Note 12 - Income Taxes

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12. Income Taxes

For the three and nine-month periods ended September 30, 2023 and 2022, our income tax expense and effective income tax rates were as follows (dollars in millions):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Income tax expense (benefit)	$	3		$	42		$	(3	)	$	101
Effective income tax rate		(8	%)		28	%		4	%		27	%

We estimate our differences between taxable income or loss and recorded income or loss on an annual basis. Our tax provision for each quarter is based upon these full year projections, which are revised each reporting period. These projections incorporate estimates of permanent differences between U.S. GAAP income or loss and taxable income or loss, state income taxes and adjustments to our liability for unrecognized tax benefits to adjust our statutory Federal income tax rate of 21% to our effective income tax rate. For the nine-month period ended September 30, 2023, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 4% as follows: state income taxes added 3%, permanent differences between our U.S. GAAP income and taxable income reduced our rate by 7% and discrete items further reduced our rate by 13%. For the nine-month period ended September 30, 2022, these estimates increased or decreased our statutory Federal income tax rate to our effective income tax rate of 27% as follows: state income taxes added 5%, permanent differences between our U.S. GAAP income and taxable income added 1%.

During the nine-months ended September 30, 2023, we made $43 million of federal and state income tax payments, net of refunds. During the remainder of 2023, we anticipate making income tax payments (before deducting refunds) of approximately $5 million to $9 million. As of September 30, 2023, we have an aggregate of approximately $344 million of various state operating loss carryforwards, of which we expect that approximately one-third will be utilized. We expect that approximately $217 million of these state net operating loss carryforwards will not be utilized due to section 382 limitations and those that will expire prior to utilization. After applying our state effective tax rate, this amount is included in our valuation allowance for deferred tax assets.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020, and permits net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. During 2020, we carried back certain net operating losses resulting in a refund of $21 million, excluding interest, that is currently outstanding.