Income Taxes (Tables)

3 Months Ended

Mar. 31, 2014

Income Taxes [Abstract]

Components of income tax expense (benefit)

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

(in thousands)	Three Months Ended
	March 31, 2014			March 31, 2013
Federal – current	$	238		$	-
State – current		412			64
Total current		650			64
Federal – deferred		(457	)		(229	)
State – deferred		-			-
Change in valuation allowance		457			229
Total deferred		-			-
Income tax expense (benefit)	$	650		$	64

Income tax reconciliation

The components of pretax income (loss) and the difference between income taxes computed at the statutory federal rate and the provision for income taxes are as follows:

(in thousands)	Three Months Ended
	March 31, 2014			March 31, 2013
Income (loss) before income taxes	$	(1,305	)	$	(653	)
Tax expense (benefit):
Tax at statutory federal rate	$	(457	)	$	(229	)
State income taxes		55			64
Federal interest		238			-
State interest		357			-
Permanent items		-			-
Other		-			-
Change in valuation allowance		457			229
Income tax expense (benefit)	$	650		$	64

A reconciliation of the United States federal statutory rate to the Company's effective income tax rate is as follows:

	Three Months Ended
	March 31, 2014		March 31, 2013
Tax at statutory federal rate	35.0	%	35.0	%
State income taxes	(4.2)		(9.8)
Federal interest	(18.2)		0.0
State interest	(27.4)		0.0
Permanent differences, tax credits and other adjustments	0.0		0.0
Other	0.0		0.0
Change in valuation allowance	(35.0)		(35.0)
Effective income tax rate	(49.8)	%	(9.8)	%

Net deferred tax asset

The Carteret Tax Basis and federal NOL carryforward deductions utilized as part of the Company's 2012 federal income tax return as filed were as follows:

(in thousands)
Carteret Tax Basis	$	152,000
Federal NOL carryforwards utilized	$	25,000

Calculation of net federal uncertain tax position reserve

A roll forward of the uncertain tax positions reserve, excluding accrued federal and state interest is as follows:

(in thousands)	March 31, 2014		March 31, 2013
Uncertain tax position reserve excluding accrued interest, at beginning of period	$	34,157	$	34,157
Federal uncertain tax position reserve excluding accrued interest		-		-
State uncertain tax position reserve excluding accrued interest		-		-
Uncertain tax position reserve excluding accrued interest, at end of period	$	34,157	$	34,157

Uncertain tax positions tax reserve

The Company's uncertain tax positions tax reserve, including accrued interest is as follows:

(in thousands)	March 31, 2014		December 31, 2013
Federal uncertain tax positions reserve, including accrued federal interest	$	19,417	$	19,179
State uncertain tax positions reserve, including accrued state interest		17,223		16,866
Total uncertain tax positions reserve, including accrued federal and state interest	$	36,640	$	36,045

Interest expense related to the uncertain tax positions

The interest expense related to the uncertain tax positions is as follows:

(in thousands)	Three Months Ended
	March 31, 2014		March 31, 2013
Federal	$	238	$	-
State jurisdictions		357		-
Interest expense - taxes	$	595	$	-

Federal net operating loss carryforwards

The federal NOL carryforwards as of March 31, 2014 are as follows:

Tax Year Originating	Tax Year Expiring	Amount
2013	2033	$	3,600,000
2014	2034		700,000
		$	4,300,000

State net operating loss carryforwards

The state NOL carryforwards as of March 31, 2014 are as follows:

Tax Year Originating	Tax Year Expiring	Amount
2011	2031	$	1,900,000
2013	2033		3,400,000
2014	2034		700,000
		$	6,000,000

Calculation of net deferred tax assets from NOL carryforwards

The Company has calculated a net deferred tax asset arising primarily from NOL carryforwards as follows.

	March 31, 2014			December 31, 2013
Net deferred tax asset	$	1,650,000		$	1,400,000
Valuation allowance		(1,650,000	)		(1,400,000	)
Net deferred tax asset recognized	$	-		$	-

Indemnification asset

The Company's indemnification asset which reflects the potential amounts reimbursable pursuant to the tax gross-up provision of the Settlement Agreement for the federal uncertain tax position reserve recognized, is as follows:

(in thousands)	March 31, 2014		December 31, 2013
Indemnification asset – federal tax gross-up	$	18,429	$	18,429