Bristow Group Inc. 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, 2015

For financial reporting purposes, income (loss) before income taxes and equity earnings for the years ended December 31, 2015, 2014 and 2013 were as follows (in thousands):



	2015			2014		2013
U.S.	$	27,699		$	22,631	$	29,149
Foreign	(3,740		)	—		—
Total	$	23,959		$	22,631	$	29,149

The components of income tax expense (benefit) for the years ended December 31, 2015, 2014 and 2013 were as follows (in thousands):



	2015			2014		2013
Current:
Federal	$	(70	)	$	—	$	3,758
State	63			15		91
Foreign	(76		)	1,220		742
Total current	(83		)	1,235		4,591
Deferred:
Federal	13,977			6,870		5,912
State	364			180		1,224
Foreign	(141		)	—		—
Total deferred	14,200			7,050		7,136
Income tax expense	$	14,117		$	8,285	$	11,727

The following table reconciles the difference between the statutory federal income tax rate for the Company and the effective income tax rate for the years ended December 31, 2015, 2014 and 2013:



Provision (benefit):	2015		2014		2013
Statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal tax benefit	(0.1	)%	0.8	%	1.7	%
Valuation allowance	1.8	%	0.1	%	2.7	%
Transfer of asset to Hauser	4.0	%	—	%	—	%
Write-off of deferred tax asset upon consolidation of Aeróleo	16.0	%	—	%	—	%
Other	2.2	%	0.7	%	0.8	%
	58.9	%	36.6	%	40.2	%

The components of net deferred income tax liabilities as of December 31, 2015 and 2014 were as follows (in thousands):



	2015			2014
Deferred tax liabilities:
Property and equipment	$	232,835		$	222,521
Buy-in on maintenance contracts	1,990			2,488
Other	1,552			—
Total deferred tax liabilities	236,377			225,009
Deferred tax assets:
Equipment leases	355			496
State NOL	7,414			6,857
Other	—			3,431
Valuation allowance	(1,240		)	(806		)
Total deferred tax assets	6,529			9,978
Net deferred tax liabilities	$	229,848		$	215,031

As of December 31, 2015 and 2014, the Company had state income tax net operating loss ("NOL") carryforwards of $125.2 million and $117.0 million, respectively, in various states and $34.3 million and $17.6 million for foreign jurisdictions. The state NOL carryforwards will expire from 2019 to 2035, and the foreign NOL carryforwards have unlimited carryforward periods.

After considering all available evidence in assessing the need for the valuation allowance, the Company believes that it is more likely than not the benefit from foreign and some state deferred tax assets will not be realized. As of December 31,2015, the Company has provided a valuation allowance of $1.2 million on the state deferred tax assets. The Company has provided a valuation allowance of $11.4 million with respect to the foreign deferred tax assets of which $11.2 million relates to Aeróleo and is not included in the Company’s deferred rollforward table. If the assumptions change and the Company determines it will be able to realize those deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets would be recorded in the income tax provision in the period in which such adjustments are identified.

The Company’s operations are subject to the jurisdiction of multiple tax authorities, which impose various types of taxes on it including income taxes. Determining taxes owed in any jurisdiction requires the interpretation of relevant tax laws, regulations, judicial decisions and administrative interpretation of the local tax authority. As a result, the Company is subject to tax assessments in such jurisdictions including the re-determination of taxable amounts by tax authorities that may not agree with the Company’s interpretations and positions taken.

The effects of a tax position are recognized in the period in which it is determined that it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. We remain subject to examination for U.S. federal and major state tax jurisdictions for tax years after 2013 and in Brazil for 2011 and subsequent years.

Pursuant to a new shareholders’ agreement entered into on October 1, 2015 with the Company’s new partner in Aeróleo (see Note 4), the Company is the primary beneficiary, and Aeróleo is now a consolidated entity. The Company has analyzed filing positions of Aeróleo in Brazil where it is required to file income tax returns for all open tax years (2011 to 2015).

A reconcilication of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):



	2015
Unrecognized tax benefits at the beginning of the year	$	—
Increases due to the consolidation of Aeróleo	648
Unrecognized tax benefits at the end of the year	$	648

Amounts accrued for interest and penalties associated with unrecognzied income tax benefits are included in other expense on the Consolidated Statements of Operations. As of December 31, 2015, the gross amount of liability for accrued interest and penalties related to unrecognized tax benefits was $0.6 million. The Company is not currently aware of any material amounts included as unrecognized tax benefits at December 31, 2015 that, if recognized, would impact the Company’s future effective income tax rate. While amounts could change in the next twelve months, we do not anticipate it having a material impact on our financial statements.