Income Taxes
 12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Tax Disclosure
Note 11—Income Taxes
The Company is subject to U.S. federal, state and local income taxes with respect to its allocable share of any taxable income or loss of CRP, as well as any stand-alone income or loss generated by the Company. CRP is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, CRP is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by CRP is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis.
Income tax expenses and benefits included in the Consolidated Statements of Operations are detailed below:
 
Year Ended December 31,
(in thousands)
2019
 
2018
 
2017
Current taxes
 
 
 
 
 
Federal
$
—

 
$
—

 
$
—

State
—

 
—

 
—

 
—

 
—

 
—

Deferred taxes
 
 
 
 
 
Federal
(5,396
)
 
(56,365
)
 
(26,713
)
State
(401
)
 
(3,075
)
 
(3,217
)
 
(5,797
)
 
(59,440
)
 
(29,930
)
 
 
 
 
 
 
Income tax benefit (expense)
$
(5,797
)
 
$
(59,440
)
 
$
(29,930
)

A reconciliation of the statutory federal income tax expense, which is calculated at the federal statutory rate of 21% in 2019 and 2018 and 35% in 2017, to the income tax expense from continuing operations provided for the periods presented, is as follows:
 
Year Ended December 31,
(in thousands)
2019
 
2018
 
2017
Income tax expense at the federal statutory rate
$
(4,646
)
 
$
(57,157
)
 
$
(39,720
)
State income tax expense - net of federal income tax benefits
(401
)
 
(3,075
)
 
(2,788
)
Change in Federal tax rate (net of state benefit)
—

 
—

 
4,425

Noncontrolling interest in partnership
129

 
2,696

 
2,795

Equity based compensation
(780
)
 
(1,825
)
 
241

Nondeductible expenses
(99
)
 
(79
)
 
(31
)
Change in valuation allowance
—

 
—

 
5,148

Income tax benefit (expense)
$
(5,797
)
 
$
(59,440
)
 
$
(29,930
)

The change in the Federal tax rate was due to the passage of Public Law No. 115-97, commonly referred to as the Jobs Act, which was enacted on December 22, 2017. The passage of this legislation resulted in the Company generating a deferred tax benefit primarily due to the reduction in the U.S. statutory rate from 35% to 21%.
The tax effects of temporary differences that give rise to significant positions of the deferred income tax assets and liabilities are presented below:
(in thousands)
December 31, 2019
 
December 31, 2018
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
88,043

 
$
87,196

Capitalized intangible drilling cost
100,307

 
29,159

Interest expense
18,722

 
6,023

Equity-based compensation
8,284

 
3,366

Other assets
295

 
282

Total deferred tax assets
215,651

 
126,026

Deferred tax liabilities:
 
 
 
Investment in CRP
(301,155
)
 
(188,193
)
 
 
 
 
Net deferred tax asset (liability)
$
(85,504
)
 
$
(62,167
)

In connection with the conversion of shares from a noncontrolling interest owner, a tax loss was recorded in equity of $17.5 million in 2019 and a tax benefit was recorded in equity of $7.2 million and $20.0 million, respectively, for 2018 and 2017.
As of December 31, 2019, the Company had approximately $417.4 million and $78.2 million of U.S. federal and state net operating loss carryovers, respectively, which expire variously from 2035 to 2038.
The Company periodically assesses whether it is more-likely-than-not that it will generate sufficient taxable income to realize its deferred income tax assets, including interest limitations and net operating loss carry forwards. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years. Based on when the Company expects existing taxable differences to be realized, management determined that sufficient positive evidence exists as of December 31, 2019 to conclude that it is more-likely-than-not that the remaining deferred tax assets will be realized prior to their expiration.
The calculation of the Company’s tax liabilities involves uncertainties in the application of complex tax laws and regulations. The Company gives financial statement recognition to those tax positions that it believes are more-likely-than-not to be sustained upon the examination by the Internal Revenue Service or other governmental agency. As of December 31, 2019 and 2018, the Company did not have any accrued liability for uncertain tax positions and does not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. Interest and penalties related to uncertain tax positions are reported in income tax expense.
The Company is subject to the following material taxing jurisdictions: U.S., Colorado, New Mexico, and Texas. As of December 31, 2019, the Company has no current tax years under audit. The Company remains subject to examination for federal income taxes and state income taxes for tax years 2016 through 2019.