Note 4 - Income Taxes

The income tax benefit recorded for each of the three and nine months ended September 30, 2016, and 2015, differs from the amount that would be provided by applying the statutory United States federal income tax rate to income or loss before income taxes primarily due to the effect of state income taxes, changes in valuation allowances, research and development (“R&D”) credits, and other permanent differences. The quarterly rate can also be affected by the proportional impacts of forecasted net income or loss as of each period end presented.

The provision for income taxes consists of the following:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
	(in thousands)
Current portion of income tax expense (benefit):
Federal	$	—		$	—		$	—		$	—
State	24			(8,308		)	265			2,092
Deferred portion of income tax expense (benefit)	(23,756		)	4,168			(314,770		)	(80,388		)
Income tax benefit	$	(23,732	)	$	(4,140	)	$	(314,505	)	$	(78,296	)
Effective tax rate	36.7		%	403.5		%	36.1		%	42.2		%

On a year-to-date basis, a change in the Company’s effective tax rate between reported periods will generally reflect differences in its estimated highest marginal state tax rate due to changes in the composition of income or loss from Company activities among multiple state tax jurisdictions. Cumulative effects of state tax rate changes are reflected in the period legislation is enacted.

The Company is generally no longer subject to United States federal or state income tax examinations by tax authorities for years before 2013. During the first quarter of 2016, the Company received an expected $4.9 million refund of tax and interest after the Company and the Internal Revenue Service (“IRS”) reached a final agreement on the examination of the Company’s 2007 - 2011 tax years. There were no material adjustments to previously reported amounts. During the quarter ended September 30, 2015, the IRS initiated an audit of the tax partnership between the Company and Mitsui E&P Texas LP for the 2013 tax year. The Company has a significant investment in the underlying assets of this tax partnership. The Company received notice during the first quarter of 2016 that the IRS concluded the audit with no adjustments. In accordance with regulations, the Senior Convertible Notes and the capped call transactions, as defined and discussed in Note 5 - Long-Term Debt, were identified during the quarter as an integrated transaction.