7.	*Income Taxes*

The components of income tax expense (benefit) are as follows:


	For the Years Ended December 31,
	2015		2014		2013

Current Federal alternative minimum tax (“AMT”) expense	$	303,000	$	92,000	$	42,000
Current state and local tax expense		662,000		254,000		132,000
Deferred Federal tax expense (benefit) (A)		4,962,000		2,118,000		(12,775,000)
Deferred state and local tax expense (benefit)		(513,000)		(4,000)		(1,299,000)

Consolidated income tax expense (benefit), including taxes attributable to discontinued operations (B)		5,414,000		2,460,000		(13,900,000)
Less income tax expense (benefit) attributable to discontinued operations		1,409,000		(382,000)		(230,000)

Income tax expense (benefit) (C)	$	4,005,000	$	2,842,000	$	(13,670,000)

(A)

Includes an AMT (benefit) of $(303,000), $(92,000) and $(1,181,000) in 2015, 2014 and 2013, respectively.

(B)

Includes income tax expense (benefit) attributable to (loss) from discontinued operations.

(C)

Reflects the tax expense (benefit) from continuing operations as reported on the consolidated statements of operations for the periods presented.

The reconciliation of income tax computed at the U.S. Federal statutory rate to income tax expense (benefit) on continuing operations is as follows:


	For the Years Ended December 31,
	2015				2014				2013
	Amount		Percent		Amount		Percent		Amount		Percent

Tax expense (benefit) at U.S. statutory rate	$	4,227,000		35.00%	$	2,610,000		35.00%	$	1,492,000		35.00%
State and local tax expense (benefit), net of Federal impact		494,000		4.09%		194,000		2.60%		86,000		2.01%
Impact of state and local tax rate change net of Federal impact		(714,000)		(5.90%)		27,000		0.36%		110,000		2.58%
Cost (benefit) attributable to valuation allowance, net		—		—		—		—		(150,000)		(3.52%)
Non-deductible items		(2,000)		(0.02%)		11,000		0.15%		9,000		0.21%
Benefit attributable to reduction in allowance against certain deferred tax assets		—		—		—		—		(15,217,000)		(356.94%)

Income tax expense (benefit)	$	4,005,000		33.17%	$	2,842,000		38.11%	$	(13,670,000)		(320.66%)

During 2013, the Company recorded an aggregate deferred Federal, state and local income tax benefit of $15,217,000 from the release of the valuation allowance against certain deferred tax assets. In the fourth quarter of 2013, the Company reversed the valuation allowance recorded against a portion of its NOL carryforwards in 2012, and the remaining balance of the valuation allowance against NOL and AMT credit carryforwards in 2013. The decision to reduce the valuation allowance in 2013 was made after management determined, based on an assessment of continuing operations, profitability and forecasts of future taxable income, that these deferred tax assets would be realized in the future. Separately, during the fourth quarter of 2013, the Company reevaluated the availability of state operating loss carryforwards and modified the future effective state and local tax rate. As a result, the future tax benefit was reduced by approximately $346,000 during the year ended December 31, 2013.

During March 2014, New York State enacted a law to (1) reduce corporate tax rates, effective in future years and (2) change the method of determining the availability and use of NOLs existing at December 31, 2014. In April 2015, New York City enacted a law which substantially conforms with the New York State changes. As a consequence, the Company evaluated all elements affecting the balance of its net deferred tax assets in the respective periods, including the availability of New York State and New York City NOL carryforwards. The changes in the New York State law were reflected in the first quarter of 2014 income tax expense and the changes in the New York City law were reflected in the second quarter of 2015 income tax expense. Given the change in the New York City law, there was a variation between the effective tax rate and the statutory tax rate for the year ended December 31, 2015.

Due to the amount of its NOL and credit carryforwards, the Company does not anticipate paying Federal income taxes for a number of years. The Company expects, in the future, that it will be subject to cash payments for Federal AMT and for a portion of its state and local income taxes as the changed New York State and New York City laws limit the amount of existing NOLs which could be used each year.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset was approximately $18,430,000 and $22,437,000 at December 31, 2015 and 2014, respectively, all of which is classified as non-current in accordance with ASU 2015-17. The significant portion of the deferred tax items relates to deferred tax assets including NOL carryforwards, Federal AMT credit carryforwards and stock based compensation, with the remainder of the deferred tax items relating to liabilities resulting from the intangible assets recorded at the time of the Merger.

