INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

3. INCOME TAXES

In current and prior years, we generated significant federal and state income and alternative minimum tax losses, and these net operating losses (“NOLs”) were carried forward for income tax purposes to be used against future taxable income.

A reconciliation of our effective income tax rate compared to the U.S. federal statutory rate is as follows:

	Year ended December 31, 2016			Year ended December 31, 2015
Provision (benefit) at U.S. federal statutory rate		(34.0	)%		(34.0	)%
State provision (benefit), net of U.S. federal tax		(4.9	)		(4.9	)
Permanent differences		0.2			0.1
Other items		0.2			1.9
Deferred tax valuation allowance		38.5			36.9
Effective income tax rate		0.0	%		0.0	%

Net deferred tax assets consist of the following:

	December 31, 2016			December 31, 2015
Net federal and state operating loss carryforwards	$	20,072,124		$	18,513,698
Impairment of investments		531,470			531,470
Other, net		798,494			795,327
Deferred tax assets		21,402,088			19,840,495
Valuation allowance		(21,402,088	)		(19,840,495	)
Net deferred tax assets	$	—		$	—

At December 31, 2016, we had aggregate federal net operating loss carryforwards of approximately $50,180,000 which expire at various times from 2017 through 2036. A majority of our federal NOLs can be used to reduce taxable income used in calculating our alternative minimum tax liability. We also have state net operating loss carryforwards of approximately $48,618,000 that expire at various times through 2036.

Approximately $4,308,000 of our NOL carryforward remaining at December 31, 2016 was derived from income tax deductions related to the exercise of stock options. The tax effect of these deductions will be credited against capital in excess of par value at the time they are utilized for book purposes, and not credited to income. We will never receive a benefit for these NOLs in our statement of operations.

Changes in the valuation allowance were as follows:

	Year ended December 31, 2016		Year ended December 31, 2015
Balance, beginning of year	$	19,840,495	$	18,210,959
Change in temporary differences		3,167		28,061
Change in net operating and capital losses		1,558,426		1,601,476
Balance, end of year	$	21,402,088	$	19,840,495

Our ability to derive future tax benefits from the net deferred tax assets is uncertain and therefore we continue to provide a full valuation allowance against the assets, reducing the carrying value to zero. We will reverse the valuation allowance if future financial results are sufficient to support a carrying value for the deferred tax assets.

 At December 31, 2016 and December 31, 2015, we had no uncertain tax positions.

We include interest and penalties on the underpayment of income taxes in income tax expense.

We file income tax returns in the United States and Connecticut. Our open tax years for review are fiscal years ended December 31, 2013 through year ended December 31, 2015. The Company’s returns filed with Connecticut are subject to audit as determined by the statute of limitations.