Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 5: Income Taxes

Major components of our income tax (provision) benefit for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands):

	2015			2014			2013
Current:
Domestic	$	3,892		$	7,761		$	2,963
Foreign		(5,376	)		(619	)		(175	)
Total current income tax (provision) benefit		(1,484	)		7,142			2,788
Deferred:
Domestic		(75,456	)		(1,572	)		247
Foreign		20,630			(330	)		6,760
Total deferred income tax (provision) benefit		(54,826	)		(1,902	)		7,007
Total income tax benefit (provision)	$	(56,310	)	$	5,240		$	9,795

Domestic and foreign components of (loss) income before income taxes for the years ended December 31, 2015, 2014 and 2013 are as follows (in thousands): 

	2015			2014			2013
Domestic	$	(65,895	)	$	(1,505	)	$	(1,681	)
Foreign		35,237			14,089			(33,244	)
Total	$	(30,658	)	$	12,584		$	(34,925	)

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

	2015					2014					2013
Computed “statutory” benefit (provision)	$	10,731		35	%	$	(4,405	)	35	%	$	12,224		35	%
Percentage depletion		2,432		8			6,034		(48	)		3,946		11
Change in valuation allowance other than utilization		(84,951	)	(277	)		(6,314	)	50			(3,870	)	(11	)
State taxes, net of federal taxes		(3,639	)	(12	)		1,671		(13	)		720		2
Transaction costs		(270	)	(1	)		—		—			(1,743	)	(5	)
Foreign currency translation of monetary assets		28,184		92			16,368		(130	)		3,445		10
Rate differential on foreign earnings		(4,746	)	(15	)		(5,938	)	47			(4,255	)	(12	)
Compensation		(815	)	(3	)		(1,308	)	10			(326	)	(1	)
Other		(3,236	)	(11	)		(868	)	7			(346	)	(1	)
	$	(56,310	)	(184	)%	$	5,240		(42	)%	$	9,795		28	%

We evaluated the positive and negative evidence available to determine the amount of valuation allowance required on our deferred tax assets.  At December 31, 2015 and 2014, the balances of our valuation allowances were approximately $116 million and $32 million, respectively, primarily related to net operating losses and tax credit 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, 2015 and 2014, the net deferred tax liability was approximately $66 million and $42 million, respectively. The individual components of our net deferred tax assets and liabilities are reflected in the table below (in thousands).

	December 31,
	2015			2014
Deferred tax assets:
Accrued reclamation costs	$	26,473		$	20,573
Deferred exploration		29,120			32,225
Foreign net operating losses		21,140			25,790
Domestic net operating losses		82,116			73,018
AMT credit carryforwards		11,607			14,698
Pension and benefit obligation		18,916			16,876
Foreign exchange gain		38,779			16,555
Miscellaneous		33,897			29,976
Total deferred tax assets		262,048			229,711
Valuation allowance		(115,806	)		(32,094	)
Total deferred tax assets		146,242			197,617
Deferred tax liabilities:
Miscellaneous		(2,394	)		(7,620	)
Properties, plants and equipment		(209,577	)		(232,397	)
Total deferred tax liabilities		(211,971	)		(240,017	)
Net deferred tax liability	$	(65,729	)	$	(42,400	)

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, and Minera Hecla, our wholly-owned subsidiary which owns our San Sebastian mine and other interests in Durango, Mexico. For the years 2015, 2014 and 2013, 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 forecasted expiration of net operating losses and tax credit carryforwards. A portion of the valuation allowance relating to foreign net operating loss carryforwards was released in 2015 as we determined that it is more likely than not that a portion of the benefit of the net operating loss carryforwards will be realized as a result of operating activities at San Sebastian. The changes in the valuation allowance for the years ended December 31, 2015, 2014 and 2013, are as follows (in thousands):

	2015			2014			2013
Balance at beginning of year	$	(32,094	)	$	(27,155	)	$	(23,030	)
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery		(92,393	)		(6,314	)		(3,870	)
Decrease related to utilization and expiration of deferred tax assets, other		8,681			1,375			(255	)
Balance at end of year	$	(115,806	)	$	(32,094	)	$	(27,155	)

As of December 31, 2015, for U.S. income tax purposes, we have federal and state net operating loss carryforwards of $241 million and $95 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 $71 million and $5 million, respectively, which expire between 2016 and 2035. We have approximately $11 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, 2015 and 2014 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 2009.  We currently have no tax years under examination.

We had no unrecognized tax benefits as of December 31, 2015 or 2014.  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.