11. Income Taxes

The provision (benefit) for income taxes and the provision (benefit) for income taxes from continuing operations consisted of (in thousands):



		For the Years Ended December 31,
		2013	2012	2011
Continuing operations	$	20	(18,744)	(19,480)
Discontinued operations		-	21,005	19,182
Total provision (benefit)
for income taxes	$	20	2,261	(298)
Continuing operations:

Current:
Federal	$	-	-	(298)
State		20	-	-
Total current		20	-	(298)
Deferred:
Federal		-	(16,071)	(16,405)
State		-	(2,673)	(2,777)
Total deferred		-	(18,744)	(19,182)
Provision (benefit) for income
taxes from continuing operations	$	20	(18,744)	(19,480)

The Company's actual provision (benefit) for income taxes from continuing operations differs from the Federal expected income tax provision (benefit) as follows (in thousands):



	For the Years Ended December 31,
	2013		2012		2011
Income tax provision (benefit) at
expected federal income tax
rate of 35%	$ 16,688	35.00%	$ (16,527)	35.00%	$ (27,647)	35.00%
Increase (decrease) resulting from:
Provision (benefit) for state taxes
net of federal benefit	2,003	4.20%	(1,738)	3.68%	(3,414)	4.32%
Taxes related to subsidiaries not consolidated for income taxes	(6,054)	-12.70%	-	0.00%	-	0.00%
Sale of BankAtlantic	5,884	12.34%	-	0.00%	-	0.00%
Nondeductible executive compensation	2,223	4.66%	-	0.00%	-	0.00%
Valuation allowance	(22,584)	-47.36%	-	0.00%	11,884	-15.04%
Other - net	1,860	3.90%	(479)	1.01%	(303)	0.38%
Provision (benefit) for income taxes	$ 20	0.04%	$ (18,744)	39.69%	$ (19,480)	24.66%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and tax liabilities were (in thousands):



		For the Years Ended December 31,
Deferred tax assets:		2013	2012	2011
Allowance for loans and impairments for
financial statement purposes	$	15,354	21,914	48,253
Federal and State NOL and tax credit carryforward		63,781	74,494	152,438
Real estate held for development and sale capitalized costs for tax purposes
in excess of amounts capitalized for financial statement purposes		3,137	5,338	4,908
Accumulated other comprehensive income		-	-	4,731
Share based compensation		691	883	2,327
Purchase accounting adjustments for bank acquisitions		-	-	962
Other		-	2,919	4,056
Total gross deferred tax assets		82,963	105,548	217,675
Less valuation allowance		(82,563)	(105,548)	(211,326)
Total deferred tax assets		400	-	6,349
Deferred tax Liabilities:
Deferred loan income		-	-	1,720
Prepaid pension expense		-	-	4,617
Other		400	-	12
Total gross deferred tax liabilities		400	-	6,349
Net deferred tax (liability) asset		-	-	-
Less net deferred tax asset at beginning of period		-	-	-
Reduction in deferred tax valuation allowance for continuing operations		-	(2,261)	-
Decrease in accumulated other comprehensive income		-	-	-
Provision for deferred income taxes		-	(2,261)	-
(Provision) benefit for deferred income taxes - discontinued operations		-	(21,005)	(19,182)
(Provision) benefit for deferred income taxes - continuing operations	$	-	18,744	19,182

Activity in the deferred tax valuation allowance was (in thousands):



		For the Years Ended December 31,
		2013	2012	2011
Balance, beginning of period	$	105,548	211,326	196,471
Other comprehensive (loss) income		-	(4,731)	2,971
(Decrease) increase included in continuing operations		(22,584)	-	11,884
Acquisitions		(401)	-	-
(Decrease) increase included in discontinued operations		-	(101,047)	-
Balance, end of period	$	82,563	105,548	211,326

The Company evaluates its deferred tax assets to determine if valuation allowances are required. In its evaluation, management considers taxable loss carry-back availability, expectations of sufficient future taxable income, trends in earnings, existence of taxable income in recent years, the future reversal of temporary differences, and available tax planning strategies that could be implemented, if required. Valuation allowances are established based on the consideration of all available evidence using a more likely than not standard. The Company had taxable income during the year ended December 31, 2013 resulting from significant recoveries on loans charged off during prior period. These recoveries were considered isolated transactions. The Company does not expect to generate sufficient taxable income in subsequent periods in order to recognize the deferred tax assets as of December 31, 2013. Based on the Company’s evaluation, a deferred tax valuation allowance of $82.6 million, $105.5 million and $211.3 million was maintained against its net deferred tax assets as of December 31, 2013, 2012 and 2011, respectively. The Company’s deferred tax assets as of December 31, 2011 for which it has not established a valuation allowance relate to amounts that can be realized through future reversals of existing taxable temporary differences. The majority of the benefits of the Company’s net deferred tax assets can be carried forward for 20 years and applied to offset future taxable income. The Company’s deferred tax asset valuation allowance would be reversed if and when it becomes more likely than not that the Company will generate sufficient taxable income in the future to utilize the tax benefits of the related deferred tax assets.

Generally, the amount of tax expense or benefit allocated to continuing operations is determined without regard to the tax effects of other categories of income or loss, such as other comprehensive income. However, an exception to the general rule is provided when, in the presence of a valuation allowance against deferred tax assets, there is a pretax loss from continuing operations and pretax income from other categories. In such instances, income from other categories must offset the current loss from operations, the tax benefit of such offset being reflected in continuing operations. During the years ended December 31, 2012 and 2011, the Company reduced its deferred tax valuation allowance from continuing operations by $18.7 million and $19.5 million, respectively, to reflect the allocation of income from discontinued operations to continuing operations.

Included in the Company’s deferred tax assets as of December 31, 2013 was $121.0 million of federal income tax NOL carry-forwards, of which $61.2 million expire in 2030 and $59.8 million expire in 2031. The Company’s federal tax credit carry-forwards were $2.1 million at December 31, 2013 and expire from 2025 to 2029.

BBX and its subsidiaries currently file consolidated federal and state income tax returns. BBX filed separate state income tax returns for years ending prior to December 31, 2011. The Company’s state NOL carry-forwards were $541.3 million as of December 31, 2013 and expire from 2024 through 2031. Renin’s Canadian and United Kingdom subsidiaries’ earnings are subject to taxation in Canada and the United Kingdom. Renin had taxable losses in these tax jurisdictions during the two months ended December 31, 2013.

The Company’s income tax returns for all years subsequent to the 2009 tax year are subject to examination. Various state jurisdiction tax years remain open to examination. There were no income tax filings under examination as of December 31, 2013.

Prior to December 31, 1996, BankAtlantic was permitted to deduct from taxable income an allowance for bad debts which was in excess of the provision for such losses charged to income. Accordingly, at December 31, 2011, the Company had $21.5 million of excess allowance for bad debts for which no provision for income tax had been provided. Included in the provision for income taxes for the year ended December 31, 2012 was a $21.5 million reduction in bad debt expenses associated with the recapture of the excess allowance for bad debts upon the sale of BankAtlantic.