19. Income Taxes
|12 Months Ended|
Dec. 31, 2015
|Pro forma financial information|
|19. Income Taxes||
The provision for income taxes for the years ending December 31, 2015 and 2014 consists of the following:
For the year ended December 31, 2015, the Company recorded a deferred tax liability of approximately $7.7 million as a result of intangible assets subject to amortization acquired in our acquisition of Fidelity that are not amortizable for income tax purposes. As a result of the business combination, this recording of the deferred tax liability resulted in a release of $7.7 million of the valuation allowance against the Company's deferred tax assets and has been recorded as an income tax benefit during the year ended December 31, 2015. The tax benefit will be realized as we amortize the intangible assets over their estimated useful lives (See Note 5).
The following reconciles the Federal statutory tax rate to the effective income tax rate for the years ended December 31, 2015 and 2014:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on Managements evaluation, it is more likely than not that the deferred tax asset will not be realized and as such a valuation allowance has been recorded as of December 31, 2015 and 2014.
The components of the Company's deferred tax assets and liabilities consist of the following at December 31, 2015 and 2014:
At December 31, 2015 and 2014, the Company had federal net operating loss carryforwards of approximately $93.0 million and $132.0 million, respectively, which expire in varying amounts through December 31, 2035. Pursuant to Code Sec. 382 of the Internal Revenue Code (the Code), the utilization of net operating loss carryforwards may be limited as a result of a cumulative change in stock ownership of more than 50% over a three year period. The Company underwent such a change and consequently, the utilization of a portion of the net operating loss carryforwards is subject to certain limitations. For the year ended December 31, 2015, the Company evaluated the future utilization of its net operating losses ("NOLs") under Sec. 382 and concluded that it has a limitation in the future utilization of its NOLs of approximately $27 million before they expired. In addition, as a result of this evaluation there was a reduction of NOLs and valuation allowance of approximately $48 million.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef