Income Taxes

Empire and all of its subsidiaries file a consolidated income tax return. At December 31, 2013 and 2012, the estimated deferred income tax assets and liability were comprised of the following:



	(in thousands)
	2013			2012
Deferred tax assets:
Net operating loss carry forwards	$	55,171		$	48,727
Other	10,962			8,158
	66,133			56,885
Deferred tax liability:
Depreciation	(301		)	(311		)
Net deferred tax assets	65,832			56,574
Valuation allowance	(65,832		)	(56,574		)
Deferred tax assets, net	$	—		$	—

The valuation allowance increased approximately $9.3 million during the year ended December 31, 2013 and the valuation allowance decreased approximately $7.4 million during the year ended December 31, 2012. Of the $139.3 million approximately $39.5 million is readily available as of December 31, 2013.

The following is a reconciliation of the federal statutory tax rate to the Company’s effective tax rate:



	Year ended December 31,
	2013		2012
Tax provision at federal statutory tax rate	35.0	%	35.0	%
State income taxes, net	(0.1	)%	(1.4	)%
Permanent items	(0.3	)%	(17.2	)%
Expiration of net operating loss carry forwards	—	%	(141.1	)%
Change in valuation allowance	(34.7	)%	122.4	%
Other taxes	—	%	—	%
Non-includable (income) expenses	—	%	—	%
Effective tax rate	(0.1	)%	(2.3	)%

There are limits on the Company’s ability to use its current net operating loss carry forwards, potentially increasing future tax liability. As of December 31, 2013, the Company had net operating loss carry forwards of approximately $139.3 million that expire between 2013 and 2033. The 2004 merger of the Company’s operations with Catskills Development LLC and the investment by Kien Huat in 2009 will limit the amount usable in any year of its net operating losses due to the change in control of the Company within the meaning of the tax laws.

As of December 31, 2013, the Company does not have any uncertain tax positions. As a result, there are no unrecognized tax benefits as of December 31, 2013. If the Company was to incur any interest and penalties in connection with income tax deficiencies, the Company would classify interest in the “interest expense” category and classify penalties in the “non-interest expense” category within the consolidated statements of operations.

The Company files tax returns in the U.S. federal jurisdiction and in various states. All of its federal and state tax filings as of December 31, 2012 have been timely filed. The Company is subject to U.S. federal or state income tax examinations by tax authorities for years after 2008. During the periods open to examination, the Company has net operating loss and tax credit carry forwards that have attributes from closed periods. Since these net operating loss and tax credit carry forwards may be utilized in future periods, they remain subject to examination.