INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Income tax expense (benefit) attributable to income from continuing operations differed from the amounts computed by applying the U.S. federal income tax of 34% to pretax income from continuing operations as a result of the following for the years ended December 31, 2015 and 2014:



	December 31, 2015			December 31, 2014
Statutory tax on book income	$	(5,852,000	)	$	(1,996,000	)
Permanent differences	(3,428,000		)	52,000
Net operating loss utilization	—			—
Change in valuation allowance	15,109,000			922,000
Other	(523,000		)	1,033,763
Income tax expense (benefit)	$	5,306,000		$	11,763

The components of income tax (benefit) expense for the years ended December 31, 2015 and 2014 are as follows:



	December 31, 2015			December 31, 2014
Current federal tax expense	$	—		$	11,763
Deferred federal tax (expense)/benefit	(5,306,000		)	—
Total federal tax (expense)/benefit	$	(5,306,000	)	$	(11,763	)

The cumulative tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2015 and 2014 are presented below:



	December 31, 2015			December 31, 2014
Deferred tax assets:
Alternative minimum tax credits	$	75,000		$	220,000
Accrued compensation	306,000			560,000
Intangible Assets	1,538,000			—
Allowance for doubtful accounts	668,000			684,000
Contribution carryover	51,000			37,000
Net operating loss carry forwards	23,107,000			14,167,000
Less valuation allowance	(21,282,000		)	(6,173,000		)
Total deferred tax assets	$	4,463,000		$	9,495,000

	December 31, 2015			December 31, 2014
Deferred tax liabilities:
Gain on purchase	$	(2,372,000	)	$	(2,372,000	)
Contingent liability	(1,785,000		)	(1,785,000		)
Accelerated tax depreciation	4,000			208,000
Other - income from partnership	(310,000		)	(240,000		)
Net deferred tax liabilities	$	(4,463,000	)	$	(4,189,000	)

Net Deferred tax assets and liabilities	$	—		$	5,306,000

The Company has determined that a valuation allowance of approximately $21,282,000 is necessary at December 31, 2015 to reduce the deferred tax assets to the amount that will more than likely not be realized.

The Company is subject to examination by Federal and State tax authorities for fiscal years 2012 through 2015.

At December 31, 2015, the Company had federal net operating loss carry-forwards ("NOLs") of approximately $68.0 million acquired as part of the Merger between World Waste and the Company's wholly-owned subsidiary Vertex Merger Sub, LLC and subsequent operating losses incurred by the Company. It is possible that the Company may be unable to use these NOLs in their entirety. The history of these NOLs and the related tax laws are complex and the Company is researching the facts and circumstances as to whether the Company will ultimately be able to utilize the benefit from these NOLs. The extent to which the Company will be able to utilize these carry-forwards in future periods is subject to limitations based on a number of factors, including the number of shares issued within a three-year look-back period, whether the merger is deemed to be a change in control, whether there is deemed to be a continuity of World Waste's historical business, and the extent of the Company's subsequent income. The net operating loss carryforward will begin to expire in 2026.