INCOME TAXES

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

Financial files a consolidated federal income tax return with its subsidiaries.

Income tax (benefit) expense consists of the following: 

	Year Ended December 31,
	2015			2014			2013
Federal income tax (benefit) expense:
Current	$	(228,000	)	$	(22,000	)	$	19,000
Deferred		—			—			—
		(228,000	)		(22,000	)		19,000
State and local:
Current		(47,000	)		(5,000	)		—
Deferred		—			—			—
		(47,000	)		(5,000	)		—
Total:
Current		(275,000	)		(27,000	)		19,000
Deferred		—			—			—
	$	(275,000	)	$	(27,000	)	$	19,000

Income tax benefit in 2015 and 2014 represent the utilization of the loss from continuing operations against income from discontinued operations, exclusive in 2015 of the capital loss from disposal of the investment in the former affiliate. The provision for income taxes in 2013 represents a federal minimum tax assessment of $19,000, including $4,000 of interest and penalties, relating to 2012.

Reconciliation between the income tax (benefit) provision and income taxes computed by applying the statutory Federal income tax rate to loss before income taxes is as follows: 

	Year Ended December 31,
	2015			2014			2013
Expected income tax benefit at statutory Federal tax rate (34%)	$	(1,051,000	)	$	(2,251,000	)	$	(2,004,000	)
State and local taxes, net of Federal tax effect		(68,000	)		(464,000	)		(413,000	)
Increase in valuation allowance		784,000			2,551,000			2,342,000
Permanent difference		13,000			39,000			46,000
Other		47,000			98,000			48,000
Income tax (benefit) expense	$	(275,000	)	$	(27,000	)	$	19,000

The principal items giving rise to deferred tax assets (liabilities) are as follows: 

	December 31,
	2015			2014
Deferred tax assets:
Net operating loss credit carryforwards	$	9,456,000		$	8,046,000
Capital loss carryforwards		395,000			24,000
Alternative minimum tax carryforward		—			9,000
Employee stock based compensation		237,000			237,000
Retail brokerage accounts (c)		140,000			211,000
Contribution carryover		178,000			223,000
Furniture, equipment and leasehold improvements		181,000			115,000
Accrued expenses		252,000			337,000
Investment in former affiliate (a)		—			736,000
Other		44,000			30,000
Total		10,883,000			9,968,000
Valuation allowance		(10,002,000	)		(9,218,000	)
Net deferred tax assets		881,000			750,000
Deferred tax liability:
Receivable from affiliate (b)		(881,000	)		(750,000	)
	$	0		$	0

(a) Attributable to non-deductible bonus accrued at December 31, 2014 by an affiliate, which was deducted in 2015.

(b) Relates to receivable from business sold to affiliate treated as an installment sale for tax purposes.

(c) Related to acquired retail discount brokerage accounts, which are being amortized over 15 years for tax purposes and have been fully amortized for financial reporting purposes.

Due to cumulative losses incurred by the Company during the current and prior two years, the Company is unable to conclude that it is more likely than not that it will realize its deferred tax asset in excess of the deferred tax liability and, accordingly, has recorded a valuation allowance to fully offset such amount at December 31, 2015 and 2014.

At December 31, 2015, the Company has state net operating loss carryforwards aggregating $15.4 million, which expires from 2029 through 2035. In addition, the Company has federal net operating loss carryforwards of $20.3 million at December 31, 2015, which expires from 2030 through 2035. The Company also has additional federal net operating loss carryforwards of $350,000 at December 31, 2015 which is attributable to WFN and expires through 2020. Utilization of WFN’s federal net operating loss carryforwards is subject to annual limitations under Section 382 of the Internal Revenue Code.

The Company applied the “more-likely-than not” recognition threshold to all tax positions taken or expected to be taken in a tax return which resulted in no unrecognized tax benefits reflected in the financial statements as of December 31, 2015. The Company classifies interest and penalties that would accrue according to the provisions of relevant tax law as income taxes.

Tax years 2012 and thereafter are subject to examination by federal and certain tax authorities. For other states the 2010 through 2013 tax years remain open to examination. The Company is currently under tax examination by New York State for the years 2012 to 2014 and by the state of Illinois for the year 2012.