Income Taxes

The following table sets forth the components of income tax (benefit) expense (in thousands):



	Year Ended December 31,
	2016			2015
Current:
State	$	—		$	3
	—			3
Deferred:
Federal	(73		)	154
State	(6		)	13
	(79		)	167
Income tax (benefit) expense	$	(79	)	$	170

Our effective tax rate differs from the statutory federal tax rate as shown in the following table (in thousands):



	Year Ended December 31,
	2016			2015
U.S. federal income taxes at the statutory rate	$	(1,264	)	$	(692	)
State taxes, net of federal effects	(108		)	(53		)
Permanent differences	10			13
Impact of state tax rate change to deferred	(36		)	119
Expired net operating loss carry-forwards	—			4,026
Prior year provision to actual adjustments	(36		)	—
Other	8			12
Change in valuation allowance	1,347			(3,255		)
Income tax (benefit) expense	$	(79	)	$	170

The tax effect of the temporary differences that give rise to significant portions of the deferred tax assets and liabilities is presented below (in thousands):



	December 31,
	2016			2015
Deferred tax assets:
Tax benefit of operating loss carry forward	$	11,612		$	10,385
Reserves and allowances	12			148
Accrued expenses	35			73
Charitable contributions	198			190
Stock-based compensation	1,098			846
Fixed assets	102			330
Texas margin tax temporary credit	239			246
Total deferred tax assets	13,296			12,218
Valuation allowance	(13,192		)	(11,844		)
Net deferred tax assets	$	104		$	374

Deferred tax liabilities:
481(a) adjustment	$	—		$	2
Goodwill	230			309
Intangible amortization	104			372
Total deferred tax liabilities	$	334		$	683

Net deferred tax liability	$	(230	)	$	(309	)

The ending balances of the deferred tax assets have been fully reserved, reflecting the uncertainties as to realizability evidenced by the Company’s historical net losses. The change in valuation allowance for the year ended December 31, 2016 is an increase of $1,348,000.

We and our subsidiary file federal and state tax returns on a consolidated basis. During 2013, we determined that an “ownership change” had occurred in 2013 (as defined under Section 382 of the Internal Revenue Code of 1986, as amended) which places an annual limitation on the utilization of the net operating loss (“NOL”) carryforwards accumulated before the ownership change. As a result of this annual limitation and the limited carryforward life of the accumulated NOLs, we determined that the ownership change resulted in the permanent loss of approximately $1.9 million of tax benefit associated with the NOL carryforwards. If additional ownership changes occur in the future, the use of the NOL carryforwards could be subject to further limitation. At December 31, 2015 we had federal NOL carryforwards of $27,417,000 available to offset future federal taxable income which expire in various amounts from 2017 through 2035. At December 31, 2016, we had federal NOL carryforwards of $30,558,000 available to offset future federal taxable income which expire in various amounts from 2018 through 2036. The Company also has various state NOL carryforwards. The determination of the state NOL carryforwards is dependent upon apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards.

There were no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC Topic 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s consolidated financial statements for the years ended December 31, 2016 and 2015. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.

Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the years ended December 31, 2016 and 2015.

The federal and state tax returns for the years ending December 31, 2015, 2014 and 2013 are currently open and the tax return for the year ended December 31, 2016 will be filed by September 2017.