Income and Mining Taxes

12 Months Ended

Dec. 31, 2020

The components of Income (loss) before income taxes are below:


	Year ended December 31,
In thousands	2020		2019		2018
United States	$	40,890	$	(16,702)	$	(50,522)
Foreign	21,782		(341,323)		(15,213)
Total	$	62,672	$	(358,025)	$	(65,735)

The components of the consolidated Income and mining tax (expense) benefit from continuing operations are below:


	Year ended December 31,
In thousands	2020		2019		2018
Current:
United States	$	226	$	(334)	$	1,188
United States — State mining taxes	(8,384)		(4,001)		(3,208)
United States — Foreign withholding tax	(800)		(1,598)		(5,617)
Canada	232		119		378
Mexico	(36,066)		(19,619)		(26,021)
Other	33		(3)		67
Deferred:
United States	(49)		236		23,322
United States — State mining taxes	(354)		251		1,134
Canada	—		32,084		16,057
Mexico	8,117		3,994		9,929
Other	—		—		(449)
Income tax (expense) benefit	$	(37,045)	$	11,129	$	16,780

he Company’s Income and mining tax benefit (expense) differed from the amounts computed by applying the United States statutory corporate income tax rate for the following reasons:


	Year ended December 31,
In thousands	2020		2019		2018
Income and mining tax (expense) benefit at statutory rate	$	(13,161)	$	75,185	$	14,052
State tax provision from continuing operations	(152)		1,243		2,284
Change in valuation allowance	(17,522)		(77,220)		2,471

Percentage depletion	5,056		820		89
Uncertain tax positions	2,321		2,358		1,830
U.S. and foreign permanent differences	3,844		2,272		3,314

Foreign exchange rates	1,390		(7,066)		(3,973)
Foreign inflation and indexing	684		(2,933)		(2,374)
Foreign tax rate differences	(3,971)		19,729		(24)
Mining, foreign withholding, and other taxes	(17,457)		(2,746)		(3,857)
Other, net	1,923		(513)		2,968

Income and mining tax (expense) benefit	$	(37,045)	$	11,129	$	16,780

At December 31, 2020 and 2019, the significant components of the Company’s deferred tax assets and liabilities are below:


	Year ended December 31,
In thousands	2020		2019
Deferred tax liabilities:
Mineral properties	$	—	$	25,691
Inventory	5		847
Royalty and other long-term debt	1,094		—
Foreign subsidiaries - unremitted earnings	99		50
	$	1,198	$	26,588
Deferred tax assets:
Net operating loss carryforwards	$	241,985	$	219,192
Mineral properties	1,907		—
Property, plant, and equipment	10,841		20,212
Mining royalty tax	7,447		6,764
Capital loss carryforwards	17,341		21,956
Asset retirement obligation	38,761		34,134
Unrealized foreign currency loss and other	3,386		9,133
Royalty and other long-term debt	—		6,235
Accrued expenses	16,849		8,899
Tax credit carryforwards	29,809		29,881
	368,326		356,406
Valuation allowance	(401,304)		(371,277)
	(32,978)		(14,871)
Net deferred tax liabilities	$	34,176	$	41,459

A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. The Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be more likely than not able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of factors that impact the Company’s ability to realize its deferred tax assets. Based upon this analysis, the Company has recorded valuation allowances as follows:


	Year ended December 31,
In thousands	2020		2019
U.S.	$	215,396	$	213,783
Canada	146,611		118,738
Mexico	15,885		15,884
New Zealand	22,740		21,863
Other	672		1,009
	$	401,304	$	371,277

The Company has the following tax attribute carryforwards at December 31, 2020, by jurisdiction:


In thousands	U.S.		Canada		Mexico		New Zealand		Other		Total
Regular net operating losses	$	432,447	$	304,237	$	52,951	$	86,486	$	1,337	$	877,458
Expiration years	2021-2038		2029-2039		2021-2030		Indefinite		2021-2022
Capital losses	63,024		—		—		—		—		63,024
Foreign tax credits	24,939		—		—		—		—		24,939

The majority of the U.S. capital losses will expire through 2022. Foreign tax credits expire if unused beginning in 2021.

