INCOME TAXES

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES:

The Company has evaluated the impact of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was signed into law by the President of the United States in March 2020. The CARES Act has various income tax related provisions, including temporary net operating loss carryback and limitation measures, a relaxation of the limitation on interest deductions, the postponement of statutory filing dates, and a technical correction of the 2017 Tax Cuts and Jobs Act related to qualified improvement property.

The Company's effective tax rate is based on its estimated full year effective tax rate. The effective tax rate for the three months ended March 31, 2020 differs from the U.S. federal statutory rate of 21%, primarily due to the income tax benefit for excess percentage depletion, offset by the impact of discrete tax expense related to equity compensation and the unfavorable impact on percentage depletion related to the additional interest deduction available under the CARES Act. The CARES Act increased the amount of deductible interest from 30% of adjusted taxable income to 50% for tax years 2019 and 2020, which generates current cash tax benefit, but also reduces the base of earnings upon which percentage depletion was computed. The effective tax rate for the three months ended March 31, 2020 was 44.6%, composed of a tax benefit of (3.1)% from operations and discrete tax expense of $902 related to equity compensation and $1,139 related to the effect of the CARES Act, as noted above.

The effective tax rate for the three months ended March 31, 2019 was (4.4)%, composed of a tax benefit of (2.5)% from operations and a discrete tax benefit of (1.9)% primarily related to equity compensation. The effective tax rate for the three months ended March 31, 2019 differs from the U.S. federal statutory rate of 21%, primarily due to the income tax benefit for excess percentage depletion.

The Company utilizes the “more likely than not” standard in recognizing a tax benefit in its financial statements. For the three months ended March 31, 2020 and the year ended December 31, 2019, 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 and its various states, as well as Canada and its various provinces. Under the provisions of the tax matters agreement entered into between the Company and its former parent on November 28, 2017 (the “TMA”), certain subsidiaries of the Company are subject to examination for tax years for the period January 1, 2016 through the three months ended March 31, 2020 for certain state and foreign returns. Further, the Company is subject to examination for the period November 28, 2017 through the three months ended March 31, 2020 for federal and certain state returns.