NOTE 9 – INCOME TAXES

The provision for income taxes from continuing operations is comprised of:


	Years ended December 31,
	2014			2013			2012
Current:
Federal	$	7,616		$	5,289		$	1,213
State		1,369			677			194

		8,985			5,966			1,407
Deferred:
Federal		(676	)		(1,554	)		(794	)
State		298			(196	)		(58	)

		(378	)		(1,750	)		(852	)

Total tax expense	$	8,607		$	4,216		$	555

The reconciliation between our effective tax rate on net income (loss) from continuing operations and the federal statutory rate is as follows:


	Years ended December 31,
	2014					2013					2012
Income tax at federal statutory rate	$	7,905		35.0	%	$	3,799		35.0	%	$	(1,309	)	35.0	%
Stock Compensation		—		0.0	%		(97	)	(0.9	%)		1,581		(42.3	%)
Section 199 Deduction		(694	)	(3.1	%)		(454	)	(4.2	%)		(268	)	7.2	%
Other permanent items		(272	)	(1.2	%)		7		0.1	%		262		(7.0	%)
Change in valuation allowance		585		2.6	%		647		6.0	%		214		(5.7	%)
Interest and penalties on uncertain tax positions		—		0.0	%		—		0.0	%		56		(1.5	%)
State income taxes, net of federal benefit		1,083		4.8	%		314		2.9	%		19		(0.5	%)

Total tax expense	$	8,607		38.1	%	$	4,216		38.9	%	$	555		(14.8	%)

Components of the net deferred tax asset or liability are as follows:


	At December 31,			At December 31,
	2014			2013
Deferred Tax Assets
Current
Accruals, prepaid items and allowances	$	208		$	86
Inventories		75			55

Current deferred tax assets		283			141
Long-term
Property and equipment		1			1
Net operating loss carryforwards		1,925			1,297

Long-term deferred tax assets		1,926			1,298

Total deferred tax assets		2,209			1,439
Less: Valuation allowance		(1,506	)		(885	)

Net deferred tax assets		703			554
Deferred Tax Liabilities
Current
Accruals, prepaid items and allowances		(26	)		(29	)
Other		(59	)		(67	)

Current deferred tax liabilities		(85	)		(96	)
Long-term
Property and equipment		(327	)		(86	)
Intangibles		(783	)		(374	)
Investment in partnership		(9,206	)		(9,554	)

Long-term deferred tax liabilities		(10,316	)		(10,014	)

Total deferred tax liabilities		(10,401	)		(10,110	)

Net deferred tax liabilities	$	(9,698	)	$	(9,556	)

As of December 31, 2014, we have federal and state income tax net operating loss (NOL) carryforwards of $1,925, the earliest of which expires in 2030.

Valuation Allowance

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets on a jurisdiction and by tax filing entity basis. A significant piece of objective negative evidence evaluated is cumulative losses incurred over the most recent three year period. Such objective evidence limits the ability to consider other subjective positive evidence such as our projections for future growth.

Based on this evaluation, a valuation allowance has been recorded as of December 31, 2014 and 2013 for the net deferred tax assets recorded on certain of our wholly owned subsidiaries. Such deferred tax assets relate primarily to net operating losses that are not more likely than not realizable. However, the amount of the deferred tax asset considered realizable could be adjusted if estimate of future taxable income during the carryforward period change, or if objective negative evidence in the form of cumulative losses is no longer present. Additional weight may be given to subjective evidence such as our projections for growth in this situation.

Uncertain Tax Positions

We are subject to taxation in the United States and various state jurisdictions. As of December 31, 2014, our tax years for 2011 through 2013 are subject to examination by the tax authorities. A rollforward of the gross unrecognized tax benefits is as follows:


Unrecognized tax benefit, January 1, 2013	$	1,365
Increase as a result of tax positions taken during the period		891
Decrease as a result of tax positions taken during the period		(945	)

Unrecognized tax benefit, December 31, 2013		1,311
Increase as a result of tax positions taken during the period		2,545
Decrease as a result of tax positions taken during the period		(1,039	)

Unrecognized tax benefit, December 31, 2014	$	2,817

The amount of unrecognized tax benefits at December 31, 2014 that would affect the effective tax rate is $1,755. Interest expense and penalties accrued related to uncertain tax positions for the year ended December 31, 2014 are $215.

We expect a decrease to the amount of unrecognized tax benefits (exclusive of penalties and interest) within the next twelve months ranging from zero up to $1,669. This decrease relates to temporary items.

Determining uncertain tax positions and the related estimated amounts requires judgment and carries estimation risk. If future tax law changes or interpretations should come to light, or additional information should become known, our conclusions regarding unrecognized tax benefits may change.