13. Income Taxes

The Company had taxable income for the years ended December 31, 2013 and 2012, but had no taxable income for the year ended December 31, 2011.

A reconciliation of the statutory U.S. Federal income tax and the income tax provision included in the accompanying consolidated statements of operations is as follows (in thousands):


Year Ended December 31, 2013		Continuing			Discontinued			Total
		Operations			Operations
Statutory rate		34	%		34	%		34	%
Tax (benefit) expense at statutory rate	$	1,689		$	(5	)	$	1,684
State income tax (benefit) expense		255			-			255
Permanent difference		4			-			4
Other		62			(62	)		-
Net change in deferred tax asset valuation allowance		-			190			190
Total income tax provision (benefit)	$	2,010		$	123		$	2,133


Year Ended December 31, 2012		Continuing			Discontinued			Total
		Operations			Operations
Statutory rate		34	%		34	%		34	%
Tax (benefit) expense at statutory rate	$	2,229		$	(1,955	)	$	274
State income tax (benefit) expense		43			-			43
Permanent difference		35			(84	)		(49	)
Other		6						6
Net change in deferred tax asset valuation allowance		-			600			600
Total income tax provision (benefit)	$	2,313		$	(1,439	)	$	874


Year Ended December 31, 2011		Continuing			Discontinued			Total
		Operations			Operations
Statutory rate		34	%		34	%		34	%
Tax (benefit) expense at statutory rate	$	1,787		$	(141	)	$	1,646
State income tax (benefit) expense		215			-			215
Permanent difference		28			14			42
Net change in deferred tax asset valuation allowance		(1,741	)		-			(1,741	)
Total income tax provision (benefit)	$	289		$	(127	)	$	162

Management has evaluated the positions taken in connection with the tax provisions and tax compliance for the years included in these financial statements. The Company believes that all of the positions it has taken will prevail on a more likely than not basis. As such no disclosure of such positions was deemed necessary. Management continuously estimates its ability to recognize a deferred tax asset related to prior period net operating loss carry forwards based on its anticipation of the likely timing and adequacy of future net income.

As of December 31, 2013 and 2012, management determined using the "more likely than not" criteria for recognition that upon sale of the Pipeline asset, the Company would not be able to utilize the state net operating loss carryforwards associated with TPC and the Tennessee oil and gas properties, and therefore established an allowance for these state net operating loss carryforwards. The total valuation allowance at December 31, 2013 and 2012 was $790,000 and $600,000, respectively.

As of December 31, 2011, management determined using the "more likely than not" criteria for recognition that increases in current projections of taxable income were sufficient so the valuation allowance was no longer necessary. Therefore, the $1.7 million valuation allowance was removed.

As of December 31, 2013, the Company had net operating loss carry forwards of approximately $19.7 million which will expire between 2019 and 2031 if not utilized. Our open tax years include all returns filed for 2010 and later. In addition, any of the Company's NOLs for tax reporting purposes are still subject to review and adjustment by both the Company and the IRS to the extent such NOLs should be carried forward into an open tax year.

The Company's deferred tax assets and liabilities are as follows: (in thousands)


	Year Ended December 31,
		2013			2012
Net deferred tax assets - current:
Charitable contribution	$	62		$	-
Bad debt	$	68		$	-
Total deferred tax assets – current	$	130		$	-

Net deferred tax assets (liabilities) – noncurrent:
Net operating loss carryforwards	$	7,723		$	8,550
Oil and gas properties		979			(154	)
Property, Plant and Equipment		(1,562	)		963
Asset retirement obligation		565			517
Tax credits		196			158
Miscellaneous		98			-
Valuation allowance		(790	)		(600	)
Total deferred tax assets – noncurrent	$	7,209		$	9,434

Net deferred tax asset	$	7,339		$	9,434