INCOME TAXES

The income tax provision (benefit), in thousands, consists of the following for the years ended December 31, 2015 and 2014:



	2015		2014
Federal
Current	$	—	$	—
Deferred	—		—
	—		—
State and Local
Current	13		38
Deferred	—		—
	13		38
	$	13	$	38

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



	2015			2014
Federal income tax at statutory rate	$	(595	)	$	(2,460	)
State and local income taxes, net of federal income tax effect	(77		)	(221		)
Permanent differences	—			—
Increase in deferred tax asset valuation allowance	716			3,035
Other differences	(31		)	(316		)
	$	13		$	38

Significant components of the Company’s deferred tax liabilities and assets, in thousands, as of December 31, 2015 and 2014 are as follows:



	2015			2014
Deferred tax liabilities
Property and equipment	$	(1,459	)	$	(2,131	)
Gross deferred tax liabilities	(1,459		)	(2,131		)
Deferred tax assets
Intangibles and goodwill	2,286			2,535
Accrued property taxes	13			13
Allowance for doubtful accounts	14			41
Inventory capitalization	63			83
Stock options	1,147			1,084
Federal net operating loss carry forward	4,176			3,920
State net operating loss carry forward	1,758			1,659
State recycling equipment tax credit carry forward	4,598			4,604
Interest rate swap	—			4
Inventory valuation reserve	78			—
Accrued expenses	77			223
Other	11			11
Gross deferred tax assets	14,221			14,177
Valuation allowance	(12,665		)	(11,949		)
Net deferred tax assets	$	97		$	97

At December 31, 2015, the Company had 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 our Kentucky state income tax liability which includes the Limited Liability Entity Tax, which is based on gross receipts or gross profits. The Company used the available state tax credits of $7.4 thousand and $16.4 thousand in 2015 and 2014, respectively.

At December 31, 2015, the Company had a Federal net operating loss ("NOL") carry forward of $12.3 million which expires beginning in 2033. The Company also has state NOL carry forwards of $26.9 million as of December 31, 2015. The majority of the state NOL carry forwards relates to losses in Kentucky and 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, the Company considers 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, 2015, 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, 2015 and 2014:



	Year Ended December 31,
	2015		2014
Valuation allowance, beginning of year	$	11,949	$	8,914
Increase in deferred tax asset valuation allowance	716		3,035
Valuation allowance, end of year	$	12,665	$	11,949