Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Taxes  
Income Taxes

(9)  Income Taxes

For the years ended December 31, 2018, 2019 and 2020, income tax expense consisted of the following:

Year Ended December 31,

(in thousands)

    

2018

    

2019

    

2020

Current income tax expense (benefit)

$

33,615

(539)

(55,517)

Deferred income tax expense (benefit)

(1,304)

(101,927)

(171)

Total income tax expense (benefit)

$

32,311

(102,466)

(55,688)

Income tax expense differs from the amount that would be computed by applying the U.S. statutory federal income tax rate of 21% for the years ended December 31, 2018, 2019 and 2020, to income before taxes as a result of the following:

Year Ended December 31,

(in thousands)

    

2018

    

2019

    

2020

Federal income tax expense (benefit)

$

20,773

(96,092)

(37,426)

State income tax expense (benefit), net of federal benefit

4,133

(17,089)

(6,998)

Non-deductible equity-based compensation

8,087

13,694

516

Non-deductible IPO expenses

1

Charitable contributions

(2,473)

Carryback of NOLs

(11,225)

Other

(683)

(506)

(555)

Total income tax expense (benefit)

$

32,311

(102,466)

(55,688)

Deferred income taxes reflect the impact of temporary differences between assets and liabilities for financial reporting purposes and such amounts as measured by tax laws. The tax effect of the temporary differences giving rise to net deferred tax assets

as follows:

December 31,

(in thousands)

    

2019

    

2020

Deferred tax assets:

    

    

NOL carryforwards

$

68,614

60,606

Investment in Antero Midstream Partners (1)

30,846

37,710

Equity-based compensation

1,298

2,590

Charitable contributions

2,473

2,496

Total deferred tax assets

103,231

103,402

Valuation allowance

Net deferred tax assets

103,231

103,402

Deferred tax liabilities:

Net deferred tax liabilities

Net deferred tax assets (liabilities)

$

103,231

103,402

(1) Investment in Antero Midstream Partners includes $2 million of transaction costs associated with the Transactions. See Note 3—Business Combination.

As of December 31, 2019 and 2020, the Company has a deferred tax asset in its Investment in Antero Midstream Partners of $31 million and $38 million, respectively. At the time of the Transactions on March 12, 2019, the investment in Antero Midstream Partners was recorded at fair value for both GAAP and income tax purposes. The GAAP versus tax treatment of activity occurring after the transaction, such as the treatment of impairments and differing recovery rates of the underlying assets, gave rise to the deferred tax asset. Due to Antero Midstream Partners’ strong history of pre-tax earnings, the Company believes the benefits of this deferred tax asset will be realized.

In assessing the realizability of all of the deferred tax assets, management considers whether some portion or all of the deferred tax assets will be realized based on a more-likely-than-not standard of judgment. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the Company’s temporary differences become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment. Based upon the projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes that the Company will realize the benefits of these deductible differences and thus has not recorded a valuation allowance.

As of December 31, 2020, the Company has U.S. federal and state NOL carryforwards before the effect of income taxes of $211 million and $315 million, respectively, which have no expiration date. Tax years 2017 through 2020 remain open to examination by the U.S. Internal Revenue Service. The Company and its subsidiaries file tax returns with various state taxing authorities and those returns remain open to examination for tax years 2016 through 2020.