INCOME TAXES

The income tax provision (benefit), in thousands, consists of the following for the years ended December 31, 2014 and 2013:



	2014		2013
Federal
Current	$	—	$	(25	)
Deferred	—		(357		)
	—		(382		)
State and Local
Current	38		364
Deferred	—		1,406
	38		1,770
	$	38	$	1,388

A reconciliation of income taxes at the statutory rate to the reported provision (benefit), in thousands, is as follows:



	2014			2013
Federal income tax at statutory rate	$	(2,460	)	$	(4,225	)
State and local income taxes, net of federal income tax effect	(221		)	(371		)
Permanent differences	—			1,140
Increase in deferred tax asset valuation allowance	3,035			4,752
Other differences	(316		)	92
	$	38		$	1,388

Significant components of the Company’s deferred tax liabilities and assets, in thousands, as of December 31, 2014 and 2013 are as follows:



	2014			2013
Deferred tax liabilities
Property and equipment	$	(2,131	)	$	(2,735	)
Gross deferred tax liabilities	(2,131		)	(2,735		)
Deferred tax assets
Intangibles and goodwill	2,535			2,919
Accrued property taxes	13			10
Allowance for doubtful accounts	41			43
Inventory capitalization	83			120
Stock options	1,084			62
Federal net operating loss carry forward	3,920			2,413
State net operating loss carry forward	1,659			1,521
State recycling equipment tax credit carry forward	4,604			4,617
Interest rate swap	4			30
Accrued expenses	223			—
Other	11			11
Gross deferred tax assets	14,177			11,746
Valuation allowance	(11,949		)	(8,914		)
Net deferred tax assets	$	97		$	97

At December 31, 2014, we have deferred recycling equipment state tax credit carry forwards of $4.6 million relating to our shredder purchase which do not expire. This tax credit is limited to 25 percent of our Kentucky state income tax liability which includes the Limited Liability Entity Tax, which is based on gross receipts or gross profits. We used the available state tax credits of $16.4 thousand and $15.0 thousand in 2014 and 2013, respectively.

At December 31, 2014, we have a Federal net operating loss ("NOL") carry forward of $11.5 million which expire beginning in 2033. We also have state NOL carry forwards of $24.7 million as of December 31, 2014. The majority of the state NOL carry forwards relate to losses in Kentucky which expire beginning in 2031.

A deferred tax asset valuation allowance is established if it is “more likely than not” that the related tax benefits will not be realized. In determining the appropriate valuation allowance, we consider the projected realization of tax benefits based on expected levels of future taxable income, considering recent operating losses, available tax planning strategies, reversals of existing taxable temporary differences and taxable income in the state in carry back years. As of December 31, 2014, management determined that only the state recycling equipment tax credit carry forwards would be realized to the extent of $97.0 thousand and reserved all other net deferred tax assets by increasing the related valuation allowance. The state tax credit carry forwards have been reduced to their net realizable value based upon estimates of future gross profits and utilization of the credit in the foreseeable future.

The recorded valuation allowance, in thousands, consisted of the following at December 31, 2014 and 2013:



	Year Ended December 31,
	2014		2013
Valuation allowance, beginning of year	$	8,914	$	4,162
Increase in deferred tax asset valuation allowance	3,035		4,752
Valuation allowance, end of year	$	11,949	$	8,914