INCOME TAXES

The Company follows ASC Topic 740, Income Taxes (“ASC 740”). Under the asset and liability method of ASC 740, deferred assets and liabilities are recognized for the future costs and benefits attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company periodically reviews the requirements for a valuation allowance and makes adjustments to such allowances when changes in circumstances result in changes in the Company’s judgment about the future realization of deferred tax assets. ASC 740 places greater emphasis on historical information, such as the Company’s cumulative operating results than it places on estimates of future taxable income. The Company considered all income sources, including other comprehensive income, in determining the amount of deferred taxes recorded. The Company intends to maintain a valuation allowance until evidence would support the conclusion that it is more likely than not that the deferred tax asset will be realized. The Company has recorded $3.2 million of tax benefit during the year ended December 31, 2014. Included in that amount was $4.5 million of non-recurring net tax benefit which was primarily related to the tax impact from the impairment of an indefinite-lived intangible asset and goodwill (see Note 2, Summary of Significant Accounting Policies, for further information). Due to the indefinite life of the intangible asset and goodwill for book purposes, the related deferred tax liability cannot serve as a source of taxable income to support deferred tax assets. Accordingly, the impairment resulted in a reduction to the deferred tax liability previously recorded to the Consolidated Statements of Operations. In addition, the amount recorded included a non-recurring tax benefit to revalue deferred tax liabilities as a result of the change in the state rate for which deferred taxes are measured. The Company has a cumulative net deferred tax liability of $3.8 million as of December 31, 2014.

The benefit / (provision) for income taxes consist of the following for 2014, 2013, and 2012:



(in thousands)	2014			2013			2012
Current Income Tax (Expense) Benefit
Federal	$	—		$	—		$	—
State and local	(35		)	53			(107		)
Foreign	(94		)	(160		)	(252		)
Total current income tax expense	(129		)	(107		)	(359		)
Deferred Income Tax Benefit / (Expense)
Federal	2,596			20			(1,061		)
State and local	742			3			(182		)
Total deferred income tax benefit / (expense)	3,338			23			(1,243		)
Income tax benefit / (provision)	$	3,209		$	(84	)	$	(1,602	)

A reconciliation of the federal income tax benefit / (provision) at the statutory rate to the effective rate for 2014, 2013, and 2012 is as follows:



(in thousands)	2014			2013			2012
Computed tax benefit at the federal statutory rate of 35%	$	2,894		$	591		$	19,069
State income taxes, net of federal benefit	(52		)	(19		)	(57		)
Non-deductible compensation	(647		)	(91		)	(537		)
Non-deductible expense	(189		)	(113		)	(131		)
Non-deductible goodwill impairment	(323		)	1,257			(15,490		)
Tax on foreign income	(94		)	(104		)	(252		)
Valuation allowance	1,579			(1,686		)	(4,186		)
Other	41			81			(18		)
Income tax benefit / (provision)	$	3,209		$	(84	)	$	(1,602	)
Effective tax rate	(38.8		)%	5.0		%	2.9		%

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2014 and 2013 were as follows:



(in thousands)	2014			2013
Deferred Tax Assets
Provision for doubtful accounts	$	674		$	614
Accrued rent	1,308			1,572
Reserve for newsstand returns	168			100
Accrued compensation	3,173			4,854
Deferred revenue	7,741			1,582
NOL/credit carryforwards	46,712			56,567
Depreciation	4,875			5,374
Amortization of intangible assets	5,477			6,054
Other	597			208
Total deferred tax assets	70,725			76,925
Deferred Tax Liabilities
Prepaid expenses	(251		)	(585		)
Amortization of intangible assets	(3,755		)	(7,094		)
Total deferred tax liabilities	(4,006		)	(7,679		)
Valuation allowance	(70,474		)	(76,340		)
Net Deferred Tax Liability	$	(3,755	)	$	(7,094	)

At December 31, 2014, the Company had aggregate federal net operating loss carryforwards of $114.1 million (before-tax), which will be available to reduce future taxable income through 2034, with the majority expiring in years 2024 and 2025. The Company had federal and state tax credit and capital loss carryforwards of $3.2 million (tax effected), which begin to expire in 2015. To the extent the Company achieves positive net income in the future, the net operating loss and credits carryforwards may be utilized and the Company’s valuation allowance will be adjusted accordingly.

ASC 740 further establishes guidance on the accounting for uncertain tax positions. As of December 31, 2014, the Company reduced the ASC 740 liability to zero. The Company treats interest and penalties due to a taxing authority on unrecognized tax positions as interest and penalty expense.

The Company is no longer subject to U.S. federal income tax examinations by tax authorities for the years before 2005 and state examinations for the years before 2003. The Company does not anticipate that the liability will change significantly over the next 12 months.