NOTE 10: INCOME TAXES

The federal and state components of the provision for income taxes are presented in the following table:


		For the Years Ended December 31,
		2014		2013
		($ in thousands)

Current:
Federal	$	15,894	$	876
State and local		111		22
		16,005		898
Deferred:
Federal		160		463
State and local		22		81
		182		544
Provision for income taxes	$	16,187	$	1,442

Deferred income taxes arise because of differences in the book and tax basis of certain assets and liabilities and tax credit and operating loss carry forwards. Deferred income tax assets and liabilities consist of the following:


		As of December 31,
($ in thousands)		2014			2013

Deferred income tax assets:
Employee pensions and other benefits	$	3,289		$	2,226
State net operating loss carryforwards		1,190			1,040
Equity compensation expense		293			563
Intangible assets		932			785
Other		594			756
Total deferred income tax assets		6,298			5,370

Valuation allowance		(4,247	)		(3,163	)

Deferred income tax liabilities:
Property, plant and equipment		1,962			2,001
Tax amortizable goodwill		723			541
Other		89			206
Total deferred income tax liabilities		2,774			2,748
Net deferred income tax liabilities	$	(723	)	$	(541	)

Based on a current evaluation of expected future taxable income, the Company determined it is not more-likely-than-not that all deferred tax assets will be realized. Therefore, the Company maintained a valuation allowance against its deferred tax assets as of December 31, 2014 and 2013.

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 of the appropriate character during the periods in which those temporary differences become deductible and the tax credits and loss carryforwards are available to reduce taxable income. In making its assessment, the Company considered all sources of taxable income including carryback potential, future reversals of existing deferred tax liabilities, prudent and feasible tax planning strategies, and lastly, objectively verifiable projections of future taxable income exclusive of reversing temporary differences and carryforwards. At December 31, 2014 and 2013, the Company concluded that its existing deferred tax liabilities represented a source of taxable income to realize its deferred tax assets, exclusive of the deferred tax liability associated with tax amortizable goodwill. At December 31, 2014 and 2013, projections of future taxable income did not provide an additional source of income in the evaluation of the realization of deferred tax assets. Carryback potential and prudent and feasible tax planning strategies did not provide a source of taxable income in either 2014 or 2013. The Company will continue to assess all available evidence during future periods to evaluate the realization of its deferred tax assets.

The following summarizes the changes in the Company's valuation allowance on deferred tax assets for the period indicated:


		2014		2013


Balance at the beginning of the period	$	3,163	$	3,198
Amounts charged to expense		160		874
Other increases (decreases)		924		(909	)
Balance at the end of the period	$	4,247	$	3,163

For the year ended December 31, 2014, the net increase in the Company's deferred tax assets related principally to its unfunded postretirement liability and the corresponding increase to the valuation allowance has been recorded within other comprehensive income/(loss). The Company recorded a charge to income of $0.2 million to increase the valuation allowance on the remaining net deferred tax assets at December 31, 2014.

For the year ended December 31, 2013, the net decrease in the Company's deferred tax assets related principally to its unfunded postretirement liability and the corresponding decrease to the valuation allowance has been recorded within other comprehensive income/(loss). The Company recorded a charge to income of $0.9 million to increase the valuation allowance on the remaining net deferred tax assets at December 31, 2013.

The difference between tax expense (benefit) and the amount computed by applying the statutory federal income tax rate (34%) to income (loss) before income taxes is as follows:


		Years Ended December 31,
($ in thousands)		2014			2013


Statutory rate applied to pre-tax income	$	15,967		$	271
Add (deduct):
State income taxes, net		(119	)		192
Valuation allowance		160			874
Equity compensation write-off		108			94
Permanent differences and other		71			11
Income taxes	$	16,187		$	1,442

Accounting for uncertainty in income taxes requires uncertain tax positions to be classified as non-current income tax liabilities unless they are expected to be paid within one year. The Company has concluded that there are no uncertain tax positions requiring recognition in its consolidated financial statements as of December 31, 2014 and 2013.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. For the years ended December 31, 2014 and 2013, there was no interest expense relating to unrecognized tax benefits.

The Company had state net operating loss carry-forwards in the amount of approximately $21.8 million as of December 31, 2014. These losses expire through 2034.

The Company and its subsidiaries file a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the years 2011 and thereafter State income tax returns are generally subject to examination for a period of 3 to 5 years after filing the respective return. The impact of any federal changes on state returns remains subject to examination by the relevant states for a period of up to one year after formal notification to the states. The Company is currently under audit in the state of New Jersey for the years ended December 31, 2009 through December 31, 2012.