Callon Petroleum Company Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2014

Note 11 - Income Taxes

The Company provides for income taxes at a statutory rate of 35% adjusted for permanent differences expected to be realized, which primarily relate to non-deductible executive compensation expenses and state income taxes. The effective tax rate for the years ended December 31, 2014 and 2013 was 38% and 42%, respectively.

The following table presents Callon’s deferred tax assets and liabilities with respect to its carryforwards and other temporary differences:


	As of December 31,
	2014		2013
Deferred tax asset
Federal net operating loss carryforward	$	86,629	$	70,365
Statutory depletion carryforward		8,876		8,880
Alternative minimum tax credit carryforward		208		208
Asset retirement obligations		1,003		1,024
Other		6,621		7,575
Total deferred tax asset		103,337		88,052
Deferred tax liability
Oil and natural gas properties		54,723		26,412
Other		10,140		32
Total deferred tax liability		64,863		26,444
Net deferred tax asset	$	38,474	$	61,608

If not utilized, the Company’s federal operating loss (“NOL”) carryforwards will expire as follows:



			Year Expiring
	Total		2015-2020		2021-2023		2024-2026		2027-2029		2030-2034
Federal NOL carryforwards	$	247,513	$	—	$	111,415	$	14,408	$	41,379	$	80,311

The Company’s current operations are located in Texas and are subject to the Texas margin tax. The Company has established a full valuation allowance on the tax benefits associated with state net operating loss carryforwards of approximately $171,907, which expire in years through 2034, related to other states in which the Company does not anticipate generating taxable state income. These amounts are not included in the deferred tax summary table above.

The Company had no significant unrecognized tax benefits at December 31, 2014. Accordingly, the Company does not have any interest or penalties related to uncertain tax positions. However, if interest or penalties were to be incurred related to uncertain tax positions, such amounts would be recognized in income tax expense. Tax periods for years 2001 through 2014 remain open to examination by the federal and state taxing jurisdictions to which the Company is subject.

Below is a reconciliation of the reported amount of income tax expense attributable to continuing operations to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.



	For the Year Ended December 31,
Components of income tax rate reconciliation	2014		2013		2012
Income tax expense computed at the statutory federal income tax rate		35%		35%		35%
Percentage depletion carryforward		—%		(8)%		(22)%
State taxes net of federal benefit		1%		4%		6%
Restricted stock and stock options		—%		5%		2%
Section 162(m)		2%		6%		22%
Other		—%		—%		4%
Effective income tax rate		38%		42%		47%



	For the Year Ended December 31,
Components of income tax expense	2014		2013		2012
Current state income tax expense	$	—	$	326	$	110
Deferred federal income tax expense		22,373		2,652		1,777
Deferred state income tax expense		761		126		336
Total income tax expense	$	23,134	$	3,104	$	2,223

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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