The utilization of U.S. net operating loss carryforwards, tax credit carryforwards, and recognized built-in losses may be subject to limitation under the rules regarding a change in stock ownership as determined by the Internal Revenue Code and state tax laws. Section 382 of the Internal Revenue Code of 1986, as amended, imposes annual limitations on the utilization of net operating loss carryforwards, tax credit carryforwards, and certain built-in losses upon an ownership change as defined under that Section. Generally, an ownership change may result from transactions that increase the aggregate ownership of certain shareholders in the Company’s stock by more than 50 percentage points over a three-year testing period. If the Company experiences an ownership change, an annual limitation would be imposed on certain of the Company’s tax attributes, including net operating losses and certain other losses, credits, deductions or tax basis. Management has determined that the Company experienced ownership changes during 2002, 2003, 2007, and 2015 for purposes of Section 382. Based on management’s calculations, the Company does not expect any of its U.S. tax attributes to expire unused as a result of the Section 382 annual limitations. However, the annual limitations may impact the timeframe over which the net operating loss carryforwards can be used, potentially impacting cash tax liabilities in a future period. The U.S. federal tax credits and state net operating losses may potentially be limited as well. We continue to maintain a full valuation allowance on our US net deferred tax assets since it is more likely than not that the related tax benefits will not be realized.

The Company may also experience ownership changes in the future as a result of subsequent shifts in our stock ownership. As a result, if the Company earns U.S. federal taxable income, it may be limited in the ability to (1) recognize current deductions on built-in loss assets and (2) offset this income with our pre-change net operating loss carryforwards and other tax credit carryforwards, which may be subject to limitations, potentially resulting in increased future tax liability to us. Under the Tax Cuts and Jobs Act of 2017 (“TCJA”), federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited to 80% of future taxable income. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act suspended the 80% limitation on losses incurred in 2018 and in future years, for tax years beginning before January 1, 2021. The Company does not expect this to impact its net operating loss usage.

The Company intends to indefinitely reinvest earnings from Mexican operations.

A reconciliation of the beginning and ending amount related to unrecognized tax benefits is below (in thousands):






Unrecognized tax benefits at December 31, 2018	$	3,776
Gross increase to current period tax positions	—
Gross increase to prior period tax positions	137
Reductions in unrecognized tax benefits resulting from a lapse of the applicable statute of limitations	(1,207)
Unrecognized tax benefits at December 31, 2019	$	2,706
Gross increase to current period tax positions	—
Gross increase to prior period tax positions	(122)
Reductions in unrecognized tax benefits resulting from a lapse of the applicable statute of limitations	(1,861)
Unrecognized tax benefits at December 31, 2020	$	723

At December 31, 2020, 2019, and 2018, $0.7 million, $2.7 million, and $3.8 million, respectively, of these gross unrecognized benefits would, if recognized, decrease the Company’s effective tax rate.

The Company operates in numerous countries around the world and is subject to, and pays annual income taxes under, the various income tax regimes in the countries in which it operates. The Company has historically filed, and continues to file, all required income tax returns and paid the taxes reasonably determined to be due. The tax rules and regulations in many countries are highly complex and subject to interpretation. From time to time, the Company is subject to a review of its historic income tax filings and, in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Company’s business conducted within the country involved.

The Company files income tax returns in various U.S. federal and state jurisdictions, in all identified foreign jurisdictions, and various others. The statute of limitations remains open from 2017 for the US federal jurisdiction and from 2013 for certain other foreign jurisdictions. As a result of statutes of limitations that will begin to expire within the next 12 months in various jurisdictions and possible settlement of audit-related issues with taxing authorities in various jurisdictions with respect to which none of these issues are individually significant, the Company believes that it is reasonably possible that the total amount of its unrecognized income tax liability will decrease between $0.5 million and $1.5 million in the next 12 months.

The Company classifies interest and penalties associated with uncertain tax positions as a component of income tax expense and recognized interest and penalties of $1.1 million, $2.3 million, and $3.5 million at December 31, 2020, 2019, and 2018, respectively.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details