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, 2014, 2013 and 2012 are as follows (in thousands):



	2014		2013		2012
Current
Federal	$	—	$	—	$	—
State	—		—		—
Total current	—		—		—

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

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, 2014 and 2013 are as follows (in thousands):



	2014			2013
Deferred income tax assets
Tax over book basis of land inventory	$	15,085		$	15,699
Unrecoverable land development costs	6,222			6,728
Executive incentive compensation	1,338			1,086
Net operating loss carry forward	61,128			50,136
Impairment charges	55,529			67,453
Other	4,061			4,257
Total deferred income tax assets	143,363			145,359
Valuation allowance for deferred tax assets	(129,862		)	(130,232		)
Net deferred income tax assets	13,501			15,127

Deferred income tax liabilities
State tax effect of deferred tax assets	(3,412		)	(4,344		)
Book over tax income recognized on sale of the Ocala Property	(7,751		)	(8,870		)
Tax over book on 4.50% Convertible Notes	(960		)	(621		)
Book over tax basis of depreciable assets	(1,378		)	(1,292		)
Total deferred income tax liabilities	(13,501		)	(15,127		)

Net deferred income tax liability	$	—		$	—

At December 31, 2014, our gross federal and state NOL carryforwards were approximately $142.7 million and $304.1 million, 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 market conditions provided significant evidence supporting the need for a valuation allowance. During 2014, we recognized a decrease of $0.4 million in the deferred tax valuation allowance against net deferred tax assets generated from the pretax loss for the year. As of December 31, 2014, our deferred tax asset valuation allowance was $129.9 million. 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.

No additional income tax benefits were generated from the exercise of share-based compensation during 2014, 2013 and 2012.

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, 2014, 2013 and 2012 is as follows (in thousands):



	2014			2013			2012
Income tax (benefit) expense computed at statutory rate	$	(522	)	$	(3,317	)	$	(31,582	)
State income tax (benefit) expense, net of federal benefit	823			(385		)	(3,388		)
Change in valuation allowance on deferred tax assets	(370		)	3,699			35,050
Prior period adjustments charged to retained earnings	—			—			—
Other	69			3			(80		)
Income tax (benefit) expense	$	—		$	—		$	—

We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are subject to U.S. federal income tax examination for calendar tax years ending 2011 through 2014. Additionally, we are subject to various state income tax examinations for the 2010 through 2014 calendar tax years.

We received income tax payment refunds of $0.0 million and $1.3 million in 2014 and 2013, respectively.