Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

(9)         INCOME TAXES

The total provision for income taxes consists of the following:

	Years Ended December 31,
	2013		2012
	(in thousands)
Current Taxes:
Federal	$	—	$	—
State		—		—
Deferred Taxes:
Federal		—		(80	)
State		—		—
Total tax benefit	$	—	$	(80	)

The following is a reconciliation of the reported amount of income tax benefit for the years ended December 31, 2013 and 2012 to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income:

	Years Ended December 31,
	2013			2012
	(in thousands)
Statutory tax benefit	$	(340	)	$	(892	)
Increase (decrease) in valuation allowance
Change in valuation allowance		337			(3,137	)
Effect of subsidiary tax consolidation		—			—
Expiration of capital loss carryforwards		—			9
Expiration of NOL carryforwards		—			4,007
Benefit realized on settlement of unrecognized tax benefit		—			(80	)
Effect of permanent differences and other		3			13
Total tax benefit	$	—		$	(80	)

At December 31, 2013, we had available for U.S. federal income tax reporting purposes, a net operating loss (NOL) carryforward for regular tax purposes of approximately $99 million which expires in varying amounts during the tax years 2018 through 2033, an alternative minimum tax NOL carryforward of approximately $85 million which expires in varying amounts during the tax years 2018 through 2033, and a statutory depletion carryforward of approximately $8 million which can be carried forward indefinitely to offset our future taxable income, subject to certain limitations imposed by the Internal Revenue Code. Additionally, at December 31, 2013, we have a capital loss carryforward of approximately $8 million which will expire during the years 2014 through 2015. Current federal income tax law allows corporations to deduct capital losses only if they offset capital gains. In 2003, we underwent a change in ownership, within the meaning of Internal Revenue Code Section 382, which significantly restricts our ability to utilize our domestic NOLs and capital losses.

The components of our federal deferred income taxes were as follows for the years ended December 31, 2013 and 2012:

	2013			2012
	(in thousands)
Deferred tax assets:
Net operating losses (NOL) carryover	$	33,973		$	33,444
Depletion carryover		3,020			3,020
Share based compensation		48			28
Deferred book liabilities		1			1
Loan origination fees		60			41
Book vs. tax basis in investments		20,683			19,165
Capital loss carryover		2,688			2,688
Total gross deferred tax assets		60,473			58,387
Deferred tax liabilities:
Property and equipment		(824	)		(753	)
Net deferred tax assets		59,649			57,634
Less valuation allowances		(59,649	)		(57,634	)
Deferred tax liabilities, net of valuation allowance	$	—		$	—

Our policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense. The tax years 2010-2013 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which we are subject.  The tax years 2009-2013 also remain open for examination purposes for the Texas Franchise tax.

In May 2006, the Governor of Texas signed into law a Texas margin tax (H.B. No. 3) which restructured the state business tax by replacing the taxable capital and earned surplus components of the current franchise tax with a new “taxable margin” component.  Specifically, we became subject to an entity level tax on the portion of our total revenue (as that term is defined in the legislation) that is generated in Texas beginning in our tax year ending December 31, 2007. The Texas margin tax is imposed at a maximum effective rate of 0.7% of our total revenue that is apportioned to Texas.

In 2009, we recorded an income tax contingency related to an IRS tax examination of $225 thousand, including interest and penalties, in our consolidated financial statements. We settled this contingency during 2012, resulting in a gain realized as an income tax benefit of $73 thousand within our consolidated financial statements during the second quarter 2012. For a complete discussion of the IRS tax contingency, see Note 15 - “Commitments and Contingencies.”

The following table illustrates changes in our gross unrecognized tax benefits (in thousands) for the years ending December 31, 2013 and 2012.

	2013		2012
Unrecognized tax benefits at January 1,	$	—	$	225
Increases for positions taken in current year		—		—
Decreases for positions taken in current year		—		—
Decreases for settlements with taxing authorities		—		(225	)
Decreases for lapses in the applicable statute of limitations		—		—
Unrecognized tax benefits at December 31,	$	—	$	—