

	Years Ended December 31,
	2019			2018			2017
	(Thousands)
Current:
Federal	$	(106,487	)	$	(513,293	)	$	(89,149	)
State	5,774			(46,218		)	(5,184		)
Subtotal	(100,713		)	(559,511		)	(94,333		)
Deferred:
Federal	(213,397		)	20,496			(1,039,769		)
State	(61,666		)	(157,496		)	(54,314		)
Subtotal	(275,063		)	(137,000		)	(1,094,083		)
Total income tax benefit	$	(375,776	)	$	(696,511	)	$	(1,188,416	)

For the year ended December 31, 2019, the current federal income tax benefit consisted primarily of expected refunds of $120 million related to the Company's alternative minimum tax (AMT) credit carryforward and the Tax Cuts and Jobs Act. For the year ended December 31, 2018, the current federal income tax benefit consisted primarily of an expected refund of $141 million related to the Company's AMT credit carryforward, partly offset by $16 million of current state tax expense. For the year ended December 31, 2017, the current federal income tax benefit consisted primarily of expected refunds of $65 million related to amended returns the Company had filed to carryback federal and AMT net operating losses (NOLs) that were generated in 2017 and 2016. The remaining current tax benefit of $435 million and $29 million for the years ended December 31, 2018 and 2017, respectively, was offset by current expense related to discontinued operations and will not result in additional refunds to the Company.

On December 22, 2017, the U.S. Congress enacted the Tax Cuts and Jobs Act, which made significant changes to U.S. federal income tax law, including lowering the federal corporate tax rate to 21% from 35% beginning January 1, 2018. As a result of the change in the corporate tax rate the Company recorded a deferred tax benefit of $1.2 billion during the year ended December 31, 2017 to revalue its existing net deferred tax liabilities to the lower rate.

The Company applied the guidance in SAB 118 when accounting for the enactment-date effects of the Tax Cuts and Jobs Act in 2017 and throughout 2018. At December 31, 2017, the Company had not completed the accounting for all the enactment-date income tax effects of the legislation under Accounting Standards Codification (ASC) 740, Income Taxes, for the following aspects: remeasurement of deferred tax assets and liabilities and incentive-based compensation limitations. During 2018, the Company completed the accounting for all the enactment-date income tax effects of the Tax Cuts and Jobs Act and recognized adjustments of $5.3 million to the provisional amounts recorded at December 31, 2017. These adjustments were included as a component of income tax expense from continuing operations. The additional expense was primarily a result of adjustments to the increased limitations on deductible executive compensation.

The Tax Cuts and Jobs Act preserved deductibility of intangible drilling costs (IDCs) for federal income tax purposes, which allows the Company to deduct a portion of drilling costs in the year incurred and minimizes current taxes payable. Prior to 2018, IDCs were limited for AMT purposes, which resulted in the Company paying AMT in periods when no other federal taxes were then currently payable. The Tax Cuts and Jobs Act also repealed the AMT for tax years beginning January 1, 2018 and provided that existing AMT credit carryforwards can be used to offset current federal taxes owed in tax years 2018 through 2020. In addition, 50% of any unused AMT credit carryforwards can be refunded during these years with any remaining AMT credit carryforward being fully refunded in 2021. As a result of an IRS announcement in January 2019 that reversed its position that AMT refunds were subject to sequestration by the federal government at a rate equal to 6.2% of the refund, the Company reversed the related valuation allowance of $13 million in the first quarter of 2019.

As of December 31, 2019, the Company had current income tax receivable of $299 million, which consisted of refunds of AMT credits of $95 million and $190 million for 2019 and 2018, respectively, and $14 million in state taxes previously paid related to the Company's 2018 tax return. The Company expects to receive $95 million in refunds of AMT in 2020 and 2021.

