Income taxes

12 Months Ended

Dec. 31, 2016

9.	Income taxes

The components of income tax expense are as follows (in thousands):

	Year Ended December 31,
		2016		2015
Current
Federal		$	-	$	-
State and local			54		27
Total current			54		27

For the year ended December 31, 2016 and 2015, current income tax expense related to operations substantially represents minimum state income taxes.

The difference between the benefit for income taxes computed at the statutory rate and the reported amount of tax expense (benefit) from operations is as follows:

	Year ended December 31,
	2016			2015
Federal income tax rate		(34.0	)%		(34.0	)%
State income tax (net of federal effect)		1.7			(4.7	)
Change in valuation allowance		34.3			41.9
Non-deductible expenses		0.6			2.7
Non-taxable income		-			(4.8	)
Effective tax rate		2.6	%		1.1	%

The deferred tax assets and liabilities are summarized as follows (in thousands):

	December 31,
	2016			2015
Deferred tax assets:
Net operating loss carryforwards	$	8,809		$	8,325
Equity-based compensation		1,275			1,237
Tax credit carryforwards		148			148
Accrued compensation		305			369
Accrued liabilities & other		105			113
Gross deferred tax assets		10,642			10,192
Less: valuation allowance		(9,850	)		(9,138	)
Deferred tax assets after valuation allowance		792			1,054


Deferred tax liabilities:
Intangible assets		(784	)		(1,043	)
Other		(8	)		(11	)
Deferred tax liabilities		(792	)		(1,054	)
Net Deferred tax assets	$	-		$	-

A valuation allowance is provided when it is more likely than not that some portion of deferred tax assets will not be realized. The valuation allowance increased by approximately $712,000 and $998,000 respectively, during the years ended December 31, 2016 and 2015 due to increases of net operating loss carryforwards and other deferred tax assets.

The Company files a consolidated federal tax return with its subsidiaries. As of December 31, 2016, the Company has a federal net operating loss carryforward of approximately $21.4 million, which expires from 2031 through 2036, and various state and local net operating loss carryforwards totaling approximately $19.2 (pre-apportioned) and $1.4 (post-apportioned) million, which expire between 2017 and 2036. Approximately $1.3 million of the federal net operating loss carryforward and $8.5 million of the state net operating loss carryforward were acquired from Winthrop. The acquired federal net operating loss carryfoward is limited in its utilization by Section 382 of the Internal Revenue Code due to an ownership change.