For the year ended December 31, 2018, the Company’s annual effective tax rate is approximately 0.0%. Despite reporting pre-tax book income of $18.8 million, the Company incurred a tax loss in the current year (due principally to intangible drilling cost amortization) and thus, no current federal income taxes will be due. This tax loss results in a net operating loss carryforward at December 31, 2018 in the amount of $667 million. Management assessed the realizability of the Company’s deferred tax assets based on the more likely than not standard. Management considered several factors such as: (i) the Company’s short (five-year) tax history, (ii) the lack of carryback potential resulting in a tax refund, and (iii) in light of current commodity pricing uncertainty, there is insufficient external evidence to suggest that net federal tax attribute carryforwards are realizable. As such, the Company has provided a valuation allowance of $208 million as of December 31, 2018.

	For the Year Ended December 31,
	2018		2017		2016
Current
Federal	$	—	$	—	$	—
State		—		—		6
Total current		—		—		6
Deferred
Federal		—		—		—
State		—		—		540
Total deferred		—		—		540
Total income tax expense (benefit)	$	—	$	—	$	546

The Company’s income tax expense differs from the amount derived by applying the statutory federal rate to pretax loss principally due the effect of the following items (in thousands):

	For the Year Ended December 31,
	2018			2017			2016
Income (loss) before income taxes	$	18,826		$	8,525		$	(206,189	)
Statutory rate		21	%		35	%		35	%
Income tax benefit computed at statutory rate		3,953			2,984			(72,166	)
Reconciling items:
State income taxes		—			—			546
Other, net		54			50			854
Share-based compensation		1,201			(576	)		—
Executive compensation limitation		268			496			—
Change in valuation allowance		(5,476	)		(145,449	)		71,312
Change in Federal tax rate		—			142,495			—
Income tax expense (benefit)	$	—		$	—		$	546

Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the Company’s deferred taxes are detailed in the table below (in thousands):

	For the Year Ended December 31,
	2018			2017			2016
Deferred tax asset:
Oil and gas properties and equipment	$	62,616		$	93,854		$	193,095
Federal tax loss carryforwards		140,059			114,652			145,628
Derivative instruments and other		—			1,064			16,829
State effect of deferreds		—			—			—
Other, net		7,398			4,639			4,259
Deferred tax asset		210,073			214,209			359,811
Valuation allowance		(208,324	)		(213,800	)		(359,098	)
Net deferred tax assets	$	1,749		$	409		$	713
Deferred tax liability:
Derivative instruments and other	$	1,197		$	—		$	—
Other, net		552			409			713
Net deferred tax liability	$	1,749		$	409		$	713
Reflected in the accompanying consolidated balance sheet as:
Net deferred tax asset	$	—		$	—		$	—
Net deferred tax liability	$	—		$	—		$	—

The Company has U.S. federal tax loss carryforwards (“NOL”) of approximately $667 million as of December 31, 2018. The NOL carryforwards will begin to expire in 2034. The tax years ended December 31, 2015 through 2018 will remain open to examination under the applicable statute of limitations in the U.S. and other jurisdictions in which the Company and its subsidiaries file income tax returns. However, the statute of limitations for examination of NOLs and other similar attribute carryforwards does not commence until the year the attribute is utilized. In some instances, state statutes of limitations are longer than those under U.S. federal tax law.

As of December 31, 2018, 2017, and 2016 the Company has not recorded a reserve for any uncertain tax positions. No federal income tax payments are expected in the upcoming four quarterly reporting periods.

As a result of the BRMR Merger (See Note 3— Acquisition), the Company may undergo an ownership change as described in Code section 382. This may limit the future annual availability of use of the Company’s NOLs that accrued prior to the ownership change date as well as future tax depreciation, depletion and amortization amounts. The Company is still evaluating the impacts that Code section 382 will have on their tax attributes.