Income Taxes

Empire and all of its subsidiaries file a consolidated income tax return. At December 31, 2015 and 2014, the estimated deferred income tax assets and liability were comprised of the following:



	(in thousands)
	2015			2014
Deferred tax assets:
Net operating loss carry forwards	$	57,177		$	56,942
Stock—based compensation	6,706			7,636
Development costs	20,101			6,776
Other	2,108			1,301
	86,092			72,655
Deferred tax liability:
Depreciation	—			(551		)
Net deferred tax assets	86,092			72,104
Valuation allowance	(86,092		)	(72,104		)
Deferred tax assets, net	$	—		$	—

The valuation allowance increased approximately $14.0 million and $6.3 million during the years ended December 31, 2015 and 2014, respectively. Of the $144.3 million in net operating loss carry forwards approximately $59.8 million is readily available as of December 31, 2015.

The following is a reconciliation of the federal statutory tax rate to the Company’s effective tax rate:



	Year ended December 31,
	2015		2014		2013
Tax provision at federal statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net	(0.1	)%	—	%	(0.1	)%
Non-deductible interest	(1.2	)%	(11.3	)%	—	%
Permanent items	(2.5	)%	1.8	%	(0.3	)%
Expiration of net operating loss carry forwards	—	%	—	%	—	%
Change in valuation allowance	(31.4	)%	(25.5	)%	(34.7	)%
Other taxes	—	%	—	%	—	%
Non-includable (income) expenses	—	%	—	%	—	%
Effective tax rate	(0.2	)%	—	%	(0.1	)%

There are limits on the Company’s ability to use its current net operating loss carry forwards, potentially increasing the future tax liability of the Company if it were to generate taxable income. As of December 31, 2015, the Company had net operating loss carry forwards of approximately $144.3 million that expire between 2018 and 2035. The 2004 merger of the Company’s operations with Catskills Development LLC and the investment by Kien Huat in 2009 will limit the amount usable in any year of its net operating losses due to the change in control of the Company within the meaning of the tax laws.

As of December 31, 2015, the Company does not have any uncertain tax positions. As a result, there are no unrecognized tax benefits as of December 31, 2015. If the Company was to incur any interest and penalties in connection with income tax deficiencies, the Company would classify interest in the “interest expense” category and classify penalties in the “non-interest expense” category within the consolidated statements of operations.

The Company files tax returns in the U.S. federal jurisdiction and in various states. All of its federal and state tax filings as of December 31, 2014 have been timely filed. The Company is subject to U.S. federal or state income tax examinations by tax authorities for years after 2010. During the periods open to examination, the Company has net operating loss and tax credit carry forwards that have attributes from closed periods. Since these net operating loss and tax credit carry forwards may be utilized in future periods, they remain subject to examination.