Income Taxes

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



	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014		2013
Current:
Federal	$	(396	)	$	93		$	64,047	$	93
State	(4		)	169			125		169
Total	(400		)	262			64,172		262
Deferred:
Federal	59			(104		)	40,519		(110		)
State	(45		)	—			10,518		6
Total	14			(104		)	51,037		(104		)
Income tax (benefit) expense	$	(386	)	$	158		$	115,209	$	158

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 September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Tax at the statutory federal rate	$	(180	)	$	1,524		$	186,428		$	1,605
State income taxes (net of federal benefit)	(18		)	153			18,643			161
Decrease in valuation allowance	81			(1,376		)	(90,083		)	(1,476		)
Other	(269		)	(143		)	221			(132		)
Income tax (benefit) expense	$	(386	)	$	158		$	115,209		$	158

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



	September 30,			December 31,
	2014			2013
Deferred tax assets:
Federal net operating carryforwards	$	—		$	26,884
State net operating loss carryforwards	11,906			20,759
Impairment losses	118,203			151,050
Prepaid income from land sales	5,515			10,210
Other	4,324			7,592
Total gross deferred tax assets	139,948			216,495
Valuation allowance	(5,870		)	(95,953		)
Total net deferred tax assets	134,078			120,542
Deferred tax liabilities:
Investment in real estate and property and equipment basis differences	1,438			1,726
Deferred gain on land sales and involuntary conversions	31,574			31,385
Prepaid pension asset	14,729			15,596
Installment sales	126,002			58,969
Total gross deferred tax liabilities	173,743			107,676
Total net deferred tax (liability) asset	$	(39,665	)	$	12,866

During the nine months ended September 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 September 30, 2014, the Company had no federal net operating loss carryforwards and had $340.2 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 $39.7 million as of September 30, 2014, as compared to a net deferred tax asset of $12.9 million as of December 31, 2013. During the nine months ended September 30, 2014, the Company reversed $90.1 million of the valuation allowance that was recorded as of December 31, 2013.

As of September 30, 2014, management believes it has not met the requirements to realize the benefits for a portion of its deferred tax assets for state net operating loss carryforwards; therefore, the Company has maintained a valuation allowance of $5.9 million for these deferred tax assets. 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 September 30, 2014.