6.	*Income Taxes*

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


	For the Years Ended December 31,
	2016		2015			2014
Current Federal alternative minimum tax (“AMT”) expense	$	147,000	$	303,000		$	92,000
Current state and local tax expense		40,000		662,000			254,000
Deferred Federal tax expense (A)		1,704,000		4,962,000			2,118,000
Deferred state and local tax expense (benefit)		62,000		(513,000	)		(4,000	)

Consolidated income tax expense, including taxes attributable to discontinued operations (B)		1,953,000		5,414,000			2,460,000
Less income tax expense (benefit) attributable to discontinued operations		—		1,409,000			(382,000	)

Income tax expense (C)	$	1,953,000	$	4,005,000		$	2,842,000

(A)	Includes an AMT (benefit) of $(147,000), $(303,000) and $(92,000) in 2016, 2015 and 2014, respectively.

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

(C)	Reflects the tax expense 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,
	2016					2015						2014
	Amount		Percent			Amount			Percent			Amount		Percent
Tax expense (benefit) at U.S. statutory rate	$	1,657,000		35.00	%	$	4,227,000			35.00	%	$	2,610,000		35.00	%
State and local tax expense (benefit), net of Federal impact		142,000		3.00	%		494,000			4.09	%		194,000		2.60	%
Impact of state and local tax rate change net of Federal impact		7,000		0.15	%		(714,000	)		(5.90	%)		27,000		0.36	%
Non-deductible items		147,000		3.10	%		(2,000	)		(0.02	%)		11,000		0.15	%

Income tax expense (benefit)	$	1,953,000		41.25	%	$	4,005,000			33.17	%	$	2,842,000		38.11	%

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 $16,815,000 and $18,430,000 at December 31, 2016 and 2015, respectively, all of which was classified as non-current. 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,
	2016			2015
Deferred Tax Assets
Net operating loss carryforwards	$	14,561,655		$	17,314,368
Asset basis differences — tax amount greater than book value		—			254,773
Liability reserves		792,075			187,253
Stock compensation plans		1,828,185			1,644,339
AMT credit carryforwards		1,717,792			1,576,737
Other		57,153			45,903

		18,956,860			21,023,373
Valuation allowance		—			—

Total deferred tax assets		18,956,860			21,023,373

Deferred Tax Liabilities
Acquired asset differences — book value greater than tax		(1,842,450	)		(2,266,160	)
Asset basis differences — carrying amount value greater than tax		(299,673	)		(327,476	)

Total deferred tax liabilities		(2,142,123	)		(2,593,636	)

Net deferred tax asset (liability)	$	16,814,737		$	18,429,737

The Company had Federal NOL carryforwards aggregating approximately $38,679,000 at December 31, 2016, 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 3), losses from the Reis Services business prior to the Merger and the Company’s operating losses prior to the Merger. Approximately $5,961,000 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 NOLs are expected to be fully utilized in the future.

The next NOL expiration for the Company is in 2024 for approximately $3,334,000 of Federal NOLs. Included in the Federal NOLs at December 31, 2016 is approximately $1,723,000 attributable to excess tax deductions on equity award activity in prior years. The tax benefits attributable to those NOLs have been credited directly to additional paid in capital when utilized to offset taxes payable. In 2017, these NOLs will be recorded on the Company’s consolidated balance sheet upon adoption of ASU 2016-09.

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, 2014 and 2015 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 and such NOL was utilized during an open tax year or will be utilized in the future.

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. With few exceptions, the state and local income tax returns are open to examination for the years 2013 through 2015.

The Company’s reserve for unrecognized tax benefits, including estimated interest, was $154,000 and $159,000 at December 31, 2016 and 2015, respectively. The unrecognized tax benefits as well as related interest was included in general and administrative expenses. The Company recorded a reduction in expense of $(4,000) in 2016 and additional expense, including interest, of $70,000 and $43,000 in 2015 and 2014, respectively.

A reconciliation of the unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 follows:


	For the Years Ended December 31,
	2016			2015			2014
Balance at beginning of period	$	159,000		$	105,000		$	62,000
(Reduction) additional provision and interest related to prior years, net		(4,000	)		70,000			43,000
Resolution of matters during the period		(1,000	)		(16,000	)		—

Balance at end of period	$	154,000		$	159,000		$	105,000

The Company expects that a substantial portion of the 2016 balance could be resolved in 2017.