Note 10 - Income Taxes

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

(in thousands)	Year Ended December 31, 2015			Year Ended December 31, 2014
Federal - current	$	-		$	(19,179	)
State - current		140			(16,683	)
Total current		140			(35,862	)
Federal - deferred		(1,365	)		(10,200	)
State - deferred		(205	)		(324	)
Change in valuation allowance		1,570			10,524
Total deferred		-			-
Income tax expense (benefit)	$	140		$	(35,862	)

The components of pretax income (loss) and the difference between income taxes computed at the statutory federal rate and the provision for income taxes are as follows:

(in thousands)	Year Ended December 31, 2015			Year Ended December 31, 2014

Income (loss) before income taxes	$	(4,485	)	$	(21,441	)
Tax expense (benefit) :
Tax at statutory federal rate	$	(1,570	)	$	(7,504	)
State income taxes		140			183
Federal uncertain tax position reversal		–			(19,179	)
State uncertain tax position reversal		–			(16,866	)
Permanent items		–			(3,020	)
Other		-			-
Change in valuation allowance		1,570			10,524
Income tax expense (benefit)	$	140		$	(35,862	)

A reconciliation of the United States federal statutory rate to the Company's effective income tax rate is as follows:

	Year Ended December 31, 2015		Year Ended December 31, 2014
Tax at statutory federal rate	35.0	%	35.0		%
State income taxes	(3.1)		(0.9)
Federal uncertain tax position reversal	-		89.5
State uncertain tax position reversal	-		78.7
Permanent difference, tax credits and other adjustments	-		14.1
Other	-		-
Change in valuation allowance	(35.0)		(49.1)
Effective income tax rate	(3.1)	%	167.3	)	%

The Company has not been notified of any other potential tax audits by any federal, state or local tax authorities. The Company believes the statutes of limitations for the assessment of additional federal and state tax liabilities are generally closed for tax years prior to 2012. Interest and/or penalties related to underpayments of income taxes, or if applicable on uncertain tax positions, would be included as a component of income tax expense (benefit). The accompanying financial statements do not include any amounts for penalties.

State income tax amounts for the year ended December 31, 2015 reflects a provision for a minimum tax on capital imposed by the state jurisdictions.

For the year ended December 31, 2014, the Company recorded an income tax benefit attributable to a current federal benefit and a current state benefit which reflected the reversal of the Company's previously recorded uncertain tax position reserve, plus accrued interest as a result of the IRS's completion of the Company's 2012 federal income tax return examination with no changes to the tax return as filed. Included in the income tax benefit for the year ended December 31, 2014, is an income tax expense attributable to a provision for a minimum tax on capital imposed by the state jurisdictions.

Pursuant to the accounting principles with regard to recognition of uncertain tax positions, (ASC 740-10, Accounting for Income Taxes), the Company had been required to record an uncertain tax position liability to reflect the net tax effect plus accrued interest for potential tax audit adjustments with regard to the Company's 2012 federal income tax return as filed. The Company had recorded an indemnification asset – federal tax gross-up to reflect the net amount (excluding accrued interest) of the federal uncertain tax position reserve recognized. A portion of the uncertain tax position reserve was attributable to certain state taxes on the Settlement Amount which were not reimbursable to the Company as part of the Settlement Agreement. In December 2014, the IRS completed their review of the examination of the Company's 2012 federal income tax return with no change to the tax return as filed. As a result, the Company, in December 2014, recorded a reversal of the indemnification asset – federal tax gross-up and the reversal of the uncertain tax position reserve, as noted in the tables herein. The Company believes that if any additional federal tax had been owed as a result of any adjustments, these potential amounts would be reimbursable to the Company pursuant to the tax gross-up provision of the Settlement Agreement

A roll forward of the uncertain tax positions reserve, excluding accrued federal and state interest is as follows:

(in thousands)	December 31, 2015		December 31, 2014
Uncertain tax position reserve excluding accrued interest, at beginning of period	$	-	$	34,157
Federal uncertain tax position reserve excluding accrued interest		-		(18,429	)
State uncertain tax position reserve excluding accrued interest		-		(15,728	)
Uncertain tax position reserve excluding accrued interest, at end of period	$	-	$	-

The utilization of certain carryforwards and carrybacks is subject to limitations under U.S. federal income tax laws. Based on the Company's federal tax returns as filed and to be filed, the Company estimates it has federal NOL carryforwards and federal alternative minimum tax credit carryforwards ("AMT Credits") available to reduce future federal taxable income which would expire if unused, as indicated below.

The federal NOL carryforwards as of December 31, 2015 are as follows:

Tax Year Originating	Tax Year Expiring	Amount

2006	2026	$	500,000
2007	2027		12,700,000
2008	2028		4,600,000
2009	2029		2,400,000
2010	2030		1,900,000
2011	2031		1,900,000
2013	2033		3,700,000
2014	2034		4,900,000
2015	2035		2,700,000
		$	35,300,000

In addition, the Company has alternate minimum tax credit carryforwards ("AMT Credits"), which are not subject to expiration, as follows:

		Amount
AMT Credits		$	21,000,000

Based on the Company's state tax returns filed or to be filed, the Company estimates it has state NOL carryforwards to reduce future state taxable income, which would expire if unused.

The state NOL carryforwards as of December 31, 2015 are as follows:

Tax Year Originating	Tax Year Expiring	Amount

2011	2031	$	1,900,000
2013	2033		3,400,000
2014	2034		4,700,000
2015	2035		2,600,000
		$	12,600,000

The Company has calculated a net deferred tax asset arising primarily from NOL carryforwards and AMT credits as follows.

	December 31, 2015			December 31, 2014
Net deferred tax asset	$	34,500,000		$	32,900,000
Valuation allowance		(34,500,000	)		(32,900,000	)
Net deferred tax asset recognized	$	-		$	-

A valuation allowance has been established for the entire net deferred tax asset, as management, at the current time, has no basis to conclude that realization is more likely than not. At the current time management does not believe that any significant changes in unrecognized income tax benefits are expected to occur over the next year.