The Company has federal NOL carryforwards related to the Rice Merger and NOLs generated in 2017 in excess of amounts carried back to prior years. The Company also has NOLs acquired in the Company's 2016 acquisition of Trans Energy, Inc., of which a nominal amount is available for use annually over the next 20 years. The Tax Cuts and Jobs Act limited the utilization of NOLs generated after December 31, 2017 that have been carried forward into future years to 80% of taxable income and eliminated the ability to carry NOLs back to earlier tax years for refunds of taxes paid. NOLs generated in 2018 and in future periods can be carried forward indefinitely.



	Years Ended December 31,
	2019			2018			2017
	(Thousands)
Tax at statutory rate	$	(335,469	)	$	(646,261	)	$	69,515
Federal tax law change	—			5,288			(1,205,140		)
State income taxes	(119,659		)	(251,780		)	(57,414		)
Valuation allowance	70,875			88,785			10,680
Regulatory liability/asset	—			(276		)	10,488
Federal tax credits	(7,908		)	(2,400		)	(34,956		)
Goodwill impairment	—			111,470			—
Other	16,385			(1,337		)	18,411
Income tax benefit	$	(375,776	)	$	(696,511	)	$	(1,188,416	)

Effective tax rate	23.5		%	22.6		%	(598.4		)%

The Company's effective tax rate for the year ended December 31, 2018 was higher compared to the U.S. federal statutory rate due primarily to state income taxes. The Company recognized additional state tax benefit as a result of the 2018 Divestitures and the resulting shift in the Company's state apportionment in state taxing jurisdictions for natural gas and liquids sales as these sales shifted more heavily to lower taxed jurisdictions. The Company had no tax basis in the goodwill allocated to continuing operations that had been impaired in 2018.

The Company's effective tax rate for the year ended December 31, 2017 was lower compared to the U.S. federal statutory rate due primarily to the effect of the Tax Cuts and Jobs Act on the Company's net deferred tax liability, which was remeasured at the updated corporate tax rate of 21%. The effective tax rate was also lower compared to the U.S. federal statutory rate due to an increase in federal tax credits generated during 2017 as a result of $30.2 million of federal marginal well tax credits. The IRS notice supporting the calculation of the credit was not published until 2017 and, absent the IRS notice, the Company was unable to estimate the amount of this credit in 2016. As a result, $6.1 million of this credit recorded in 2017 related to 2016 activity.

For the year ended December 31, 2017, the Company realized $10.5 million of tax expense associated with Federal Energy Regulatory Commission (FERC) regulated assets as a result of the corporate tax rate reduction from the Tax Cuts and Jobs Act. Following the normalization rules of the Internal Revenue Code (IRC), this regulatory liability is amortized on a straight-line basis over the estimated remaining life of the related assets. This regulatory liability was transferred to Equitrans Midstream in connection with the Separation and Distribution and was included in discontinued operations.

The Company believes that it is more likely than not that the benefit from certain state NOL carryforwards and certain federal NOLs acquired in recent acquisitions will not be realized. 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. All available evidence, both positive and negative, must be considered in determining the need for a valuation allowance. At December 31, 2019, 2018 and 2017, positive evidence considered included the reversals of financial-to-tax temporary differences, the implementation of and/or ability to employ various tax planning strategies and the estimation of future taxable income. Negative evidence considered included historical pre-tax book losses of the Company's former EQT Production business segment. A review of positive and negative evidence regarding these tax benefits resulted in the conclusion that valuation allowances for certain NOLs were warranted as it was more likely than not that the Company would not use them prior to expiration. Uncertainties such as future commodity prices can affect the Company's calculations and its ability to use these NOLs prior to expiration. Further, because of the Tax Cuts and Jobs Act, the Company recorded a valuation allowance against a deferred tax asset related to the interest expense limitation for separate company state income tax purposes and recorded a write-off of deferred tax assets related to certain executive incentive-based awards to be paid in a future year that will not be deductible.

