Income Taxes

9 Months Ended

Sep. 30, 2014

Income Taxes [Text Block]

11. Income Taxes

For the three and nine month periods ended September 30, 2014, the Company did not report an income tax provision or benefit compared to an income tax benefit of approximately $3.0 million and $8.0 million for the three and nine month periods ended September 30, 2013, respectively. The following table summarizes the components of the Company’s income tax provision (benefit) for the three and nine months ended September 30, 2014 and 2013:

		Three months		Three month			Nine months		Nine months
		ended		ended			ended		ended
		September 30,		September 30,			September 30,		September 30,
		2014		2013			2014		2013
Federal:
Current	$	-	$	20		$	-	$	20
Deferred		-		(2,726	)		-		(7,157	)
Total		-		(2,706	)		-		(7,137	)
State:
Current		-		-			-		-
Deferred		-		(320	)		-		(839	)
Total	$	-	$	(3,026	)	$	-	$	(7,976	)

As of September 30, 2014 management of the Company used the guidelines contained in ASC 740 and evaluated the positive and negative evidence available to determine whether a valuation allowance against the deferred tax assets should be established. Management has determined that the Company’s negative evidence of a cumulative loss position after significant permanent differences and the lack of future taxable income based on current conditions regarding the Troy Mine outweighed the positive evidence. Management believes that it is more likely than not the deferred tax assets will not be recovered. Therefore a valuation allowance equal to 100% of the deferred tax assets has been recorded.

The income tax provision (benefit) for the three and nine months ended September 30, 2014 and 2013 varies from the statutory rate primarily because of the change in valuation allowance for net deferred tax assets and depletion. The Company has estimated an effective tax rate of zero for 2014.

The Company has U.S. net operating loss carry forward of $44.0 million that expires at various dates between 2019 and 2034. Montana state net operating losses of $34.0 million expire at various dates between 2014 and 2021. The Company has a net capital loss carry forward of approximately $1.5 million that expires in 2017 and 2018.

As a result of the reorganization of the Canadian company to a U.S. company, the Canadian net operating loss of approximately $10.7 million was forfeited upon the reorganization. Therefore, the Company’s deferred tax asset and valuation allowance has been reduced by approximately $2.8 million.