Income Taxes

Income tax expense (benefit) for the three and six months ended June 30, 2014 and 2013 consists of the following:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014		2013
Current:
Federal	$	(19,770	)	$	—		$	64,443	$	—
State	(31		)	—			129		—
Total	(19,801		)	—			64,572		—
Deferred:
Federal	28,415			(6		)	40,459		(6		)
State	76			6			10,563		6
Total	28,491			—			51,022		—
Income tax expense	$	8,690		$	—		$	115,594	$	—

Income tax expense attributable to income from operations differed from the amount computed by applying the statutory federal income tax rate of 35% to pre-tax income as a result of the following:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Tax at the statutory federal rate	$	8,154		$	947		$	186,619		$	81
State income taxes (net of federal benefit)	816			95			18,662			8
Decrease in valuation allowance	(864		)	(907		)	(90,164		)	(100		)
Other	584			(135		)	477			11
Income tax expense	$	8,690		$	—		$	115,594		$	—

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of June 30, 2014 and December 31, 2013 are presented below:



	June 30,			December 31,
	2014			2013
Deferred tax assets:
Federal net operating carryforwards	$	—		$	26,884
State net operating loss carryforwards	11,800			20,759
Impairment losses	118,361			151,050
Prepaid income from land sales	5,517			10,210
Other	4,156			7,592
Total gross deferred tax assets	139,834			216,495
Valuation allowance	(5,789		)	(95,953		)
Total net deferred tax assets	134,045			120,542
Deferred tax liabilities:
Investment in real estate and property and equipment basis differences	1,794			1,726
Deferred gain on land sales and involuntary conversions	30,812			31,385
Prepaid pension asset	15,087			15,596
Installment sales	126,452			58,969
Total gross deferred tax liabilities	174,145			107,676
Total net deferred tax (liability) asset	$	(40,100	)	$	12,866

During the six months ended June 30, 2014, the Company had taxable income from the AgReserves Sale of approximately $502.6 million, of which $179.9 million is expected to be deferred for fifteen years for tax purposes. The Company utilized federal net operating loss carryforwards of $76.8 million and state net operating loss carryforwards of $314.1 million to offset part of the remaining taxable income from the AgReserves Sale. As of June 30, 2014, the Company had no federal net operating loss carryforwards and had $337.1 million of state net operating loss carryforwards, which are available to offset future taxable income through 2031.

In general, a valuation allowance is recorded if, based on the available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in future years in the appropriate tax jurisdictions to obtain a benefit from the reversal of deductible temporary differences and from loss carryforwards. As of December 31, 2013, based on the timing of reversal of future taxable amounts and the Company’s history of losses, management did not believe it met the requirements to realize the benefits of certain of its deferred tax assets; therefore, the Company had maintained a valuation allowance of $96.0 million. As a result of the deferred tax liability of $69.2 million from the AgReserves Sale, the reversals of the deferred tax assets for the federal and state net operating loss carryforwards and the reversals of deferred tax assets for impairment losses, primarily from the RiverTown Sale, the Company had a net deferred tax liability of $40.1 million as of June 30, 2014, as compared to a net deferred tax asset of $12.9 million as of December 31, 2013. During the six months ended June 30, 2014, the Company reversed $90.2 million of the valuation allowance that was recorded as of December 31, 2013.

The Company has maintained a valuation allowance of $5.8 million at June 30, 2014 primarily for a portion of its deferred tax assets for state net operating loss carryforwards that management believes it has not met the requirements from which to realize the benefits. In addition, as a result of the adoption of the guidance that was effective for the Company on January 1, 2014 related to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists, the Company reclassed $1.7 million of its unrecognized tax benefit from Accrued liabilities and deferred credits to net deferred tax liabilities as of June 30, 2014.