6.	*Income Taxes*

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


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2017		2016		2017		2016
Current Federal alternative minimum tax (“AMT”) (benefit) expense	$	(8,000)	$	8,000	$	27,000	$	149,000
Current state and local tax (benefit) expense		(8,000)		(49,000)		180,000		111,000
Deferred Federal tax expense (benefit) (A)		256,000		245,000		(114,000)		1,490,000
Deferred state and local tax expense (benefit)		46,000		93,000		(88,000)		114,000

Income tax expense (B)	$	286,000	$	297,000	$	5,000	$	1,864,000

(A) Includes an AMT deferred expense (benefit) of $8,000 and $(8,000) in the three months ended September 30, 2017 and 2016, respectively, and $(27,000) and $(149,000) in the nine months ended September 30, 2017 and 2016, respectively. (B) The income tax expense in the nine months ended September 30, 2017 reflects the impact from the recognition of a windfall tax benefit on stock options exercised in the nine months ended September 30, 2017.

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, state and local taxes where the Company has established nexus and there are no available NOLs, and for a portion of its state and local income taxes for New York State and New York City due to laws enacted in March 2014 and April 2015, respectively, which 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 $17,663,000 and $16,815,000 at September 30, 2017 and December 31, 2016, respectively. 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 May 2007 merger.

The Company had Federal NOL carryforwards aggregating approximately $38,679,000 at December 31, 2016, as well as significant state and local NOL carryforwards. 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 a 2014 New York State law and a 2015 New York City law 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.