Income Taxes

12 Months Ended

Dec. 31, 2019

On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the Tax Act) which significantly changed U.S. corporate income tax laws beginning, generally, in 2018. These changes included, among others, (i) a permanent reduction of the U.S. corporate income tax rate from a top marginal rate of 35 percent to a flat rate of 21 percent, (ii) elimination of the corporate alternative minimum tax, (iii) immediate deductions for certain new investments instead of deductions for depreciation expense over time, (iv) limitation on the tax deduction for interest expense to 30 percent of adjusted taxable income, (v) limitation of the deduction for net operating losses to 80 percent of current year taxable income and elimination of net operating loss carrybacks, and (vi) elimination of many business deductions and credits, including the domestic production activities deduction, the deduction for entertainment expenditures, and the deduction for certain executive compensation in excess of $1 million. The 2019 and 2018 tax provisions reflect the legislative changes noted above, including the new corporate tax rate of 21 percent.

Income tax expense (benefit) is summarized as follows:



	Year Ended December 31,
(In thousands)	2019			2018			2017
Current
Federal	$	(29,584	)	$	(95,191	)	$	(9,531	)
State	4,320			6,682			1,816
	(25,264		)	(88,509		)	(7,715		)
Deferred
Federal	233,136			230,643			(313,938		)
State	11,282			(1,040		)	(7,175		)
	244,418			229,603			(321,113		)
Income tax expense (benefit)	$	219,154		$	141,094		$	(328,828	)

Income tax expense (benefit) was different than the amounts computed by applying the statutory federal income tax rate as follows:



	Year Ended December 31,
	2019					2018					2017
(In thousands, except rates)	Amount			Rate		Amount			Rate		Amount			Rate
Computed "expected" federal income tax	$	189,047		21.00	%	$	146,609		21.00	%	$	(79,952	)	35.00	%
State income tax, net of federal income tax benefit	14,773			1.64	%	11,850			1.70	%	(4,239		)	1.86	%
Deferred tax adjustment related to change in overall state tax rate	(660		)	(0.07	)%	(15,208		)	(2.18	)%	(48		)	0.02	%
Valuation allowance	17,676			1.96	%	8,975			1.29	%	(505		)	0.22	%
Provision to return adjustments	(1,966		)	(0.22	)%	(1,773		)	(0.25	)%	(3,242		)	1.42	%
Excess stock compensation	(918		)	(0.10	)%	327			0.05	%	2,965			(1.30	)%
Tax Act	—			—	%	(11,367		)	(1.63	)%	(242,875		)	106.32	%
Other, net	1,202			0.13	%	1,681			0.24	%	(932		)	0.41	%
Income tax expense (benefit)	$	219,154		24.34	%	$	141,094		20.21	%	$	(328,828	)	143.95	%

In 2019, the Company's overall effective tax rate increased compared to 2018, primarily due to larger tax benefits recorded in 2018 compared to 2019 related to the Tax Act and changes in the overall state tax rate. The overall effective tax rate was significantly higher in 2017 due to the Tax Act, where the Company recorded an income tax benefit of $242.9 million resulting from the remeasurement of its net deferred tax liabilities based on the new lower corporate income tax rate.

Excluding the discrete impact of the Tax Act, the adjusted effective tax rates were 24.3 percent for 2019, 21.8 percent for 2018 and 37.6 percent for 2017. The effective tax rate was lower in 2019 and 2018 than in 2017 primarily due to the reduction of the U.S. corporate income tax rate from 35 percent to 21 percent.

The composition of net deferred tax liabilities is as follows:



	December 31,
(In thousands)	2019			2018
Deferred Tax Assets
Net operating losses	$	22,360		$	56,769
Alternative minimum tax credits	22,120			114,149
Foreign tax credits	—			3,473
Other business credits	—			3,380
Incentive compensation	17,776			17,378
Deferred compensation	5,463			5,690
Post-retirement benefits	7,847			6,799
Equity method investments	21,454			20,746
Capital loss carryforward	—			8,877
Other	1,336			2,957
Less: valuation allowance	(31,763		)	(14,943		)
Total	66,593			225,275
Deferred Tax Liabilities
Properties and equipment	768,692			670,704
Derivative instruments	5			13,168
Total	768,697			683,872
Net deferred tax liabilities	$	702,104		$	458,597

As of December 31, 2019, the Company had fully utilized its federal net operating loss (NOL) carryforward, foreign tax credits, and other business credit carryforwards. The Company did have a remaining AMT credit carryforward balance of $22.1 million, which is expected to be fully utilized to offset regular income taxes in 2020. The Company also had gross state NOL carryforwards of $390.1 million, the majority of which will not expire until 2025 through 2039.

At December 31, 2019, the Company had $13.6 million of valuation allowances on the deferred tax benefits related to state NOLs, and recorded a valuation allowance of $18.1 million on the deferred tax benefits related to its equity method investments. The Company believes it is more likely than not that the remainder of its deferred tax benefits will be utilized prior to their expiration.

Unrecognized Tax Benefits

A reconciliation of unrecognized tax benefits is as follows:



	Year Ended December 31,
(In thousands)	2019			2018		2017
Balance at beginning of year	$	16,850		$	663	$	663
Additions for tax positions of prior years	—			16,187		—
Reductions for tax positions of prior years	(16,330		)	—		—
Balance at end of year	$	520		$	16,850	$	663

During 2019, the Company released a $16.3 million net reserve for unrecognized tax benefits related to alternative minimum tax associated with uncertain tax positions and a $3.1 million liability for accrued interest associated with the uncertain tax positions. The release of the net reserve did not have a material impact on the Company's effective tax rate. As of December 31, 2019, the Company had a $0.5 million reserve for unrecognized tax benefits related to the allocation of certain gains associated with its divestitures for purposes of computing state income taxes. If recognized, the net tax benefit of $0.5 million would not have a material effect on the Company's effective tax rate.

The Company files income tax returns in the U.S. federal, various states and other jurisdictions. The Company is no longer subject to examinations by state authorities before 2012 or by federal authorities before 2013. The Company is currently under examination by the Internal Revenue Service for its 2014 through 2017 tax years. The Company believes that appropriate

provisions have been made for all jurisdictions and all open years, and that any assessment on these filings will not have a material impact on the Company's financial position, results of operations or cash flows.