Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.1.9
Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Income Taxes
 
The provision for or benefit from income taxes on continuing operations for the years ended December 31, 2014 and 2013 is comprised of the following:

 
2014
 
2013
Current:
 
 
 
Federal
$
—

 
$
—

State
297

 
180

Total current
297

 
180

Deferred:
 
 
 

Federal
(4,686
)
 
—

State
(349
)
 
—

Total deferred
(5,035
)
 
—

(Benefit) Provision for income taxes
$
(4,738
)
 
$
180



During 2014, in conjunction with the accounting associated with the RedPath acquisition described in Note 3, Acquisitions, the Company recorded a net deferred tax liability related to the book and tax basis difference of the underlying RedPath assets. The net deferred tax liability will serve as reversible temporary differences that will give rise to future taxable income and, accordingly, serve as a source of income that permits the recognition of certain existing deferred tax assets of the Company. Solely on this basis, management determined that it is more likely than not that a portion of its valuation allowance was no longer required. As a result of the release of the valuation allowance, the Company recorded a tax benefit of $5.0 million in the consolidated statement of operations for the year ended December 31, 2014. In addition to the benefit of the release of the valuation allowance, the Company recorded for the year ended December 31, 2014 a current provision of $0.3 million for income taxes on current income and a benefit of $44,000 related to the realization of current year losses in certain state jurisdictions.

The Company performs an analysis each year to determine whether the expected future income will more likely than not be sufficient to realize the deferred tax assets.  The Company's recent operating results and projections of future income weighed heavily in the Company's overall assessment.  As a result of this analysis, the Company continues to maintain a full valuation allowance against its federal and state net deferred tax assets at December 31, 2014 as the Company believes that it is more likely than not that these assets will not be realized. The tax effects of significant items comprising the Company’s deferred tax assets and (liabilities) as of December 31, 2014 and 2013 are as follows:

 
2014
 
2013
Deferred tax assets included in other current assets:
 
 
 
Allowances and reserves
$
4,769

 
$
1,217

Compensation
3,637

 
4,010

Valuation allowance on deferred tax assets
(7,046
)
 
(5,227
)
Current deferred tax assets
$
1,360

 
$
—

Noncurrent deferred tax assets and liabilities:
 
 

State net operating loss carryforwards
$
5,534

 
$
4,774

Federal net operating loss carryforwards
41,466

 
31,253

Credit carryforward
150

 
—

State taxes
1,124

 
1,124

Self insurance and other reserves
509

 
294

Property, plant and equipment
2,332

 
2,196

Intangible assets
(5,746
)
 
8,269

Other reserves - restructuring
181

 
391

Deferred revenue
5

 
6

Valuation allowance on deferred tax assets
(48,080
)
 
(48,307
)
Noncurrent deferred tax liabilities, net
$
(2,525
)
 
$
—



The Company's current deferred tax asset and noncurrent deferred tax liability are included within Other current assets and Other long-term liabilities, respectively, within the consolidated balance sheet as of December 31, 2014. Federal tax attribute carryforwards at December 31, 2014, consist primarily of approximately $118.5 million of federal net operating losses.  In addition, the Company has approximately $120.0 million of state net operating losses carryforwards.  The utilization of the federal carryforwards as an available offset to future taxable income is subject to limitations under federal income tax laws.  If the federal net operating losses are not utilized, they begin to expire in 2027, and current state net operating losses not utilized begin to expire this year.
 
A reconciliation of the difference between the federal statutory tax rates and the Company's effective tax rate from continuing operations is as follows:
 
 
2014
 
2013
Federal statutory rate
35.0
 %
 
35.0
 %
State income tax rate, net of Federal tax benefit
0.8
 %
 
0.3
 %
Meals and entertainment
(0.1
)%
 
(2.3
)%
Valuation allowance
1.1
 %
 
(35.9
)%
Other non-deductible
(3.2
)%
 
(1.3
)%
Other taxes
—
 %
 
—
 %
Net change in Federal and state reserves
—
 %
 
—
 %
Effective tax rate
33.5
 %
 
(4.2
)%

 
The following table summarizes the change in uncertain tax benefit reserves for the two years ended December 31, 2014:

 
Unrecognized
 
Tax Benefits
Balance of unrecognized benefits as of January 1, 2013
$
1,117

Additions for tax positions related to the current year
—

Additions for tax positions of prior years
—

Reductions for tax positions of prior years
—

Balance as of December 31, 2013
$
1,117

Additions for tax positions related to the current year
—

Additions for tax positions of prior years
—

Reductions for tax positions of prior years
—

Balance as of December 31, 2014
$
1,117



As of December 31, 2014 and 2013, the total amount of gross unrecognized tax benefits was $1.1 million in each year.  The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2014 and 2013 was $1.1 million in each year.
 
The Company recognized interest and penalties of $0.2 million related to uncertain tax positions in income tax expense during each of the years ended December 31, 2014 and 2013.  At December 31, 2014 and 2013, accrued interest and penalties, net were $2.2 million and $2.0 million, respectively, and included in the Other long-term liabilities in the consolidated balance sheets.
 
The Company and its subsidiaries file a U.S. Federal consolidated income tax return and consolidated and separate income tax returns in numerous states and local tax jurisdictions.  The following tax years remain subject to examination as of December 31, 2014:
 
Jurisdiction
Tax Years
Federal
2010 - 2014
State and Local
2008 - 2014

To the extent there was a failure to file a tax return in a previous year; the statute of limitation will not begin until the return is filed. There were no examinations in process by the Internal Revenue Service as of December 31, 2014. In 2014, the Company was selected for examination by the Internal Revenue Service for the tax periods ending December 31, 2012 and December 31, 2011.