Annual report pursuant to section 13 and 15(d)

INCOME TAXES

v2.3.0.11
INCOME TAXES
 12 Months Ended
Dec. 31, 2011
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 13
INCOME TAXES

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

   
2011
  
2010
  
2009
 
Federal income tax expense - current
 $2,043  $112  $168 
Federal income tax (benefit) expense  - deferred
  (2,567)  1,717   (2,330)
State income tax expense (benefit) - current
  92   (85)  336 
State income tax (benefit) expense  - deferred
  (523)  102   (160)
Total income tax (benefit) expense
 $(955) $1,846  $(1,986)

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:
 
2011
  
2010
 
Net operating losses
 $4,425  $4,954 
Environmental and closure reserves
  5,047   5,309 
Impairment of assets
  7,679   7,679 
Investment
  197   ― 
Other
  2,946   2,560 
Deferred tax liabilities:
        
Depreciation and amortization
  (9,167)  (8,004)
Prepaid expenses
  (46)  ― 
    11,081   12,498 
Valuation allowance
  (7,360)  (11,944)
Net deferred income tax asset
 $3,721  $554 

An overall reconciliation between the expected tax benefit using the federal statutory rate of 34% and the provision for income taxes from continuing operations as reported in the accompanying consolidated statement of operations is provided below.

   
2011
  
2010
  
2009
 
Tax expense at statutory rate
 $3,682  $1,740  $2,618 
State tax expense (benefit), net of federal benefit
  50   (56)  222 
Previously unrecorded state tax benefit
  ―   (173)  (1,497)
Permanent items
  150   61   175 
Other
  (377)  (1,369)  57 
(Decrease) increase in valuation allowance
  (4,460)  1,643   (3,561)
Income tax expense (benefit)
 $(955) $1,846  $(1,986)

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 2011, 2010 and 2009, we determined that it was more likely than not that approximately $3,721,000, $554,000 and $2,192,000, respectively, of deferred income tax assets will be realized based, primarily, on profitable historic results and projections of future taxable income.  Our valuation allowance increased (decreased) by approximately ($4,460,000), $1,643,000 and ($3,561,000) for the years ended December 31, 2011, 2010, and 2009, respectively.

We have estimated net operating loss carryforwards (NOLs) for federal and state income tax purposes of approximately $6,091,000 and $27,718,000, respectively, as of December 31, 2011.  These net operating losses can be carried forward and applied against future taxable income, if any, and expire in various amounts through 2021.  However, as a result of various stock offerings and certain acquisitions, 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.