Income Taxes

3 Months Ended

Mar. 31, 2020

Income Taxes

Income taxes are accounted for using the liability method under which deferred income taxes are recognized for the future tax effects of temporary differences between financial statement carrying amounts and the tax basis of existing assets and liabilities using the enacted statutory tax rates in effect at period-end. The effect on deferred taxes for a change in tax rates is recognized in income in the period that includes the enactment date. The Company’s policy is to recognize penalties and interest related to unrecognized tax benefits, if any, in income tax expense.

The Company's provision (benefit) for income taxes and resulting effective tax rates were as follows for the periods presented.



	Three months ended March 31,
	2020			2019
Provision (benefit) for income taxes (in thousands)	$	(52,235	)	$	51,990
Effective tax rate	21.9		%	21.8		%

The Company computes its quarterly income tax provision (benefit) under the effective tax rate method based on applying an anticipated annual effective tax rate to year-to-date pre-tax income (loss), except for discrete items. Income taxes for discrete items are computed and recorded in the period in which the specific transaction occurs.

The Company's effective tax rate differs from the United States federal statutory tax rate due to the effect of state income taxes, equity compensation, valuation allowances, and other tax items as reflected in the table below.



	Three months ended March 31,
In thousands, except tax rates	2020			2019
Income (loss) before income taxes	$	(239,019	)	$	238,483
U.S. federal statutory tax rate	21.0		%	21.0		%
Expected income tax provision (benefit) based on U.S. federal statutory tax rate	(50,194		)	50,081
Items impacting the effective tax rate:
State and local income taxes, net of federal benefit	(7,603		)	7,798
Equity compensation	3,886			(8,318		)
Other, net	(3,189		)	2,429
Valuation allowance	4,865			—
Provision (benefit) for income taxes	$	(52,235	)	$	51,990
Effective tax rate	21.9		%	21.8		%

The Company reduces its deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more-likely-than-not that the Company will not realize some portion or all of the deferred tax assets. The Company considers relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes the Company's 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. The Company determined it was more-likely-than-not that a portion of its Oklahoma NOL carryforwards would not be able to be utilized before expiration, and a valuation allowance of approximately $4.9 million was established for the deferred tax assets associated with such NOL carryforwards.

The Company will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to its deferred tax assets. Changes in positive and negative evidence, including differences between estimated and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial statements. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.