7.  Income Taxes

Our income tax benefit for the three months ended March 31, 2017 and 2016 was $7.6 million and $4.9 million, respectively.  Our annualized effective tax rate for both periods was not meaningful.  The income tax benefit for both periods relates to net operating loss (“NOL”) carryback claims made pursuant to Internal Revenue Code (“IRC”) Section 172(f) (related to rules for “specified liability losses”), which permit certain platform dismantlement, well abandonment and site clearance costs to be carried back 10 years.

During the three months ended March 31, 2017 and 2016, we did not pay any income tax or receive any income tax refunds of significance.         

 As of March 31, 2017 and December 31, 2016, our valuation allowance was $276.5 million and $290.2 million, respectively, related to Federal, Louisiana and Alabama NOL’s and other deferred taxes.  Net deferred tax assets were recorded related to NOL’s 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 NOL’s are deductible.  In addition, the realization depends on the ability to carryback certain items to prior years for refunds of taxes previously paid.  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 March 31, 2017 and December 31, 2016, we recorded current income tax receivables of $11.9 million and non-current income tax receivables of $59.8 million and $52.1 million, respectively.  The current income tax receivables primarily relates to our NOL claim for 2016 carried back to 2006.  The non-current income tax receivables relates to our NOL claims for the years 2012, 2013 and 2014 that were carried back to prior years filed on Form 1120X, U.S. Corporation Income Tax Return and to an estimated NOL claim for 2017 that is expected to be filed subsequent to December 31, 2017.  These carryback claims are made pursuant to IRC Section 172(f) described above.  The refund claims filed on Form 1120X will require a review by the Congressional Joint Committee on Taxation and are accordingly classified as non-current.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense.  During the three months ended March 31, 2017 and 2016, we recorded immaterial amounts of accrued interest expense related to our unrecognized tax benefit.

The tax years 2013 through 2016 remain open to examination by the tax jurisdictions to which we are subject.