13. Income Taxes

The provision for income taxes consists of the following:


	Year Ended December 31,
	2014		2013		2012
Deferred:
Federal	$	(894,506)	$	(93,078,760)	$	4,586,506
State and local		(1,582,500)		(6,128,198)		493,946
		(2,477,006)		(99,206,958)		5,080,452
Valuation allowance		2,477,006		99,206,958		(5,080,452)
	$	—	$	—	$	—

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,
	2014		2013		2012
U.S. statutory income tax rate	34.0	%	34.0	%	34	%
State and local taxes, net of federal tax benefit	2.4	%	0.3	%	5.7	%
Permanent differences between book and tax	17.1	%	(26.9)	%	22.1	%
Deferred tax adjustments	(71.9)	%	(151.7)	%	(8.2)	%
State rate adjustments	(29.2)	%	—	%	—	%
Valuation allowance	47.6	%	144.3	%	(53.6)	%
Effective income tax rate	—	%	—	%	—	%

Included in permanent differences between book and tax in the above table are the impacts of the non-deductible mark-to-market activity associated with convertible debt and warrants as well as permanent differences such as nondeductible meals and entertainment. The deferred tax adjustment for the year ended December 31, 2014 is a write-off of a portion of the deferred tax asset related to stock compensation. The deferred tax adjustment for the year ended December 31, 2013 represents the impact of the Section 382 limitation discussed below. The deferred tax adjustment for the year ended December 31, 2012 is a write-off of a portion of the deferred tax asset related to stock compensation and net operating losses due to expiration. The state rate adjustments are a result of changes in apportionment and various state rate law changes.

The components of the deferred tax asset are as follows:


	December 31,
	2014		2013
Current accruals	$	1,416,823	$	1,998,086
Depreciation and amortization		2,302,685		2,566,979
Deferred compensation		1,589,935		5,421,688
Net operating loss carryovers		30,246,136		28,045,831
Deferred tax assets		35,555,579		38,032,584
Valuation allowance		(35,555,579)		(38,032,584)
Net deferred tax assets	$	—	$	—

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. Following significant ownership changes during 2013, the Company initiated a review of the availability of its U.S. net operating loss carryforwards. As a result of this review, it was determined that a large portion of the Company’s net operating loss carryovers would expire unused due to the limitation under IRC Section 382. The Company reduced the net operating loss carryover and corresponding valuation allowance as a result of these limitations as reflected in the net operating loss carryovers in the table above. The remaining net operating loss carryforwards following the ownership change have been assigned a full valuation allowance against all deferred tax assets.

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.

Based on the results of the review, discussed above, as of December 31, 2014, we had gross federal net operating loss carryforwards of approximately $85.0 million. The federal net operating loss carryforwards will expire between 2018 and 2034. As of December 31, 2014, we had state net operating loss deferred tax assets of approximately $1.4 million which will expire at various dates between 2015 and 2034 if not utilized.

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, 2014 accrued interest and penalties were less than $0.1 million.

At December 31, 2014 and 2013, the Company had approximately $0.2 million in reserves for uncertain tax positions.