Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

Provision (benefit) for income taxes are as follows:

	2022			2021			2020
	(In Thousands)
Current:
Federal	$	—		$	—		$	(4	)
State		2,320			(250	)		33
Total Current	$	2,320		$	(250	)	$	29
Deferred:
Federal	$	43,217		$	(6,217	)	$	(4,631	)
State		(6,363	)		1,911			(147	)
Total Deferred	$	36,854		$	(4,306	)	$	(4,778	)
Provision (benefit) for income taxes	$	39,174		$	(4,556	)	$	(4,749	)

The current provision (benefit) for federal and state income taxes shown above includes federal and state income tax after the consideration of permanent and temporary differences between income for GAAP and tax purposes.

The deferred tax provision (benefit) results from the recognition of changes in our prior year deferred tax assets and liabilities, and the utilization of federal and state NOL carryforwards and other temporary differences. We reduce income tax expense for tax credits in the year they arise and are earned. On December 31, 2022, our gross amount of tax credits available to offset state income taxes was $4.3 million ($3.4 million net of federal benefit). Most of these tax credits carryforward for 9 years and begin expiring in 2022. The gross amount of federal tax credits was $8.1 million. These credits carryforward for 20 years and begin expiring in 2034.

In 2022, we utilized approximately $240 million and $243 million of federal and state NOL carryforwards, respectively, to reduce tax liabilities and in 2021, we utilized approximately $64 million and $56 million of federal and state NOL carryforwards, respectively, to reduce tax liabilities (minimal in 2020). On December 31, 2022, we have remaining federal and state tax NOL carryforwards of $352 million and $440 million, respectively. The federal NOL carryforwards begin expiring in 2036 and the state NOL carryforwards began expiring in 2023.

We considered both positive and negative evidence in our determination of the need for valuation allowances for the deferred tax assets associated with federal and state NOLs and federal credits and in conjunction with the IRC Section 382 limitation. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Valuation allowances are reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets and liabilities, the impact of annual utilization limitations of interest expense and net operating losses and our results of operations. Based on our analysis, we believe that it is more-likely-than-not that all of our federal deferred tax assets will be utilized and a portion of our state deferred tax assets will not be able to be utilized. Information relating to our valuation allowance are included in the tables below. In 2022, the provision for income taxes includes the reversal of approximately $13 million of federal valuation allowance and $19 million of state valuation allowance primarily due to current year income. There is no federal valuation allowance left as of December 31, 2022.

Deferred tax assets and liabilities include temporary differences and carryforwards as follows:

	December 31,
	2022			2021
	(In Thousands)
Deferred compensation	$	2,354		$	2,390
Other accrued liabilities		1,813			1,721
Lease liability		5,215			6,710
Interest expense carryforward		16,025			27,928
Net operating loss		93,201			159,213
Other		11,950			12,030
Less valuation allowance on deferred tax assets		(14,916	)		(46,968	)
Total deferred tax assets	$	115,642		$	163,024
Property, plant and equipment		(169,507	)		(178,535	)
Right-of-use-assets		(5,340	)		(6,709	)
Prepaid and other insurance reserves		(4,282	)		(4,413	)
Total deferred tax liabilities	$	(179,129	)	$	(189,657	)
Net deferred tax liabilities	$	(63,487	)	$	(26,633	)

All of our income (loss) before taxes relates to domestic operations. Detailed below are the differences between the amount of the provision (benefit) for income taxes and the amount which would result from the application of the federal statutory rate to “Income (loss) before benefit for income taxes.”

	2022			2021			2020
	(In Thousands)
Provision (benefit) for income taxes at federal   statutory rate	$	56,543		$	8,187		$	(13,999	)
State current and deferred income tax provision    (benefit)		9,374			1,833			(5,094	)
Valuation allowance - Federal		(12,701	)		(13,400	)		8,758
Valuation allowance - State		(19,351	)		(4,286	)		4,308
State tax rate changes		2,824			7,360			(660	)
Tax credits		—			(2,835	)		—
PPP loan forgiveness		—			(2,456	)		—
Other		2,485			1,041			1,938
Provision (benefit) for income taxes	$	39,174		$	(4,556	)	$	(4,749	)

A reconciliation of the beginning and ending amount of uncertain tax positions is as follows:

	2022		2021			2020
	(In Thousands)
Balance at beginning of year	$	—	$	464		$	519
Additions based on tax positions related to the current year		—		—			—
Reductions for tax positions of prior years		—		(464	)		(55	)
Balance at end of year	$	—	$	—		$	464

We expect that the amount of unrecognized tax benefits may change as the result of ongoing operations, the outcomes of audits, and the expiration of statute of limitations. This change is not expected to have a significant effect on our results of operations or financial condition. As of December 31, 2022, there is no remaining uncertain tax position.

We record interest related to unrecognized tax positions in interest expense and penalties in operating other expense. For 2022, 2021 and 2020, the amounts for interest and penalties associated with unrecognized tax positions were minimal. At December 31, 2022, there was no accrued interest or penalties (none at December 31, 2021).

LSB and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2019-2022 years remain open for all purposes of examination by the U.S. Internal Revenue Service (“IRS”) and other major tax jurisdictions. Additionally, the 2013-2018 years remain subject to examination for determining the amount of net operating loss and other carryforwards.