Income Taxes

Income taxes have been provided using the liability method under ASC 740. The liability method is used in accounting for income taxes where deferred income tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences reverse.

The components of income tax expense (benefit) for the years ended December 31, 2013, 2012 and 2011 are as follows:



	2013		2012		2011
Current
Federal	$	—	$	—	$	—
State	—		—		—
Total current	—		—		—

Deferred
Federal	—		—		473
State	—		—		—
Total deferred	—		—		473
Total income tax expense (benefit)	$	—	$	—	$	473

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred income tax assets and liabilities as of December 31, 2013 and 2012 are as follows:



	2013			2012
Deferred income tax assets
Tax over book basis of land inventory	$	14,922		$	14,564
Unrecoverable land development costs	6,359			6,622
Executive incentive compensation	1,030			1,099
Net operating loss carry forward	50,136			33,872
Impairment charges	63,982			74,551
Other	4,031			5,428
Total deferred income tax assets	140,460			136,136
Valuation allowance for deferred tax assets	(130,232		)	(126,533		)
Net deferred income tax assets	10,228			9,603

Deferred income tax liabilities
Book over tax income recognized on sale of the Ocala Property	(8,413		)	(9,118		)
Tax over book on 4.50% Convertible Notes	(589		)	(696		)
Book over tax basis of depreciable assets	(1,226		)	211
Total deferred income tax liabilities	(10,228		)	(9,603		)

Net deferred income tax liability	$	—		$	—

Our gross federal and state NOL carryforwards are approximately $119,300 and $269,800, respectively. Federal NOL carryforwards may be used to offset future taxable income for 20 years and begin to expire in 2030. State NOL carryforwards may be used to offset future taxable income for a period of time ranging from 5 to 20 years, depending on the state, and begin to expire in 2015.

In accordance with ASC 740, we evaluate our deferred tax assets quarterly to determine if valuation allowances are required. ASC 740 requires that companies assess whether valuation allowances should be established based on the consideration of all available evidence using a “more likely than not” standard. During 2008, we established a valuation allowance against our deferred tax assets. Our cumulative loss position over the evaluation period and the uncertain and volatile market conditions provided significant evidence supporting the need for a valuation allowance. During 2013, we recognized an increase of $3,699 in the deferred tax valuation allowance against net deferred tax assets generated from the pretax loss for the year. As of December 31, 2013, our deferred tax asset valuation allowance was $130,232. In future periods, the allowance could be reduced based on sufficient evidence indicating that it is more likely than not that a portion of our deferred tax assets will be realized.

On October 25, 2010, we received notification from the Internal Revenue Service (the “IRS”) that our federal income tax returns for tax years 2004, 2005, 2006 and 2009 were being examined. On February 10, 2012, we agreed with the IRS’s Notice of Proposed Adjustment to the 2009 net operating loss carryback. This adjustment generated an income tax expense of $473 for 2011 with a reduction in the anticipated income tax receivables in the same amount. Income tax receivable as of December 31, 2013 and December 31, 2012 consists of $0 and $1,293, respectively, in anticipated income tax refunds.

In 2006, we sold property we owned in Marion County, Florida to the Board of Trustees of the Internal Improvement Trust Fund of the State of Florida under threat of condemnation. The bulk of the land was transferred in 2006 and the final closing took place in 2007. These transactions and subsequent correspondence with the IRS entitled us to defer payment of income taxes of $24,355 from the gain on these sales until replacement property is sold provided we obtained qualifying replacement property for the Marion County property by December 31, 2010. We believe that we acquired appropriate replacement properties by December 31, 2010. If the IRS determines in the future that some or all of the properties acquired by us as replacement properties do not qualify as replacement properties, we may be required to make an income tax payment plus interest on the value of the portion of the properties determined not to qualify as replacement property.

No additional income tax benefits were generated from the exercise of share-based compensation during 2013, 2012 and 2011.

A reconciliation of income tax expense (benefit) to the expected income tax expense (benefit) at the federal statutory rate of 35% for each of the years ended December 31, 2013, 2012 and 2011 is as follows:



	2013			2012			2011
Income tax (benefit) expense computed at statutory rate	$	(3,317	)	$	(31,582	)	$	(57,893	)
State income tax (benefit) expense, net of federal benefit	(385		)	(3,388		)	(6,521		)
Adjustment to 2009 net operating loss carryback	—			—			—
Change in valuation allowance on deferred tax assets	3,699			35,050			68,961
Prior period adjustments charged to retained earnings	—			—			(4,044		)
Other	3			(80		)	(30		)
Income tax (benefit) expense	$	—		$	—		$	473

We received income tax payment refunds of $1,293 and $0 in 2013 and 2012, respectively.