During 2019, the Company recorded a partial valuation allowance against a deferred tax asset related to the unrealized loss recorded on its investment in Equitrans Midstream that it does not believe it will be able to utilize due to limitations imposed on capital losses. The Company has capital loss carryback capacity and provided a valuation allowance on the portion in excess of the carryback. Management will continue to assess the potential for realizing deferred tax assets based on the feasibility of future tax planning strategies and may record adjustments to the related valuation allowances in future periods that could materially impact net income.



	2019			2018			2017
	(Thousands)
Balance at January 1	$	315,279		$	301,558		$	252,434
Additions for tax positions taken in current year	19,431			8,459			50,469
Additions for tax positions taken in prior years	8,929			14,396			8,978
Reductions for tax positions taken in prior years	(84,051		)	(9,134		)	(10,323		)
Balance at December 31	$	259,588		$	315,279		$	301,558

Included in the balances above are unrecognized tax benefits of $150.9 million, $124.6 million and $120.5 million that, if recognized, would affect the effective tax rates as of December 31, 2019, 2018 and 2017, respectively. Also included in the balances above are uncertain tax positions of $113.7 million, $88.2 million, and $84.1 million for the years ended December 31, 2019, 2018 and 2017, respectively, that were recorded in the Consolidated Balance Sheets as a reduction of the related deferred tax asset for AMT and general business credit carryforwards and NOLs. The Company released $84 million of reserves and reinstated the related deferred tax asset for AMT during 2019 due to settlement of the 2013 amended return refund claim with the IRS. The state deferred tax asset was reduced for uncertain tax positions of approximately $0.3 million during the year ended December 31, 2017.

Included in the balances above are $0.7 million, $0.7 million and $4.7 million, as of December 31, 2019, 2018 and 2017, respectively, for tax positions for which the ultimate deductibility is highly certain but there is uncertainty about the timing of tax deductions. Any disallowance of the shorter deductibility period would accelerate the payment of cash taxes to an earlier period but would not affect the Company's annual effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company recorded interest and penalties of approximately $3.3 million, $3.4 million and $3.2 million for 2019, 2018 and 2017, respectively. Interest and penalties of $15.2 million, $11.9 million and $8.4 million were included in the Consolidated Balance Sheets at December 31, 2019, 2018 and 2017, respectively.

As of December 31, 2019, 2018 and 2017, the Company believed that, as a result of potential settlements with, or legal or administrative guidance by, relevant taxing authorities or the lapse of applicable statutes of limitation, it is reasonably possible that a decrease of $80.2 million, $33.3 million and $42.5 million, respectively, in unrecognized tax benefits related to federal tax positions may be necessary within twelve months.

(R&E) tax credit claim for such years. In addition, the Company has filed refund claims related to R&E and AMT preference adjustments for 2010 through 2013. The Company is under IRS audit for 2013 and agreed to a settlement related to a 2013 amended return refund claim in the fourth quarter of 2019. The Company is also the subject of various state income tax examinations. With few exceptions, as of December 31, 2019, the Company is no longer subject to state examinations by tax authorities for years before 2012.



	December 31,
	2019			2018
	(Thousands)
Deferred income taxes:
Total deferred income tax assets	$	(643,227	)	$	(549,969	)
Total deferred income tax liabilities	2,129,041			2,373,350
Total net deferred income tax liabilities	1,485,814			1,823,381
Total deferred income tax liabilities (assets):
Drilling and development costs expensed for income tax reporting	1,100,061			1,469,320
Tax depreciation in excess of book depreciation	974,520			904,030
Investment in Equitrans Midstream	(109,883		)	(10,359		)
Incentive compensation and deferred compensation plans	(16,923		)	(24,682		)
Net operating loss carryforwards	(635,446		)	(429,983		)
Alternative minimum tax credit carryforward	(190,992		)	(308,727		)
Federal tax credits	(59,854		)	(37,710		)
Unrealized gains (losses)	54,460			(28,096		)
Interest disallowance limitation	(46,776		)	(35,358		)
Other	(6,797		)	(26,462		)
Total excluding valuation allowances	1,062,370			1,471,973
Valuation allowances	423,444			351,408
Total net deferred income tax liabilities	$	1,485,814		$	1,823,381

