6,189			946
Non-deductible expenses		(45	)		(3,659	)
Changes in valuation allowances		(110,445	)		(4,332	)
State rate change, net of federal benefit		6,100			—
Non-cash compensation		(137	)		(367	)
Other		800			60
Total income tax benefit (expense)	$	(115	)	$	50

The Company’s deferred 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,			December 31,
	2020			2019
Deferred income tax assets:
Property, Plant & Equipment	$	115,695		$	37,075
Net operating loss carryforward		174,479			141,534
Derivatives		2,448			—
Disallowed interest expense		5,388			10,627
Accrued liabilities		1,226			1,431
Other		1,717			4,234
Total deferred income tax assets:		300,953			194,901
Valuation allowance		(300,386	)		(189,941	)
Net deferred income tax assets		567			4,960

Deferred income tax liabilities:
Derivatives	$	—		$	2,767
Other		567			2,193
Total deferred income tax liabilities		567			4,960

Net deferred income tax liabilities	$	—		$	—

As of December 31, 2020, the Company had approximately $732.1 million of federal net operating loss (“NOL”) carryovers of which $710.1 million have no expiration date and the remaining will expire in year 2037. In connection with the Merger with Midstates in 2019, the Company is subject to IRC §382 loss limitation on pre-merger NOL and tax attributes. The amount of 2020 federal NOL carryover generated post-merger, and not subject to §382 loss limitation, is $31.6 million. As of December 31, 2020, the Company had approximately $420.3 million of state net operating loss carryovers of which $367.3 million have no expiration period and the remaining will expire in varying amounts beginning in 2037.

In assessing deferred tax assets, the Company considers whether a valuation allowance should be recorded for some or all of the deferred tax assets which may not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Among other items, the Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and available tax planning strategies. A valuation allowance is established against deferred tax assets for which management believes realization is considered to be more likely than not that all of the deferred tax assets will not be realized. As of December 31, 2020, a valuation allowance of $300.4 million had been recorded which is an increase to the valuation allowance of $110.5 million from the prior year.

Uncertain Income Tax Position. We must recognize the tax effects of any uncertain tax positions we 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. We had no unrecognized tax benefits as of December 31, 2020.

Tax Audits and Settlements. Notification was received from the Internal Revenue Service (IRS) during the year that the examination of our 2017 federal income tax return was complete with no change to reported tax. Our income tax years 2018 through 2020 remain open and subject to examination by the IRS. For state and local jurisdictions, our 2017 through 2020 tax years remain open and subject to examination where we conduct operations. In certain jurisdictions we operate through more than one legal entity, each of which may have different open years subject to examination.