INCOME TAXES:

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



	For The Years Ended December 31,
	2017			2016			2015
Current:
U.S. Federal	$	65,856		$	(76,447	)	$	49,435
U.S. State	2,732			(1,924		)	2,591
Non-U.S.	2,030			1,411			963
	70,618			(76,960		)	52,989
Deferred:
U.S. Federal	17,397			89,268			66,187
U.S. State	(787		)	2,257			6,429
	16,610			91,525			72,616

Total Income Tax Expense	$	87,228		$	14,565		$	125,605

A reconciliation of income tax expense (benefit) and the amount computed by applying the statutory federal income tax rate of 35% to income from operations before income tax is:



	For the Years Ended December 31,
	2017					2016					2015
	Amount			Percent		Amount			Percent		Amount			Percent
Statutory U.S. federal income tax rate	$	59,429		35.0	%	$	22,755		35.0	%	$	155,059		35.0	%
State income taxes, net of federal tax benefit	1,264			0.7		997			1.5		6,767			1.5
Excess tax depletion	(24,216		)	(14.3	)	(21,856		)	(33.6	)	(27,720		)	(6.3	)
Effect of domestic production activities	(6,493		)	(3.8	)	1,621			2.5		(4,933		)	(1.1	)
Effect of change in U.S. tax law	58,558			34.5		—			—		—			—
IRS and state tax examination settlements	—			—		13,958			21.5		—			—
Effect of valuation allowance	1,379			0.8		—			—		—			—
Other	(2,693		)	(1.6	)	(2,910		)	(4.5	)	(3,568		)	(0.8	)
Income Tax Expense / Effective Rate	$	87,228		51.3	%	$	14,565		22.4	%	$	125,605		28.3	%

Significant components of deferred tax assets and liabilities were as follows:



	December 31,
	2017			2016
Deferred Tax Asset:
Postretirement benefits other than pensions	$	131,354		$	255,507
Asset retirement obligations	51,415			99,467
Pneumoconiosis benefits	36,160			43,371
Workers' compensation	16,778			28,530
Mine subsidence	15,322			39,251
Salary retirement	12,465			37,498
State bonus, net of Federal	4,473			3,175
Long-term disability	3,375			6,358
Other	7,924			8,042
Total Deferred Tax Asset	279,266			521,199
Valuation Allowance	(1,379		)	—
Net Deferred Tax Asset	277,887			521,199

Deferred Tax Liability:
Property, plant and equipment	(174,806		)	(256,947		)
Equity Partnerships	(17,991		)	(67,498		)
Advance mining royalties	(10,025		)	(12,175		)
Total Deferred Tax Liability	(202,822		)	(336,620		)

Net Deferred Tax Asset	$	75,065		$	184,579

A gross state net operating loss carryforward of $4,584 was generated during the current year, resulting in a deferred tax asset of $81. This NOL is principally related to Pennsylvania and Maryland, and will expire in 2037.

As required by U.S. GAAP, a valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Management must review all available evidence, both positive and negative, in determining the need for a valuation allowance. For the years ended December 31, 2017 and 2016, positive evidence considered included pretax cumulative income over the past three years, reversals of financial to tax temporary differences, and the implementation of and/or ability to employ various tax planning strategies. Negative evidence included the tax loss generated in the current year and the ability to fully utilize certain tax assets as a result of enactment of Public Law 115-97, commonly known as the Tax Cuts and Jobs Act. Management assessed both the federal and deferred state tax attributes for all subsidiaries during the period. After considering all available evidence, both positive and negative, management determined that a valuation allowance of $1,379 is necessary.

On December 22, 2017, the President of the United States signed Public Law 115-97 “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” commonly referred to as the Tax Cuts and Jobs Act (“Tax Bill”). Under U.S. GAAP, the effects of new legislation are recognized upon enactment, which, for federal legislation, is the date the President signs a bill into law. Accordingly, recognition of the tax effects of the Tax Bill is required in the interim and annual periods that include December 22, 2017. The SEC also released Staff Accounting Bulletin 118 on December 22, 2017. This bulletin clarifies certain aspects of ASC 740 and provides a three-step process for applying ASC 740. First, a company must reflect in its financial statements the income tax effects of the Tax Bill on items for which the company can make a complete assessment. Next, a measurement period not to exceed one year is provided for a company to report provisional amounts of the income tax effects of the Tax Bill for items for which the company’s assessment is incomplete, but for which it can make a reasonable estimate. A company may adjust provisional amounts as it obtains additional information in subsequent reporting periods. Finally, for items for which a company cannot make a reasonable estimate, a company is not required to report provisional amounts and will continue to apply ASC 740 based on tax law existing immediately before December 22, 2017. A company is required to report provisional amounts for these items in the first reporting period in which the company is able to make a reasonable estimate of the income tax effects of the Tax Bill.

The Company has evaluated the impact of the Tax Bill and has recorded the following provisional impacts in its financial statements. The net deferred tax asset on CONSOL Energy's balance sheet has been reduced by approximately $58,558 to a balance of $76,444 before the valuation allowance adjustment as a result of the federal corporate income tax rate being reduced from 35% to 21% for all periods after December 31, 2017. The Tax Cuts and Jobs Act is a comprehensive tax reform bill containing a number of provisions that either currently or in the future could impact the Company. Examples include the ability to fully expense certain depreciable property, and the limitation on the deductibility of business interest expense. As a result, the Company continues to evaluate all applicable provisions of the Tax Bill during the measurement period.

The Company utilizes the “more likely than not” standard in recognizing a tax benefit in its financial statements. For the years ended December 31, 2017 and 2016, the Company did not have any unrecognized tax benefits. If accrual for interest or penalties is required, it is the Company’s policy to include these as a component of income tax expense.

The Company is subject to taxation in the United States, as well as various states and Canada, as well as various provinces. Under the provisions of the tax matters agreement signed on November 28, 2017 by and between CONSOL Energy Inc. (Parent) and CONSOL Mining Corporation (Company), certain subsidiaries of the Company are subject to examination for tax years for the period January 1, 2015 through December 31, 2017 for certain state and foreign returns. Further, the Company is subject to examination for the period November 28, 2017 through December 31, 2017 for federal and certain state returns.