13. Income Taxes  

Income Tax Expense (Benefit)

Components of income tax expense (benefit) were as follows (in thousands):

Effective Tax Rate Reconciliation

The reconciliation of income taxes computed at the U.S. federal statutory tax rate to our income tax expense (benefit) is as follows (in thousands, except percentages):

Our effective tax rate for the years 2018, 2017 and 2016 differed from the applicable federal statutory rate of 21.0% for 2018 and 35.0% for 2017 and 2016 primarily due to recording and adjusting a valuation allowance for our deferred tax assets, which is discussed below.      

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  Significant components of our deferred tax assets and liabilities were as follows (in thousands):

During 2018, we received refunds of $11.1 million and made income tax payments of $0.1 million.  During 2017, we received refunds of $11.9 million and made income tax payments of $0.2 million.  During 2016, we received $7.8 million of refunds and made income tax payments of $0.3 million.  The refunds received in 2018, 2017 and 2016 were primarily due to net operating loss (“NOL”) carryback claims made pursuant to IRC Section 172 (f) (related to rules regarding “specified liability losses”).  

Income Taxes Receivable

As of December 31, 2018, we have current income taxes receivable of $54.1 million which primarily relates to our NOL carryback claims for the years 2012, 2013 and 2014 that were carried back to prior years.  These carryback claims were made pursuant to IRC Section 172 (f), which permits certain platform dismantlement, well abandonment and site clearance costs to be carried back 10 years.  The refund claims require a review by the Congressional Joint Committee on Taxation.

Net Operating Loss, Interest and Tax Credit Carryovers

The table below presents the details of our net operating loss and tax credit carryovers as of December 31, 2018 (in thousands):

Valuation Allowance

 During 2018 and 2017, we recorded a decrease in the valuation allowance of $53.8 million and $118.6 million, respectively, related to federal and state deferred tax assets.  Deferred tax assets are recorded related to net operating losses and temporary differences between the book and tax basis of assets and liabilities expected to produce tax deductions in future periods.  The realization of these assets depends on recognition of sufficient future taxable income in specific tax jurisdictions in which those temporary differences or net operating losses are deductible.  In assessing the need for a valuation allowance on our deferred tax assets, we consider whether it is more likely than not that some portion or all of them will not be realized.  As of December 31, 2018 and 2017, we had a valuation allowance related to our federal and state deferred tax asset.     

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted into law and we applied the guidance in Staff Accounting Bulletin No. 118 when accounting for the enactment-date effects of the TCJA in 2018 and 2017.  As a result of the enactment of the TCJA, our net deferred tax assets and its respective valuation allowance were provisionally adjusted downwards by $105.9 million as of December 31, 2017.  Our Consolidated Statement of Income, Consolidated Balance Sheet and Consolidated Statement of Cash Flow for the year 2017 were not materially impacted as a result of the provisional re-measurement of our net deferred tax assets and its related valuation allowance.  At December 31, 2017, we had not completed our accounting for all of the enactment-date income tax effects of the TCJA under Accounting Standards Codification Topic 740, Income Taxes, for the measurement of deferred tax assets and liabilities.  As of December 31, 2018, we completed our accounting for all of the enactment-date income tax effects of the TCJA and during 2018 we recognized an adjustment of $0.5 million to the provisional amounts recorded at December 31, 2017.  

Uncertain Tax Positions

The table below sets forth the beginning and ending balance of the total amount of unrecognized tax benefits.  Pending settlement of net operating loss carryback claims would require a change in our unrecognized tax benefits and materially impact on our effective tax rate if recognized.  If recognized, our estimate of recognized tax benefits would be in the range of $11.5 million to $12.0 million.  

Balances in the uncertain tax positions are as follows (in thousands):

We recognize interest and penalties related to uncertain tax positions in income tax expense.  For 2018, 2017 and 2016, the amounts recognized in income tax expense were immaterial.

Years open to examination

The tax years from 2013 through 2018 remain open to examination by the tax jurisdictions to which we are subject.