13. Income Taxes

U.S. and foreign components of income (loss) before income taxes from continuing operations were as follows (in thousands):



		For the Years Ended
		December 31,
		2014	2013
U.S.	$	4,378	48,643
Foreign		(3,175)	(963)
Income from continuing operations before income taxes	$	1,203	47,680

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



		For the Years Ended December 31,
		2014	2013	2012
Continuing operations	$	(3,101)	20	(18,744)
Discontinued operations		-	-	21,005
Total (benefit) provision
for income taxes	$	(3,101)	20	2,261
Continuing operations:

Current:
Federal	$	6	-	-
State		-	20	-
Total current		6	20	-
Deferred:
Federal		(2,605)	-	(16,071)
State		(502)	-	(2,673)
Total deferred		(3,107)	-	(18,744)
(Provision) benefit for income
taxes from continuing operations	$	(3,101)	20	(18,744)

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,
		2014		2013		2012
Income tax provision (benefit) at
expected federal income tax
rate of 35%	$	421	35.00%	16,688	35.00%	(16,527)	35.00%
(Decrease) increase resulting from:
(Benefit) provision for state taxes
net of federal benefit		(369)	-30.67%	2,003	4.20%	(1,738)	3.68%
Taxes related to subsidiaries not consolidated for income taxes		(6,963)	-578.80%	(6,054)	-12.70%	-	0.00%
Sale of BankAtlantic		-	0.00%	5,884	12.34%	-	0.00%
Nondeductible executive compensation		1,883	156.52%	2,223	4.66%	-	0.00%
Valuation allowance		1,407	116.96%	(22,584)	-47.36%	-	0.00%
Acquisition related costs		217	18.04%	38	0.08%	-	0.00%
Penalties		350	29.09%	-	0.00%	-	0.00%
Other - net		(47)	-3.91%	1,822	3.82%	(479)	1.01%
(Benefit) provision for income taxes	$	(3,101)	-257.77%	20	0.04%	(18,744)	39.69%

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:		2014	2013	2012
Allowance for loans and impairments for
financial statement purposes	$	17,666	15,354	21,914
Federal and State NOL and tax credit carryforward		64,132	63,781	74,494
Real estate held for development and sale capitalized costs for tax purposes
in excess of amounts capitalized for financial statement purposes		3,841	3,137	5,338
Accumulated other comprehensive income		-	-	-
Share based compensation		1,302	691	883
Other		-	-	2,919
Total gross deferred tax assets		86,941	82,963	105,548
Less valuation allowance		(83,970)	(82,563)	(105,548)
Total deferred tax assets		2,971	400	-
Deferred tax Liabilities:
Intangible assets		1,912	-	-
Properties and equipment		1,043	-	-
Other		16	400	-
Total gross deferred tax liabilities		2,971	400	-
Net deferred tax (liability) asset		-	-	-
Less net deferred tax asset at beginning of period		-	-	-
Net deferred tax liabilities from acquisitions		3,107	-	-
Change in deferred tax valuation allowance for continuing operations		-	-	(2,261)
Decrease in accumulated other comprehensive income		-	-	-
Benefit (provision) for deferred income taxes		3,107	-	(2,261)
Provision for deferred income taxes - discontinued operations		-	-	(21,005)
Benefit for deferred income taxes - continuing operations	$	3,107	-	18,744

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



		For the Years Ended December 31,
		2014	2013	2012
Balance, beginning of period	$	82,563	105,548	211,326
Other comprehensive loss		-	-	(4,731)
Increase (decrease) included in continuing operations		1,407	(22,584)	-
Acquisitions		-	(401)	-
Decrease included in discontinued operations		-	-	(101,047)
Balance, end of period	$	83,970	82,563	105,548

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 a taxable loss during the year ended December 31, 2014 and the Company concluded that it was more-likely-than-not that it would not generate sufficient taxable income in subsequent periods in order to recognize the deferred tax assets as of December 31, 2014. Based on the Company’s evaluation, a deferred tax valuation allowance of $84.0 million, $82.6 million and $105.5 million was maintained against its net deferred tax assets as of December 31, 2014, 2013 and 2012, respectively. The Company’s deferred tax assets as of December 31, 2014 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.

In connection with the 2014 Acquisitions the Company established net taxable temporary differences as a result of recording for financial reporting purposes identifiable intangible assets and properties and equipment in excess of amounts recognized for tax purposes. After considering the taxable temporary differences established in connection with the 2014 Acquisitions, the Company reduced its deferred tax asset valuation allowance and recognized $3.1 million benefit for income taxes.

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 year ended December 31, 2012, the Company reduced its deferred tax valuation allowance from continuing operations by $18.7 million to reflect the allocation of income from discontinued operations to continuing operations.

Included in the Company’s deferred tax assets as of December 31, 2014 was $119.8 million of federal income tax NOL carry-forwards, of which $58.4 million expire in 2030, $59.8 million expire in 2031 and $1.6 million expire in 2034. The Company’s federal tax credit carry-forwards were $2.1 million at December 31, 2014 and expire from 2025 to 2029.

BBX Capital and its subsidiaries currently file consolidated federal and state income tax returns. BBX Capital filed separate state income tax returns for years ending prior to December 31, 2011. The Company’s state NOL carry-forwards were $540.6 million as of December 31, 2014 and expire from 2024 through 2034. Renin’s Canadian 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 and the year ended December 31, 2014. The Company’s foreign income tax NOL carryforwards were $3.3 million and expire from 2023 to 2024.

The Company’s income tax returns for all years subsequent to the 2010 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, 2014.

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.