NOTE 5 – INCOME TAXES

The provision for taxes is as follows (dollars in thousands):


	Year Ended		Year Ended		Year Ended
	December 31, 2019		December 31, 2018		December 31, 2017

Current:
Federal	$	—	$	—	$	—
State		128		290		171
	$	128	$	290	$	171
Deferred:
Federal	$	—	$	—	$	(3,182)
State		—		—		—
	$	—	$	—	$	(3,182)

Tax expense (benefit)	$	128	$	290	$	(3,011)

The following is a reconciliation of income taxes computed at the U.S. Federal statutory rate to the provision for income taxes:


	Year Ended		Year Ended		Year Ended
	December 31, 2019		December 31, 2018		December 31, 2017

Statutory federal income tax rate	21.0	%	21.0	%	35.0	%
State taxes	49.7	%	17.1	%	(0.7)	%
Permanent non-deductible expenses	(5.6)	%	(1.7)	%	(10.5)	%
Federal rate change	0.0	%	0.0	%	(654.5)	%
AMT credit calculation allowance release	0.0	%	0.0	%	61.6	%
Change of valuation allowance	(71.3)	%	(40.2)	%	630.0	%

Effective income tax rate	(6.2)	%	(3.8)	%	60.9	%

The composition of our deferred tax assets and liabilities is as follows (dollars in thousands):


	December 31, 2019		December 31, 2018

Deferred tax assets:
Pension costs	$	165	$	602
Charitable contributions		21		22
Net operating loss carry forwards		61,124		53,901
Depreciation (including air rights)		5,035		5,756
Lease liability		650		—
Other		93		141
Deferred gain on sale		—		4,987
Investment in joint venture		382		355
Accrued expenses		80		178

Total deferred tax assets	$	67,550	$	65,942
Valuation allowance		(63,709)		(62,127)
Deferred tax asset after valuation allowance	$	3,841	$	3,815

Deferred tax liabilities:
Intangibles	$	(3,242)	$	(3,815)
Right-of-use asset		(599)		—
Total deferred tax liabilities	$	(3,841)	$	(3,815)
Net deferred tax assets	$	—	$	—

Current deferred tax assets	$	—	$	—
Long-term deferred tax assets		—		—
Total deferred tax assets	$	—	$	—

Effects of the U.S. Tax Cuts and Jobs Act

On December 22, 2017, the TCJA was signed into U.S. law. ASC Topic 740, Accounting for Income Taxes, required companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017, or in the case of certain other provisions of the law, January 1, 2018.

As part of the TCJA, the U.S. corporate income tax rate applicable to us decreased from 35% to 21%. This rate change resulted in the re-measurement of our net deferred tax asset (“DTA”) as of December 31, 2017. The effect was approximately a $33.7 million decrease in the DTA, which was completely offset by a decrease in the valuation allowance by the same amount.

Pursuant to the TCJA, alternative minimum tax (“AMT”) credit carryforwards will be eligible for a 50% refund in tax years 2018 through 2020. Beginning in tax year 2021, any remaining AMT credit carryforwards would be 100% refundable. As a result of these new rules, as of December 31, 2017 we had released the valuation allowance of $3.1 million formerly reserved against our AMT credit carryforwards and we had recorded a tax benefit and refund receivable of $3.1 million in connection with this valuation allowance release, which was included in receivables, net on the consolidated balance sheets. We received approximately $1.6 million of the refund receivable in October 2019.

Our accounting for the above elements of the TCJA was completed in 2018.

Other

At December 31, 2019, we had federal NOLs of approximately $241.5 million. NOLs generated prior to tax-year 2018 will expire in years through fiscal 2037 while NOLs generated in 2018 and forward carryover indefinitely. At December 31, 2019, we also had state NOLs of approximately $122.2 million. These state NOLs have various expiration dates through 2039, if applicable. We also had the New York State and New York City prior NOL conversion (“PNOLC”) subtraction pools of approximately $31.1 million and $25.5 million, respectively. The conversion to the PNOLC under the New York State and New York City corporate tax reforms does not have any material tax impact.

Based on management’s assessment, we believe it is more likely than not that the entire deferred tax assets will not be realized by future taxable income or tax planning strategy. In recognition of this risk, we have provided a valuation allowance of $63.7 million and $62.1 million as of December 31, 2019 and December 31, 2018, respectively. If our assumptions change and we determine we will be able to realize these NOLs, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets would be recognized as a reduction of income tax expense and an increase in equity.