Annual report pursuant to section 13 and 15(d)

INCOME TAXES

v2.4.0.8
INCOME TAXES
 12 Months Ended
Dec. 31, 2013
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 11
INCOME TAXES

The components of current and deferred federal and state income tax (benefit) expense for continuing operations for the years ended December 31, consisted of the following (in thousands):

 
  
2013
    
2012
  
Federal income tax benefit - current
  
$
(144
)
  
$
(2,107
)
Federal income tax (benefit) expense - deferred
    
(1,989
)
    
11
  
State income tax expense - current
    
158
      
191
  
State income tax expense (benefit)  - deferred
    
1,350
      
(246
)
Total income tax benefit
  
$
(625
)
  
$
(2,151
)

We had temporary differences and net operating loss carry forwards from both our continuing and discontinued operations, which gave rise to deferred tax assets and liabilities at December 31, as follows (in thousands):
 
Deferred tax assets:
  
2013
    
2012
  
Net operating losses
  
$
6,001
    
$
4,612
  
Environmental and closure reserves
    
2,387
      
4,740
  
Impairment of assets
    
―
      
505
  
Investment
    
(50
)
    
(59
)
Other
    
3,626
      
3,798
  
Deferred tax liabilities:
                
Depreciation and amortization
    
(3,762
)
    
(6,973
)
Goodwill and indefinite lived intangible assets
    
(1,012
)
    
(902
)
Prepaid expenses
    
(20
)
    
(16
)
 
    
7,170
      
5,705
  
Valuation allowance
    
(8,182
)
    
(5,729
)
Net deferred income tax liabilities
    
(1,012
)
    
(24
)
 
An overall reconciliation between the expected tax benefit using the federal statutory rate of 34% and the benefit for income taxes from continuing operations as reported in the accompanying consolidated statement of operations is provided below (in thousands).

 
  
2013
    
2012
  
Tax benefit at statutory rate
  
$
(11,880
)
  
$
(1,847
)
State tax benefit, net of federal benefit
    
(102
)
    
(131
)
Permanent items
    
166
      
110
  
Non-deductible Goodwill
    
9,471
      
―
  
Other
    
125
      
(100
)
Reserve for uncertain tax positions
    
180
      
―
  
Increase (decrease) in valuation allowance
    
1,415
      
(183
)
Income tax benefit
  
$
(625
)
  
$
(2,151
)

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”.  Deferred income tax assets and liabilities are recognized for future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company regularly assesses the likelihood that the deferred tax asset will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred income taxes to an amount that is more likely than not to be realized.  In 2013 and 2012, we determined that it was more likely than not that approximately $8,182,000 and $5,729,000, respectively, of deferred income tax assets would not be realized, and as such, a full valuation allowance was applied against those deferred income tax assets.  Our valuation allowance increased by $1,415,000 and decreased by approximately $183,000 for the years ended December 31, 2013 and 2012, respectively.

We have estimated net operating loss carryforwards (NOLs) for federal and state income tax purposes of approximately $9,715,000 and $53,035,000, respectively, as of December 31, 2013.  These net operating losses can be carried forward and applied against future taxable income, if any, and expire in various amounts starting in 2021.  However, as a result of various stock offerings and certain acquisitions, which in the aggregate constitute a change in control, the use of these NOLs will be limited under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended.  Additionally, NOLs may be further limited under the provisions of Treasury Regulation 1.1502-21 regarding Separate Return Limitation Years.
The Company accounts for uncertainties in income taxes pursuant to ASC 740 (formerly FASB interpretation No. 48, “Accounting for Uncertainties in Income Taxes – an Interpretation of FASB Statement No, 109”) (“FIN 48”).  A reconciliation of the beginning and ending amount of our unrecognized tax expense is summarized as follows (in thousands):

 
  
2013
    
2012
  
Balances at beginning of year
  
$
―
    
$
―
  
Addition related to prior year tax position
    
180
      
―
  
Balances at end of the year
  
$
180
    
$
―
  

Included in the unrecognized tax expense is approximately $26,000 in interest and penalties.