10.	INCOME TAXES

The Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of September 30, 2016 and December 31, 2015, the Company did not have any uncertain tax positions.

ASC Topic 740, Income Taxes, prescribes the method to determine whether a deferred tax asset is realizable and significant weight is given to evidence that it can be objectively verified. As of September 30, 2016 and December 31, 2015, the Company’s valuation allowance totaled $8,500, which relates to state net operating loss (“NOL”) carryforwards expected to expire prior to utilization.

As of September 30, 2016, we have approximately $14.8 million in federal NOL carryforwards and $7.7 million in state NOLs available to offset future taxable income.

The effective tax rates used for the nine months ended September 30, 2016 and 2015 were 37.0% and 37.3%, respectively. The income tax provision was computed based on the Company’s estimated effective tax rate and forecasted income expected for the full year, including the impact of any unusual, infrequent, or non-recurring items. The effective tax rate for the nine months ended September 30, 2016 was greater than the federal statutory rate of 35.0% primarily due to state income taxes.