2019 BBNC Annual Report | Page 71

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the effect of available carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Corporation will realize the benefits of these deductible differences and carryforwards. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. The Corporation has an income tax receivable at March 31, 2019, of $7,080,846 included in prepaid expenses and refundable taxes. During 2019, the Corporation determined tax basis in its Snake Lake Quarry and recognized a tax benefit of $758,985, net of depletion from extraction of materials in 2018 and 2019. During 2018, the Corporation sold the oil and gas rights on 47,170 acres for $155,000 and recognized a loss of approximately $246,145,000 for tax purposes. The tax loss offset 2018 taxable income and generated federal and state net operating losses of approximately $190,743,000 and $172,865,000, respectively. A portion of the unrecognized tax benefit related to the sale of ANCSA subsurface properties has been presented in the financial statements as a reduction of the deferred tax asset for net operating losses. During 2018, the Corporation recorded a tax benefit related to its FY2015 contribution of $10,779,000 to the BBNC Elders’ Trust as a result of the Tax Cuts and Jobs Act signed into law on December 22, 2017. In addition, the Corporation recorded tax benefits related to research credits for fiscal years ending March 31, 2014 through 2019 for federal and state returns. A portion of the unrecognized tax benefit related to research credits has been presented in the financial statements as a reduction of the deferred tax asset for research credits. The Corporation extended the statute of limitations for year ended March 31, 2016 to June 30, 2020 and has been notified the IRS is reviewing the refund claims filed for the Elders’ Trust contribution and research credits. There are no other extensions of the normal statute of limitations period for IRS examinations. Unrecognized tax benefits amounts to $81.9 million at March 31, 2019. At March 31, 2019, the Corporation has net operating loss carryforwards for federal and state of Alaska income tax purposes of $130,246 and $61,688, respectively, which are available to offset future federal and state of Alaska taxable income indefinitely. At March 31, 2019, the Corporation also has settlement trust contribution carryforwards for federal and state of Alaska income tax purposes of $12,847 which are available to offset future federal and state of Alaska taxable income through 2034. The Corporation’s policy is to recognize the tax basis of an ANCSA asset when either a sale or first commercial devel- opment occurs. As of March 31, 2019 and 2018, the Corporation has ANCSA assets where the tax basis has been determined and there are no current plans for sale or commercial development. If the tax basis of these assets were recognized, gross deferred tax assets would increase by approximately $40.6 million and a valuation allowance would be established also in the amount of $40.6 million. M anagement ' s D iscussion and A nalysis 69