Note

Income Taxes

Major components of our income tax benefit (provision) for the years ended

December

31,

2018,

2017

and

2016

are as follows (in thousands):

	2018			2017			2016
				Revised			Revised
Current:
Domestic	$	(454	)	$	22,171		$	(10,702	)
Foreign		(4,382	)		(22,526	)		(13,713	)
Total current income tax benefit (provision)		(4,836	)		(355	)		(24,415	)
Deferred:
Domestic		7,147			(30,766	)		7,480
Foreign		4,390			10,158			(11,155	)
Total deferred income tax benefit (provision)		11,537			(20,608	)		(3,675	)
Total income tax benefit (provision)	$	6,701		$	(20,963	)	$	(28,090	)

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

December

31,

2018,

2017

and

2016

are as follows (in thousands):

	2018			2017			2016
				Revised			Revised
Domestic	$	(44,513	)	$	(7,920	)	$	41,014
Foreign		11,249			363			48,645
Total	$	(33,264	)	$	(7,557	)	$	89,659

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 (loss) income. The reasons for the difference are (in thousands):

	2018					2017					2016
						Revised					Revised
Computed “statutory” benefit (provision)	$	6,986		(21	)%	$	2,645		35	%	$	(31,381	)	35	%
Percentage depletion		3,158		(10	)		5,174		68			8,114		(9	)
Change in valuation allowance		(2,304	)	7			24,464		324			11,336		(13	)
Federal rate change		—		—			(37,546	)	(497	)		—		—
State taxes, net of federal taxes		(849	)	3			1,112		15			(565	)	—
Foreign currency remeasurement of monetary assets and liabilities		6,747		(20	)		(12,812	)	(169	)		(7,820	)	9
Rate differential on foreign earnings		(3,970	)	12			(1,438	)	(19	)		(6,853	)	8
Compensation		(970	)	3			(661	)	(9	)		(1,517	)	2
Foreign withholding taxes		278		(1	)		(278	)	(4	)		—		—
Expiration of U.S. foreign tax credits		—		—			(2,300	)	(30	)		—		—
Other		(2,375	)	7			677		9			596		(1	)
Total benefit (provision)	$	6,701		(20	)%	$	(20,963	)	(277	)%	$	(28,090	)	31	%

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.

December

31,

2018

and

2017,

the net deferred tax liability was approximately

$172

million and

$123

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

	December 31,
	2018			2017
				Revised
Deferred tax assets:
Accrued reclamation costs	$	29,064		$	21,812
Deferred exploration		16,500			17,426
Foreign net operating losses		13,231			1,003
Domestic net operating losses		152,320			130,186
AMT credit carryforwards		—			584
Pension and benefit obligation		12,345			12,584
Foreign exchange loss		24,849			18,112
Foreign tax credit carryforward		4,149			4,983
Miscellaneous		26,290			25,411
Total deferred tax assets		278,748			232,101
Valuation allowance		(94,981	)		(78,684	)
Total deferred tax assets		183,767			153,417
Deferred tax liabilities:
Miscellaneous		(5,234	)		(4,978	)
Properties, plants and equipment		(350,083	)		(271,282	)
Total deferred tax liabilities		(355,317	)		(276,260	)
Net deferred tax liability	$	(171,550	)	$	(122,843	)

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. Due to the changes to tax laws under the TCJ Act, we are

longer required to accrue taxes on remitted earnings and the liability was reversed. For the year

2016,

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.

As discussed in

Note

, we acquired Klondex Mines Ltd. ("Klondex") in

July 2018.

With the acquisition of Klondex, we acquired a U.S. consolidated tax group (the "Klondex U.S. Group") that did

not

join the existing consolidated U.S. tax group of Hecla Mining Company and subsidiaries (“Hecla U.S.”). Under acquisition accounting, we recorded a net deferred tax liability of

$69.4

million. In

2018,

we recorded a tax benefit of

$6.3

million on a net tax loss of

$30.0

million in the Klondex U.S. Group. Net operating losses acquired as of the acquisition date are subject to limitation under Internal Revenue Code Section

382.

However, the annual limitation is

not

expected to have a material impact on our ability to utilize the benefit of these losses.

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

December

31,

2018

and

2017,

the balances of our valuation allowances were approximately

$95

million and

$79

million, respectively, primarily related to net operating losses. Due to the changes to tax laws under the TCJ Act, at

December 31, 2017

we determined it is more likely than

not

that we will

not

realize our net deferred tax assets in our Hecla U.S. consolidated group. Accordingly, we applied a valuation allowance which remains in place on those net deferred tax assets at

December

31,

2018.

A portion of the valuation allowance relating to exploration and other deferred tax assets in Mexico 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,

2018,

$92.0

million valuation allowance remains in U.S. jurisdictions,

$1.3

million in Hecla Canada Ltd. and

$1.7

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,

2018,

2017

and

2016,

are as follows (in thousands):

	2018			2017			2016
Balance at beginning of year	$	(78,684	)	$	(99,602	)	$	(115,806	)
Valuation allowance on deferred tax assets acquired with the Klondex acquisition		(11,470	)		—			—
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery		(5,700	)		(14,964	)		(2,868	)
Decrease related to utilization and expiration of deferred tax assets, other		873			35,882			19,072
Balance at end of year	$	(94,981	)	$	(78,684	)	$	(99,602	)

As of

December

31,

2018,

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

$605.9

million and

$383.3million,

respectively. U.S. net operating loss carryforwards for periods arising before

December

31,

2017

have a

-year expiration period, the earliest of which could expire in

2020.

U.S. net operating loss carryforwards arising in

2018

and future periods have an indefinite carryforward period. We have foreign and provincial net operating loss carryforwards of approximately

$50.0

million each, which expire between

2028

and

2038.

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.

As of

December 31, 2018,

change in control has occurred in the Hecla U.S. group.

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

2012.

We are currently under examination in certain local tax jurisdictions. However, we do

not

anticipate any material adjustments.

We had

unrecognized tax benefits as of

December

31,

2018

2017.

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 TCJ Act resulting in significant modifications to existing law. We 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 TCJ Act which include 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 TCJ 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.