5. Income taxes:

While we are a not-for-profit membership corporation formed under the laws of Georgia, we are subject to federal and state income taxation. As a taxable cooperative, we are allowed to deduct patronage dividends that we allocate to our members for purposes of calculating our taxable income. We annually allocate income and deductions between patronage and non-patronage activities and substantially all of our income is from patronage-sourced activities, resulting in no current period income tax expense or current or deferred income tax liability.

Although we believe that treatment of non-member sales as patronage-sourced income is appropriate, this treatment has not been examined by the Internal Revenue Service. If this treatment was not sustained, we believe that the amount of taxes on such non-member sales, after allocating related expenses against the revenues from such sales, would not have a material adverse effect on financial condition or results of operations and cash flows.

We account for income taxes pursuant to the authoritative guidance for accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

The difference between the statutory federal income tax rate on income before income taxes and our effective income tax rate is summarized as follows:


	2015		2014		2013

Statutory federal income tax rate	35.0	%	35.0	%	35.0%
Patronage exclusion	(34.7	%)	(34.4	%)	(33.3%)
Other	(0.3	%)	(0.6	%)	(1.7%)

Effective income tax rate	0.0	%	0.0	%	0.0%

The components of our net deferred tax assets and liabilities as of December 31, 2015 and 2014 were as follows:


		(dollars in thousands)
		2015			2014

Deferred tax assets
Net operating losses	$	29,724		$	29,724
Tax credits (alternative minimum tax and other)		1,198			1,275
Accounting for Rocky Mountain transactions		348,779			348,460
Other assets		107,527			100,203

Deferred tax assets		487,228			479,662
Less: Valuation allowance		(29,724	)		(30,999	)

Net deferred tax assets	$	457,504		$	448,663

Deferred tax liabilities
Depreciation	$	426,173		$	444,139
Accounting for Rocky Mountain transactions		167,907			165,462
Other liabilities		131,454			112,732

Deferred tax liabilities		725,534			722,333

Net deferred tax liabilities		268,030			273,670
Less: Patronage exclusion		(268,030	)		(273,670	)

Net deferred taxes	$	–		$	–

As of December 31, 2015, we have federal tax net operating loss carryforwards and alternative minimum tax credits as follows:


		(dollars in thousands)

Expiration Date		Alternative Minimum Tax Credits		NOLs

2018	$	–	$	61,533
2019		–		10,516
2020		–		4,362
None		1,198		–

	$	1,198	$	76,411

The net operating loss expiration dates start in the year 2018 and end in the year 2020. Due to the tax basis method for allocating patronage and as shown by the above valuation allowance, it is not more likely than not that the deferred tax asset to the net operating losses will be realized. On December 18, 2015, the President signed into law the Protecting Americans from Tax Hikes Act of 2015. The law extends to ability for us to make an election to accelerate AMT credits in lieu of bonus depreciation through 2019. We intend to make this election for tax years ended December 31, 2015 through December 31, 2017 and expect to monetize the entire balance of tax credits by the tax year ended December 31, 2017.

The authoritative guidance for income taxes addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. We may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

We file a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the year 2012 forward. State jurisdictions have statutes of limitations generally ranging from three to five years from the filing of an income tax return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states. Years still open to examination by tax authorities in major state jurisdictions include 2012 forward. We have no liabilities recorded for uncertain tax positions.