Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 5: Income Taxes

Major components of our income tax benefit (provision) for the years ended December 31, 2014, 2013 and 2012 are as follows (in thousands):

	2014			2013			2012
Current:
Domestic	$	7,761		$	2,963		$	(7,086	)
Foreign		(619	)		(175	)		(459	)
Total current income tax benefit (provision)		7,142			2,788			(7,545	)
Deferred:
Domestic		(1,572	)		247			(1,334	)
Foreign		(330	)		6,760			—
Total deferred income tax benefit (provision)		(1,902	)		7,007			(1,334	)
Total income tax benefit (provision)	$	5,240		$	9,795		$	(8,879	)

Domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2014, 2013 and 2012 are as follows (in thousands): 

	2014			2013			2012
Domestic	$	(1,505	)	$	(1,681	)	$	37,025
Foreign		14,089			(33,244	)		(13,192	)
Total	$	12,584		$	(34,925	)	$	23,833

The annual tax benefit (provision) is different from the amount that would be provided by applying the statutory federal income tax rate to our pretax income (loss). The reasons for the difference are (in thousands):

	2014					2013					2012
Computed “statutory” benefit (provision)	$	(4,405	)	35	%	$	12,224		35	%	$	(8,342	)	35	%
Percentage depletion		6,034		(48	)		3,946		11			5,575		(24	)
Change in valuation allowance other than utilization		(6,314	)	50			(3,870	)	(11	)		(3,837	)	16
State taxes, net of federal taxes		1,671		(13	)		720		2			(1,110	)	5
Transaction costs		—		—			(1,743	)	(5	)		—		—
Foreign currency translation of monetary assets		16,368		(130	)		3,445		10			—		—
Rate differential on foreign earnings		(5,938	)	47			(4,255	)	(12	)		(780	)	3
Compensation		(1,308	)	10			(326	)	(1	)		(444	)	2
Other		(868	)	7			(346	)	(1	)		59		—
	$	5,240		(42	)%	$	9,795		28	%	$	(8,879	)	37	%

We evaluated the positive and negative evidence available to determine the amount of valuation allowance required on our deferred tax assets.  At December 31, 2014 and 2013, the balances of our valuation allowances were $32 million and $27 million, respectively, primarily for foreign net operating loss carryforwards. The amount of the deferred tax asset considered recoverable, however, could be reduced in the near term if estimates of future taxable income are reduced.

At December 31, 2014 and 2013, the net deferred tax liability was $42 million and $51 million, respectively. The individual components of our net deferred tax assets and liabilities are reflected in the table below (in thousands).

	December 31,
	2014			2013
Deferred tax assets:
Accrued reclamation costs	$	20,573		$	39,262
Deferred exploration		32,225			35,267
Foreign net operating losses		25,790			27,923
Domestic net operating losses		73,018			54,181
AMT credit carryforwards		14,698			22,155
Pension and benefit obligation		16,876			10,354
Foreign exchange gain		16,555			2,488
Miscellaneous		29,976			28,589
Total deferred tax assets		229,711			220,219
Valuation allowance		(32,094	)		(27,155	)
Total deferred tax assets		197,617			193,064
Deferred tax liabilities:
Miscellaneous		(7,620	)		(5,966	)
Properties, plants and equipment		(232,397	)		(238,497	)
Total deferred tax liabilities		(240,017	)		(244,463	)
Net deferred tax asset (liability)	$	(42,400	)	$	(51,399	)

We plan to permanently reinvest earnings from foreign subsidiaries with the exception of Hecla Quebec Inc., our wholly-owned subsidiary which owns our Casa Berardi mine and other interests in Quebec, Canada. For the years 2014, 2013 and 2012, we had no unremitted foreign earnings. Foreign net operating losses carried forward are shown above as a deferred tax asset, with a partial valuation allowance as discussed below.

We recorded a valuation allowance to reflect the estimated amount of deferred tax assets, which may not be realized principally due to the expiration of foreign net operating losses and foreign tax credit carryforwards. The changes in the valuation allowance for the years ended December 31, 2014, 2013 and 2012, are as follows (in thousands):

	2014			2013			2012
Balance at beginning of year	$	(27,155	)	$	(23,030	)	$	(22,895	)
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery		(6,314	)		(3,870	)		(3,837	)
Decrease related to utilization and expiration of deferred tax assets, other		1,375			(255	)		3,702
Balance at end of year	$	(32,094	)	$	(27,155	)	$	(23,030	)

As of December 31, 2014, for U.S. income tax purposes, we have federal and state net operating loss carryforwards of $218 million and $87 million, respectively.  These net operating loss carryforwards have a 20 year expiration period, the earliest of which could expire in 2020.  We have foreign and provincial net operating loss carryforwards of approximately $87 million and $12 million, respectively, which expire between 2015 and 2034. We have approximately $15 million in alternative minimum tax credit carryforwards which do not expire and are eligible to reduce future U.S. tax liabilities.  Our utilization of U.S. net operating loss carryforwards may be subject to annual limitations if there is a change in control as defined under Internal Revenue Code Section 382.

At December 31, 2014 and 2013 we had $20 million of federal net operating loss carryovers relating to excess tax benefits from the exercise of employee stock options and the vesting of restricted stock awards. These amounts are not reflected in our deferred tax asset for net operating loss carryovers. We recognize the excess tax benefits from the exercise of employee stock options and the vesting of restricted stock awards in the period in which these tax benefits reduce income taxes payable, after net operating loss carryforwards are fully utilized.

We file income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions.  We are no longer subject to income tax examinations by U.S. federal and state tax authorities for years prior to 2000, or examinations by foreign tax authorities for years prior to 2008.  We currently have no tax years under examination.

We had no unrecognized tax benefits as of December 31, 2014 or 2013.  Due to the net operating loss carryover provision, coupled with the lack of any unrecognized tax benefits, we have not provided for any interest or penalties associated with any uncertain tax positions.  If interest and penalties were to be assessed, our policy is to charge interest to interest expense, and penalties to other operating expense.  It is not anticipated that there will be any significant changes to unrecognized tax benefits within the next 12 months.