INCOME TAXES

12 Months Ended

Dec. 31, 2018

NOTE 5 – INCOME TAXES

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

	Year Ended December 31, 2018		Year Ended December 31, 2017			Year Ended December 31, 2016

Current:
Federal	$	-	$	-		$	-
State		290		171			216
	$	290	$	171		$	216
Deferred:
Federal	$	-	$	(3,182	)	$	-
State		-		-			-
	$	-	$	(3,182	)	$	-

Tax expense (benefit)	$	290	$	(3,011	)	$	216

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

	Year Ended December 31, 2018			Year Ended December 31, 2017			Year Ended December 31, 2016

Statutory federal income tax rate		21.0	%		35.0	%		35.0	%
State taxes		17.1	%		-0.7	%		7.5	%
Permanent non-deductible expenses		-1.7	%		-10.5	%		-6.9	%
Federal rate change		0.0	%		-654.5	%		0.0	%
AMT credit calculation allowance release		0.0	%		61.6	%		0.0	%
Change of valuation allowance		-40.2	%		630.0	%		-35.7	%

Effective income tax rate		-3.8	%		60.9	%		-0.1	%

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

	December 31, 2018			December 31, 2017

Deferred tax assets:
Pension costs	$	602		$	1,008
Stock-based compensation reserves not currently deductible		-			(147	)
Net operating loss carry forwards		53,901			56,462
Depreciation (including air rights)		5,756			1,796
Other		163			-
Deferred gain on sale		4,987			-
Investment in joint venture		355			254
Accrued expenses		178			220

Total deferred tax assets	$	65,942		$	59,593
Valuation allowance		(62,127	)		(59,469	)
Deferred tax asset after valuation allowance	$	3,815		$	124

Deferred tax liabilities:
Intangibles	$	(3,525	)	$	(124	)
Other		(290	)		-
Total deferred tax liabilities	$	(3,815	)	$	(124	)
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.

Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin (“SAB”) No. 118 (“SAB 118”), which allows registrants to record provisional amounts during a one year “measurement period” similar to that used when accounting for business combinations. However, the measurement period is deemed to have ended prior to the one year term when the registrant has obtained, prepared, and analyzed the information necessary to finalize its accounting. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the TCJA.

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 remeasurement 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 through 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 regulations, 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 is included in receivables, net on the consolidated balance sheets.

Our accounting for the above elements of the TCJA is complete.

Other significant provisions that are not yet effective but may impact income taxes in future years include, but are not limited to: an exemption from U.S. tax on dividends of future foreign earnings, limitation on the current deductibility of net interest expense in excess of 30% of adjusted taxable income and a limitation of net operating losses arising in tax years beginning after December 31, 2017 to 80% of taxable income.

Other

At December 31, 2018, we had federal NOLs of approximately $222.0 million. These NOLs will expire in years through 2037. At December 31, 2018, we also had state NOLs of approximately $84.0 million. These NOLs expire in years through 2037. We also had the New York State and New York City prior net operating loss conversion (“PNOLC”) subtraction pools of approximately $23.5 million and $17.9 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 $62.1 million and $59.5 million as of December 31, 2018 and December 31, 2017, 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.