13. Income Taxes

The provision for income taxes consists of the following:


	Year Ended December 31,
	2012			2011			2010
Deferred:
Federal	$	4,586,506		$	11,367,771		$	5,650,309
State and local		493,946			1,437,062			464,169
		5,080,452			12,804,833			6,114,478
Valuation allowance		(5,080,452	)		(12,804,833	)		(6,114,478	)
	$	—		$	—		$	—

The provision for income taxes varies from the amount determined by applying the U.S. federal statutory rate to income before income taxes as a result of the following:


	Year Ended December 31,
	2012		2011		2010
U.S. statutory income tax rate	34.0	%	34	%	34	%
State and local taxes, net of federal tax benefit	5.2	%	4.5	%	2.3	%
Permanent differences between book and tax and other	14.4	%	1.5	%	(5.6	)%
Valuation allowance	(53.6	)%	(40.0	)%	(30.7	)%
Effective income tax rate	0	%	0	%	0	%

In assessing the realizability of deferred tax assets, the Company 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 during the periods in which those temporary differences become deductible. The Company considers projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses, and projections for future periods over which the deferred tax assets are deductible, the Company determined that a 100% valuation allowance of deferred tax assets was appropriate. The valuation allowance for deferred tax assets includes amounts for which subsequently recognized tax benefits will be applied directly to contributed capital.

The components of the deferred tax asset are as follows:


	December 31,
	2012			2011
Current accruals	$	1,753,064		$	1,751,515
Depreciation and amortization		2,676,884			2,644,059
Deferred compensation		5,332,415			4,648,719
Net operating loss carryovers		127,477,179			123,114,797
Deferred tax assets		137,239,542			132,159,090
Valuation allowance		(137,239,542	)		(132,159,090	)
Net deferred tax assets	$	—		$	—

As of December 31, 2012, we had federal net operating loss carryforwards of approximately $351.0 million. The federal net operating loss carryforwards will expire between 2018 and 2032. As of December 31, 2012, we had state net operating loss carryforwards of approximately $8.4 million which will expire at various dates between 2013 and 2031 if not utilized. Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. We currently have a full valuation allowance against the deferred tax asset. Our ability to use these losses to offset future taxable income will be limited if we experience an “ownership change” as defined in Section 382 of the Code.

The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. As the Company has a federal Net Operating Loss carryforward from the year ended December 31, 1994 forward, all tax years from 1994 forward are subject to examination. As states have varying carryforward periods, and the Company has recently entered into additional states, the states are generally subject to examination for the previous 10 years or less.

The Company recognizes interest accrued, if any, net of tax and penalties, related to unrecognized tax benefits as components of income tax provision as applicable. As of December 31, 2012, accrued interest and penalties were not material.