Note

Income Taxes

Major components of our income tax provision for the years ended

December

31,

2017,

2016

and

2015

are as follows (in thousands):

	2017			2016			2015
Current:
Domestic	$	22,171		$	(10,702	)	$	3,892
Foreign		(22,526	)		(13,713	)		(5,376	)
Total current income tax provision		(355	)		(24,415	)		(1,484	)
Deferred:
Domestic		(30,766	)		7,480			(75,456	)
Foreign		11,242			(10,493	)		20,630
Total deferred income tax provision		(19,524	)		(3,013	)		(54,826	)
Total income tax provision	$	(19,879	)	$	(27,428	)	$	(56,310	)

Domestic and foreign components of (loss) income before income taxes for the years ended

December

31,

2017,

2016

and

2015

are as follows (in thousands):

	2017			2016		2015
Domestic	$	(7,920	)	$	41,014	$	(65,895	)
Foreign		4,280			55,961		35,237
Total	$	(3,640	)	$	96,975	$	(30,658	)

The annual tax provision 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):

	2017					2016					2015
Computed “statutory” benefit (provision)	$	1,274		35	%	$	(33,941	)	35	%	$	10,731		35	%
Percentage depletion		5,174		142			8,114		(8	)		2,432		8
Change in valuation allowance		24,464		672			11,336		(12	)		(84,951	)	(277	)
Federal rate change		(37,546	)	(1,031	)		—		—			—		—
State taxes, net of federal taxes		1,112		30			(565	)	1			(3,639	)	(12	)
Foreign currency remeasurement of monetary assets and liabilities		(10,357	)	(284	)		(4,598	)	5			28,184		92
Rate differential on foreign earnings		(1,438	)	(39	)		(6,853	)	7			(4,746	)	(15	)
Compensation		(661	)	(18	)		(1,517	)	1			(1,014	)	(3	)
Foreign withholding taxes		(278	)	(8	)		—		—			—		—
Expiration of U.S. foreign tax credits		(2,300	)	(63	)		—		—			—		—
Other		677		18			596		(1	)		(3,307	)	(12	)
Total provision	$	(19,879	)	(546	)%	$	(27,428	)	28	%	$	(56,310	)	(184	)%

January 1, 2017

we adopted ASU

No.

2015

Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic

740

Accordingly, all deferred income tax assets and liabilities are classified as non-current in the consolidated balance sheet. Upon adoption, we classified, as non-current, previously reported current deferred tax assets of

$12.3

million and current deferred tax liabilities of

$1.3

million.

We evaluated the positive and negative evidence available to determine the amount of valuation allowance required on our deferred tax assets.

December

31,

2017

and

2016,

the balances of our valuation allowances were approximately

$79

million and

$100

million, respectively, primarily related to net operating losses and tax credit carryforwards. Due to the changes to tax laws under the Tax Cuts and Jobs Act, we determined it is more likely than

not

that we will

not

realize our U.S. net deferred tax assets. Accordingly, we have applied a full valuation allowance.

December

31,

2017

and

2016,

the net deferred tax liability was approximately

$120

million and

$87

million, respectively. The individual components of our net deferred tax assets and liabilities are reflected in the table below (in thousands).

	December 31,
	2017			2016
Deferred tax assets:
Accrued reclamation costs	$	21,812		$	30,188
Deferred exploration		17,426			26,785
Foreign net operating losses		1,003			1,058
Domestic net operating losses		130,186			82,359
AMT credit carryforwards		584			20,405
Pension and benefit obligation		12,584			18,115
Foreign exchange loss		18,112			34,977
Foreign tax credit carryforward		4,983			7,283
Miscellaneous		25,411			30,166
Total deferred tax assets		232,101			251,336
Valuation allowance		(78,684	)		(99,602	)
Total deferred tax assets		153,417			151,734
Deferred tax liabilities:
Miscellaneous		(4,978	)		(3,046	)
Properties, plants and equipment		(268,476	)		(235,700	)
Total deferred tax liabilities		(273,454	)		(238,746	)
Net deferred tax liability	$	(120,037	)	$	(87,012	)

For the year

2017,

we recorded a liability of

$0.3

million related to withholding taxes on unremitted earnings at Minera Hecla S.A. de C.V., our wholly-owned subsidiary which owns our San Sebastian mine and other interests in Durango, Mexico. For the years

2016

and

2015,

we had

unremitted foreign earnings. Foreign net operating losses carried forward are shown above as a deferred tax asset, with a valuation allowance as discussed below.

We recorded a valuation allowance in the U.S. to reflect the estimated amount of deferred tax assets, which

may

not

be realized principally due to the more likely than

not

expiration of net operating losses and tax credit carryforwards. A portion of the valuation allowance relating to exploration and other deferred tax assets was released in

2017

as we determined that it was more likely than

not

that the benefit would be realized as a result of operating activities at San Sebastian. As of

December

31,

2017,

$76

million valuation allowance remains in U.S. jurisdictions,

million in Hecla Canada Ltd. and

million in Minera Hecla S.A. de C.V. There is

valuation allowance at Hecla Quebec, Inc. The changes in the valuation allowance for the years ended

December

31,

2017,

2016

and

2015,

are as follows (in thousands):

	2017			2016			2015
Balance at beginning of year	$	(99,602	)	$	(115,806	)	$	(32,094	)
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery		(14,964	)		(2,868	)		(92,393	)
Decrease related to utilization and expiration of deferred tax assets, other		35,882			19,072			8,681
Balance at end of year	$	(78,684	)	$	(99,602	)	$	(115,806	)

As of

December

31,

2017,

for U.S. income tax purposes, we have federal and state net operating loss carryforwards of

$506

million and

$366

million, respectively. These net operating loss carryforwards have a

year expiration period, the earliest of which could expire in

2020.

We have foreign and provincial net operating loss carryforwards of approximately

million each, which expire between

2018

and

2037.

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.

December

31,

2017

and

2016

we had

million and

$22

million, respectively, 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. In

2017,

we adopted ASU

2016

Stock Compensation: Improvements to Employee Share-Based Payment Accounting. As a result, the deferred tax asset related to our NOL increased by

million due to the inclusion of additional NOLs related to excess tax benefits. The increase in the deferred tax asset was fully offset by a valuation allowance, resulting in

change to our recognized net deferred tax assets.

We file income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions.

We are

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

2011.

We currently have

tax years under examination.

We had

unrecognized tax benefits as of

December

31,

2017

2016.

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

months.

December 22, 2017,

the United States enacted the Tax Cuts and Jobs Act (the "Act") resulting in significant modifications to existing law. We have completed the accounting for the effects of the Act during the quarter ended

December 31, 2017.

Our financial statements for the year ended

December 31, 2017,

reflect certain effects of the Act which includes a reduction in the corporate tax rate from

35%

21%

as well as other changes. As a result of the changes to tax laws and tax rates under the Act, we incurred incremental income tax expense of

$30

million during the year ended

December 31, 2017,

which consisted primarily of the remeasurement of deferred tax assets and liabilities from

35%

21%

and application of a full valuation allowance. We have

not

accrued a

one

-time transition tax on unrepatriated foreign earnings due to an estimated net deficit in foreign earnings from all foreign jurisdictions.

As discussed in

Note

, we acquired Mines Management, Inc. in

September 2016.

In accounting for the acquisition, we adopted a policy to consider the recoverability of deferred tax assets acquired in the acquisition before considering the recoverability of the acquirer's existing deferred tax assets.