INCOME TAXES

Provision for/(benefit from) income taxes during the years ended September 30, 2014 and 2013 follows:



	Years Ended
Income Tax Provision	September 30, 2014			September 30, 2013
(in thousands)
Current tax:
State	$	(111	)	$	209
Federal	(44		)	(80		)

Deferred tax:
State	1,279			(557		)
Federal	(503		)	(5,094		)
Provision for/(benefit from) income taxes	$	621		$	(5,522	)

Differences between the federal statutory rate and IEC’s effective tax rates for 2014 and 2013 are explained by the following reconciliation.



	Years Ended
Taxes as Percent of Pretax Income	September 30, 2014		September 30, 2013

Federal statutory rate	(34.0	)%	(34.0	)%

Increase in valuation allowance	74.6	%	—	%
Decrease in state deferred tax rate	12.3	%	—	%
State income taxes, net of federal benefit	(7.6	)%	(2.3	)%
Decrease/(increase) in tax credits	(5.3	)%	(1.3	)%
IRS audit and other federal refunds	(2.3	)%	0.6	%
Other	4.5	%	0.3	%

Income tax provision/(benefit) as percent of pretax income	42.2	%	(36.7	)%

The following table displays deferred tax assets by category:



	Years Ended
Deferred Income Taxes	September 30, 2014			September 30, 2013
(in thousands)
Deferred tax assets:
Net operating loss carryforward	$	5,925		$	5,913
Alternative minimum tax credit carryforward	949			870
Depreciation and fixed assets	1,099			250
Amortization and impairment of intangibles	3,178			3,610
New York State investment tax & other credits	1,186			1,186
Inventories	796			737
Other	679			923
Total before allowance	13,812			13,489
Valuation allowance	(1,554		)	(455		)
Deferred tax assets, net	12,258			13,034

Net deferred income taxes (current and deferred)	$	12,258		$	13,034

IEC has federal net operating loss carryforwards (“NOLs”) for income tax purposes of approximately $16.3 million at September 30, 2014, expiring mainly in years 2021 through 2025, with a small portion expiring in 2034.

At September 30, 2014, the Company also has state NOLs of $27.7 million, expiring mainly in years 2021 through 2025 and $1.2 million of New York State investment tax and other credit carryforwards, expiring in various years through 2028. The credits cannot be utilized until the New York NOL is exhausted. Recent New York state corporate tax reform has resulted in the reduction of the business income base rate for qualified manufactures in New York state to 0% beginning in fiscal 2015 for IEC. As a result of this legislation, it is more likely than not that the New York state NOLs and credits will not be realized. The Company increased the valuation allowance during fiscal 2014 to fully offset all state NOLs and state tax credits. If the NOLs or credits expire unused, the related deferred tax asset and offsetting valuation allowance will be reduced.