During 2019, net deferred tax liability decreased $337.6 million from 2018 due primarily to book impairments, which are included in drilling and development costs expensed for income tax reporting but are not currently deductible for tax purposes, and the Company's investment in Equitrans Midstream, partly offset by increased tax depreciation in excess of book depreciation.

As of December 31, 2019, the Company had a deferred tax asset of $218.8 million, net of valuation allowances of $22.8 million, related to tax benefits from federal NOL carryforwards expiring in 2037. Federal NOLs generated in 2018 and forward will carryforward indefinitely but will be limited to offset 80% of taxable income in each year. As of December 31, 2019, the Company had a deferred tax asset of $416.7 million, net of valuation allowances of $324.1 million, related to tax benefits from state NOL carryforwards with various expiration dates ranging from 2020 to 2039. Due to a decrease in state apportionment rates and impairment of assets, the Company will have less realizable NOL in future years and, as such, had to record a valuation allowance on its property, plant and equipment state deferred tax asset of $4.5 million in 2019. Additionally, for separate company state income tax reporting purposes, the Tax Cuts and Jobs Act interest deduction limitation resulted in a valuation allowance of $21.3 million recorded in 2019. In 2019, the Company incurred an unrealized loss on its investment in Equitrans Midstream. This investment is a capital asset for tax purposes and capital losses can only be utilized to offset a capital gain and are limited to being carried back three years and forward five years for potential utilization. Due to these limitations, the Company also recorded a valuation allowance on the deferred tax asset recorded for the retained stake of Equitrans Midstream of $42.4 million for separate company state income tax reporting purposes and $8.3 million for federal.

As of December 31, 2018, the Company had a deferred tax asset of $32.9 million, net of valuation allowances of $22.8 million, related to tax benefits from federal NOL carryforwards expiring in 2037 to 2038. As of December 31, 2018, the Company had a deferred tax asset of $94.7 million, net of valuation allowances of $279.5 million, related to tax benefits from state NOL

carryforwards with various expiration dates ranging from 2020 to 2037. In October 2017, Pennsylvania enacted a change in the limitation on Pennsylvania NOL utilization from 30% of taxable income to 35% of taxable income for tax years beginning in 2018 and 40% of taxable income for tax years beginning in 2019 and thereafter. However, due to the decrease in state apportionment rates, the Company will have less realizable NOL in future years. Additionally, the Tax Cuts and Jobs Act interest deduction limitation imposed for separate company state income tax reporting purposes resulted in a valuation allowance of $21.7 million. The Company also recorded a valuation allowance on the retained stake of Equitrans Midstream of $14 million for separate company state income tax reporting purposes. The Company reduced the valuation allowance on expected AMT credit refunds subject to federal sequestration to $13.3 million as a result of a change in estimate for the period ended December 31, 2018. As a result of an IRS announcement in January 2019 that reversed its position that AMT refunds were subject to sequestration by the federal government, the Company reversed the related valuation allowance in the first quarter of 2019.

For the year ended December 31, 2019, the Company recorded a $90.9 million adjustment to retained earnings and additional paid-in-capital related to the Separation and Distribution. The Separation and Distribution resulted in the recognition of a tax gain related to a pre-Separation transaction. Recognition occurred as a result of Equitrans Midstream exiting the Company's consolidated federal filing group. The gain amount reported in the tax return was different than the amount estimated in the 2018 financial statements; therefore, the Company recorded a return-to-provision adjustment in 2019. This adjustment impacts the amount of deferred taxes transferred to Equitrans Midstream as of the Separation and Distribution date of November 12, 2018.