Note 4 - Income Taxes

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Text Block]

Note 4. Income Taxes

Avalon recorded net income of $.1 million in the third quarter of 2012 compared with net income of $.3 million in the third quarter of 2011. Avalon recorded a state income tax provision in both the third quarter of 2012 and 2011, which was related entirely to the waste management and brokerage operations. Excluding the effect of this state tax provision, Avalon’s overall effective tax rate was 0% in the third quarter of 2012 and 2011. The income tax provision recorded for the third quarter of 2012 and 2011 was offset by a change in the valuation allowance. The overall effective tax rate is different than statutory rates primarily due to a change in the valuation allowance. A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized. Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Avalon incurred a net loss of $32,000 for the first nine months of 2012 compared with net income of $41,000 for the first nine months of 2011. Avalon recorded a state income tax provision in both the nine months ended September 30, 2012 and 2011, which was related entirely to the waste management and brokerage operations. Excluding the effect of the state income tax provision, Avalon’s overall effective tax rate was 0% in the first nine months of 2012 and 2011. The income tax provision recorded for the first nine months of 2012 and 2011 were offset by a change in the valuation allowance. The overall effective tax rate is different than statutory rates primarily due to a change in the valuation allowance. A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized. Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.