Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

(5)Income Taxes

Our income tax expense was $230.5 million for the year ended December 31, 2022 compared to a benefit of $9.7 million in 2021 and a benefit of $25.6 million in 2020. The effective income tax rate is influenced by a variety of factors including geographic sources and relative magnitude of these sources of income. Reconciliation between the statutory federal income tax rate and our effective income tax rate is as follows:

	Year Ended December 31,
	2022			2021			2020
Federal statutory tax rate		21.0	%		21.0	%		21.0	%
State, net of federal benefit		1.0			4.0			5.2
State rate and law change		—			(3.4	)		4.3
Equity compensation		—			2.3			(1.0	)
Valuation allowances		(5.5	)		(26.8	)		(25.9	)
Permanent differences and other		(0.2	)		0.5			(0.1	)
Consolidated effective tax rate		16.3	%		(2.4	)%		3.5	%

Income tax expense (benefit) attributable to income (loss) before income taxes consists of the following (in thousands):

	2022								2021								2020
	Current		Deferred			Total			Current		Deferred			Total			Current			Deferred			Total
U.S. federal	$	—	$	245,839		$	245,839		$	—	$	6,297		$	6,297		$	(366	)	$	(24,489	)	$	(24,855	)
U.S. state and local		14,688		(30,067	)		(15,379	)		7,984		(24,024	)		(16,040	)		(157	)		(540	)		(697	)
Total	$	14,688	$	215,772		$	230,460		$	7,984	$	(17,727	)	$	(9,743	)	$	(523	)	$	(25,029	)	$	(25,552	)

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

	December 31,
	2022			2021
	(in thousands)
Deferred tax assets:
Net operating loss carryforward	$	581,349		$	788,375
Divestiture contract obligation		105,227			112,199
Deferred compensation		25,733			22,121
Equity compensation		4,813			4,833
Asset retirement obligations		24,113			21,734
Interest expense carryforward		16,118			53,876
Lease right-of-use liabilities		19,395			9,954
Cumulative mark-to-market loss		30,307			32,221
Other		16,922			12,181
Valuation allowances:
Federal		(21,320	)		(67,984	)
State, net of federal benefit		(171,423	)		(203,085	)
Total deferred tax assets		631,234			786,425
Deferred tax liabilities:
Depreciation and depletion		(935,710	)		(879,163	)
Lease right-of-use assets		(18,440	)		(9,247	)
Other		(10,655	)		(15,657	)
Total deferred tax liabilities		(964,805	)		(904,067	)
Net deferred tax liability	$	(333,571	)	$	(117,642	)

At December 31, 2022, deferred tax liabilities exceeded deferred tax assets by $333.6 million. As of December 31, 2022, we have a state valuation allowance of $171.4 million related to state tax attributes in Louisiana, Oklahoma, Pennsylvania, Texas and West Virginia. As of December 31, 2022, we have federal valuation allowances of $21.3 million primarily related to our federal basis differences. The net change in our deferred tax asset valuation allowances was a reduction of $78.3 million for the year ended December 31, 2022 compared to a reduction in our valuation allowances of $108.0 million in 2021 and an increase of $188.2 million in 2020. We continue to evaluate the realizability of our federal and state deferred tax assets and, in 2022, based upon significant increases in commodity prices, our 2022 results and other positive evidence, we released a significant portion of our federal and state valuation allowances.

At December 31, 2022, we had federal NOL carryforwards of $2.0 billion. This includes $374.5 million that expires in 2036 and 2037 and also includes $1.7 billion of NOL carryforwards generated after 2017 that do not expire. We have state NOL carryforwards in Pennsylvania of $825.9 million that expire between 2031 and 2042 and in Louisiana, we have state NOL carryforwards of $1.6 billion that do not expire. We file a consolidated tax return in the United States federal jurisdiction. We file separate company state income tax returns in Louisiana and Pennsylvania and file consolidated or unitary state income tax returns in Oklahoma, Texas and West Virginia. We are subject to U.S. federal income tax examinations for the years 2018 and after and we are subject to various state tax examinations for years 2018 and after. We have not extended the statute of limitation period in any income tax jurisdiction. Our policy is to recognize interest related to income tax expense in interest expense and penalties in general and administrative expense. We do not have any material accrued interest or penalties related to tax amounts as of December 31, 2022 or December 31, 2021. Throughout 2022, 2021 and 2020, our unrecognized tax benefits were not material.

On July 12, 2022, the Commonwealth of Pennsylvania enacted legislation to reduce the corporate net income tax rate from 9.99% to 8.99% in 2023 and continues to reduce that rate by 0.5% per year beginning in 2024, with the rate becoming 4.99% in 2031 and each year thereafter. We recorded a $20.7 million tax benefit in third quarter 2022 for the impact of this tax rate reduction which is reflected as a reduction to our Pennsylvania valuation allowance.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (“IRA”) into law. The IRA contains a number of revisions to the Internal Revenue Code, including a 15% corporate minimum income tax for tax years beginning after December 31, 2022. While these tax law changes have no immediate effect and are not expected to have a material adverse effect on our results of operations going forward, we will continue to evaluate their impact as further information becomes available.