Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v2.4.1.9
INCOME TAXES
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
INCOME TAXES
11. INCOME TAXES
 
For the years ended December 31, 2014 and 2013, the income tax provision consists of the following (in thousands):
 
 
 
  
2014
    
2013
  
Current:
Federal
   $ (3,436 )   $ (2,627 )
 
State
     379       289  
        (3,057 )     (2,338 )
Deferred:
Federal
     7,925       1,572  
 
State
     1,119       405  
 
Increase in valuation allowance
     (6,975 )     --  
        2,069       1,977  
      $ (988 )   $ (361 )
 
A reconciliation of the income tax provision relative to continuing operations with amounts determined by applying the statutory U.S. Federal income tax rate of 35% to consolidated income before income taxes is as follows (in thousands):
   
2014
    
2013
  
 
  
Percent
    
Amount
    
Percent
    
Amount
  
Tax provision at U.S. statutory rate
     35.0 %   $ (7,641 )     35.0 %   $ (1,513 )
State taxes, net of federal benefit
     2.6 %     (570 )     (10.9 )%     473  
Change in valuation allowance
     (31.9 )%     6,975       -- %     --  
Permanent differences
     (0.4 )%     92       (13.2 )%     573  
Credits
     -- %     --       1.6 %     (73 )
Adjustments to beginning deferred balances
     (0.2 )%     42       (5.1 )%     221  
Other
     (0.6 )%     114       0.9 %     (42 )
      4.5 %   $ (988 )     8.3 %   $ (361 )
 
At December 31, 2014 and 2013, our deferred tax assets (liabilities) consist of the following (in thousands):
 
 
  
2014
    
2013
  
Deferred tax assets:
            
Deferred compensation
   $ 238     $ 537  
Depreciation of fixed assets
     91       --  
Intangible assets and amortization
     7,249       3,204  
Accrued expenses
     642       427  
                 
Allowance for doubtful accounts
     199       188  
Other
     29       74  
Valuation allowance
     (6,975 )     --  
      1,473       4,430  
Deferred tax liabilities:
                
Depreciation of fixed assets
     (455 )     (627 )
Amortization of indefinite lived intangibles
     (926 )     (1,370 )
Prepaid expenses
     (772 )     (1,460 )
Other
     (246 )     169  
       (2,399 )     (3,288 )
    $ (926 )   $ 1,142  
 
The impairment charges recorded in 2014 and 2013 resulted in a significant amount of deferred tax assets. In assessing our ability to realize our deferred tax assets, we consider 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. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. We assessed the realizability of deferred tax assets and have concluded that it is less likely that we will be able to recognize certain deferred tax assets. Our assessment evaluated this, plus all other positive and negative evidence in determining the need for a valuation allowance. As a result, a valuation allowance of $7.0 million was recorded against federal and certain state deferred tax assets, which also resulted in a tax rate substantially below statutory rates.  As of December 31, 2014, we had $0.9 million of deferred tax liabilities relating to goodwill and other indefinite-lived intangibles for which the timing of the reversal is not determinable and, therefore, does not assure the realization of deferred tax assets or reduce the need for a valuation allowance.
 
Our tax returns resulted in tax losses during 2014 and 2013 which we elected to carryback to taxable income earned during 2012 and 2011 in accordance with IRS rules.  These carrybacks resulted in income tax receivables of $3.1 million and $2.0 million as of December 31, 2014 and 2013, respectively. The impairment charges and the valuation reserve against deferred tax assets have no effect on the actual taxes paid or owed by the Company.
 
When accounting for uncertain tax positions, accounting standards require that tax positions be assessed using a two-step process. A tax position is recognized if it meets a “more likely than not” threshold. It is then measured at the largest amount of benefit that is greater than 50% likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. It is our policy to recognize penalties and interest related to unrecognized tax benefits in the provision for income taxes. Management has made an annual analysis of its state and federal tax returns that remain subject to examination by major authorities (presently consisting of tax years 2011 through 2013) and concluded that we have no recordable liability as of December 31, 2014 or 2013, for unrecognized tax benefits as a result of uncertain tax positions taken.