13. Income Taxes

The Company had taxable income for the years ended December 31, 2015, 2014, and 2013.

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, 2015	Total
Statutory rate		34	%
Tax (benefit) expense at statutory rate	$	(5,906)
State income tax (benefit) expense		(893)
Permanent difference		3
Net change in deferred tax asset valuation allowance		14,147
Total income tax provision (benefit)	$	7,351



Year Ended December 31, 2014	Total
Statutory rate		34	%
Tax (benefit) expense at statutory rate	$	(270)
State income tax (benefit) expense		(40)
Permanent difference		304
Other		—
Net change in deferred tax asset valuation allowance		—
Total income tax provision (benefit)	$	(6)



Year Ended December 31, 2013	Continuing Operations			Discontinued Operations			Total
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

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.

In 2013, 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. At December 31, 2015, the Company recorded a full allowance of the deferred tax asset primarily due to cumulated losses incurred during the 3 years ended December 31, 2015. The total valuation allowance at December 31, 2015 was $15.0 million and $790,000 at December 31, 2014 and 2013.

As of December 31, 2015, the Company had net operating loss carry forwards of approximately $22.9 million which will expire between 2018 and 2032 if not utilized. The Company recognizes the excess income tax benefit associated with certain stock compensation deductions when such deductions produce a reduction in the Company’s current tax liability under the “with” and “without” approach. Due to cumulative net operating loss carryforwards (“NOLs”) that exceeded the excess income tax benefits generated in prior reporting periods, the Company has not recognized the excess benefit of the tax deductions upon the exercise of stock options in any prior reporting period. As of December 31, 2015, the Company’s estimated net operating losses for tax return filing purposes exceeds the gross amount for financial reporting purposes by $1.8 million. The tax effect of this excess tax benefit will be recorded as a reduction to APIC in a future reporting period when the cash benefit is realized. Our open tax years include all returns filed for 2011 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,
	2015		2014
Net deferred tax assets – current:
Bad debt	$	68	$	68
Valuation allowance		(68)
Total deferred tax assets – current	$	—	$	68

Net deferred tax assets (liabilities) – noncurrent:
Net operating loss carryforwards	$	8,963	$	7,173
Oil and gas properties		4,112		(894)
Property, Plant and Equipment		668		711
Asset retirement obligation		870		786
Tax credits		260		202
Miscellaneous		53		95
Valuation allowance		(14,926)		(790)
Total deferred tax assets – noncurrent	$	—	$	7,283

Net deferred tax asset	$	—	$	7,351