Significant components of the Company’s deferred tax assets and liabilities are as follows:


	December 31,
	2015		2014
Deferred Tax Assets

Net operating loss carryforwards	$	17,314,368	$	22,113,983

Asset basis differences — tax amount greater than book value		254,773		259,922
Liability reserves		187,253		212,142
Stock compensation plans		1,644,339		1,520,041
AMT credit carryforwards		1,576,737		1,273,792
Other		45,903		21,585

		21,023,373		25,401,465
Valuation allowance		—		—

Total deferred tax assets		21,023,373		25,401,465


Deferred Tax Liabilities

Acquired asset differences — book value greater than tax		(2,266,160)		(2,669,655)
Asset basis differences — carrying amount value greater than tax		(327,476)		(295,073)

Total deferred tax liabilities		(2,593,636)		(2,964,728)

Net deferred tax asset (liability)	$	18,429,737	$	22,436,737

The Company had Federal NOL carryforwards aggregating approximately $46,018,000 at December 31, 2015, as well as significant state and local NOL carryforwards. These NOLs included amounts generated subsequent to the Merger (including a substantial NOL realized during the year ended December 31, 2012 as a result of the Gold Peak litigation settlement, discussed in Note 10), losses from the Reis Services business prior to the Merger and the Company’s operating losses prior to the Merger. Approximately $13,300,000 of these Federal NOLs are subject to an annual Internal Revenue Code Section 382 limitation of $2,779,000, whereas the remaining balance of approximately $32,718,000 is not subject to the limitation. The enactment of the 2014 New York State law and the 2015 New York City law discussed above limit the amount of existing NOLs which could be used each year in those jurisdictions; however, all such losses are expected to be fully utilized in the future.

The next NOL expiration for the Company is in 2024 for approximately $10,672,000 of Federal NOLs. Included in the Federal NOLs at December 31, 2015 is approximately $1,723,000 attributable to excess tax deductions on equity award activity in prior years. The tax benefits attributable to those NOLs will be credited directly to additional paid in capital when utilized to offset taxes payable.

A valuation allowance is required to reduce deferred tax assets if, based on the weight of all available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result of management’s evaluation of the Company’s future operations, it has been determined that no valuation allowance was necessary at December 31, 2015, 2014 or 2013.

The Company and its subsidiaries have been audited by the Internal Revenue Service (“IRS”) for the 2012 tax year, which audit was completed in February 2015 with the IRS issuing a no change letter. The 2013 and 2014 Federal tax returns are open for examination. All prior Federal periods are closed, except to the extent that an NOL was generated in a given year. Tax returns for 1997 and 1998 are open for the NOLs generated during those years from an acquired business at that time. The Reis Services business prior to the Merger, was audited by the IRS for tax years ending October 31, 2005 and 2006. In addition, tax returns are open from 2000 to 2002 and 2007, to the extent that NOLs were generated during these periods by the Reis Services business prior to the Merger.

During the third quarter of 2015, audits of the Company and its consolidated subsidiaries for tax years 2004 through 2006 were completed by New York State resulting in net payments aggregating approximately $16,000 in the period to New York State and New York City. Such amounts had been accrued in prior periods. Tax returns for the Company and a subsidiary are open for the years 2007 to 2014 for New York State and New York City. The tax years for a subsidiary operating in Colorado are open from 2011 to 2014.

The Company’s reserve for unrecognized tax benefits, including estimated interest, was $159,000 and $105,000 at December 31, 2015 and 2014, respectively. The unrecognized tax benefits as well as related interest was included in general and administrative expenses. The Company recorded additional general and administrative expense, including interest, of $70,000, $43,000 and $51,000 in 2015, 2014, and 2013, respectively. A reconciliation of the unrecognized tax benefits for the years ended December 31, 2015, 2014 and 2013 follows:


	For the Years Ended December 31,
	2015		2014		2013

Balance at beginning of period	$	105,000	$	62,000	$	345,000
Additional provisions and interest related to prior years		70,000		43,000		51,000
Resolution of matters during the period		(16,000)		—		(334,000)

Balance at end of period	$	159,000	$	105,000	$	62,000

The Company expects that a substantial portion of the 2015 balance could be resolved in 2016.