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11. INCOME TAXES | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
INCOME TAXES | For the years ended December 31, 2014, 2013 and 2012, we recognized income tax expense (benefit) comprised of the following (in thousands):
|  | December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
State current tax |  | $ | 1,283 |  |  | $ | 643 |  |  | $ | 1,160 |
Other current tax |  |  | 29 |  |  |  | (39 | ) |  |  | 32 |
Federal deferred tax |  |  | 869 |  |  |  | 3,794 |  |  |  | (46,901 | )
State deferred tax |  |  | (214 | ) |  |  | (888 | ) |  |  | (9,518 | )
Income tax expense (benefit) |  | $ | 1,967 |  |  | $ | 3,510 |  |  | $ | (55,227 | )
A reconciliation of the statutory U.S. federal rate and effective rates is as follows (in thousands):
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Federal tax |  |  | 34.00% |  |  |  | 34.00% |  |  |  | 34.00% |
State franchise tax, net of federal benefit |  |  | -3.64% |  |  |  | -14.20% |  |  |  | 17.49% |
Other Non deductible expenses |  |  | 0.00% |  |  |  | 0.07% |  |  |  | -2.42% |
Meals and entertainment |  |  | 4.85% |  |  |  | 1.98% |  |  |  | 2.22% |
Noncontrolling Interest in Partnerships |  |  | -2.88% |  |  |  | -1.48% |  |  |  | 1.79% |
Equity compensation |  |  | -8.72% |  |  |  | 35.39% |  |  |  | 10.69% |
Changes in valuation allowance |  |  | 24.52% |  |  |  | -17.88% |  |  |  | -1284.18% |
Return-to-provision |  |  | -9.57% |  |  |  | -1.96% |  |  |  | -47.80% |
Deferred true-ups and other |  |  | 16.34% |  |  |  | 0.00% |  |  |  | 0.00% |
Uncertain tax positions |  |  | -3.67% |  |  |  | -2.92% |  |  |  | 6.45% |
Expiring net operating losses |  |  | 2.61% |  |  |  | 26.64% |  |  |  | 0.00% |
Income tax expense (benefit) |  |  | 53.85% |  |  |  | 59.64% |  |  |  | -1261.76% |
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial and income tax reporting purposes and operating loss carryforwards. Our deferred tax assets and liabilities comprise the following (in thousands):
|  | December 31, |
|  | 2014 |  |  | 2013 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses |  | $ | 87,709 |  |  | $ | 82,630 |
Accrued expenses |  |  | 3,594 |  |  |  | 3,610 |
Straight-Line Rent Adjustment |  |  | 8,897 |  |  |  | 8,053 |
Unfavorable contract liability |  |  | 2,811 |  |  |  | 3,365 |
Equity compensation |  |  | 253 |  |  |  | 645 |
Allowance for doubtful accounts |  |  | 2,124 |  |  |  | 2,494 |
Other |  |  | 1,891 |  |  |  | 1,400 |
Valuation Allowance |  |  | (6,378 | ) |  |  | (6,593 | )
Total Deferred Tax Assets |  | $ | 100,901 |  |  | $ | 95,604 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Property Plant & Equipment |  |  | (7,755 | ) |  |  | (7,948 | )
Goodwill |  |  | (17,833 | ) |  |  | (15,101 | )
Intangibles |  |  | (12,105 | ) |  |  | (12,162 | )
NAEM Reserve |  |  | (6,441 | ) |  |  | (5,555 | )
Other |  |  | (4,189 | ) |  |  | (1,603 | )
Total Deferred Tax Liabilities |  | $ | (48,323 | ) |  | $ | (42,369 | )
Net Deferred Tax Asset |  | $ | 52,578 |  |  | $ | 53,235 |
As of December 31, 2014, the Company had federal net operating loss carryforwards of approximately $245.3 million, which expire at various intervals from the years 2017 to 2034. The Company also had state net operating loss carryforwards of approximately $187.0 million, which expire at various intervals from the years 2015 through 2034. As of December 31, 2014, $23.5 million of our federal net operating loss carryforwards acquired in connection with the 2011 acquisition of Raven Holdings U.S., Inc. are subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. Future ownership changes as determined under Section 382 of the Internal Revenue Code could further limit the utilization of net operating loss carryforwards. Cumulative excess tax benefits of $5.4 million, related to the exercise of stock options, will be recorded in equity when realized. We considered all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities and recent financial operations. The evaluation of this evidence requires significant judgment about the forecasts of future taxable income, based on the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income. As of December 31, 2014, we have determined that deferred tax assets of $100.9 million are more likely-than-not to be realized. We have also determined that deferred tax liabilities of $ 17.8 million are required related to book basis in goodwill that has an indefinite life. Prior to 2012, we had recorded a valuation allowance on the majority of our deferred tax assets to reduce the deferred tax assets to the amount that was believed more likely-than-not to be realized. In assessing the need for a valuation allowance, we considered all available positive and negative evidence, including past results, the existence of cumulative losses in prior years, forecasted future taxable income, and prudent tax planning strategies. During 2012, the majority of our valuation allowance, primarily related to net operating losses (NOLs), was reversed based on historical earnings and forecasts of future taxable income, resulting in the recognition of a $56.2 million tax benefit. The remaining valuation allowance primarily relates to state NOL’s For the next five years, and thereafter, federal net operating loss carryforwards expire as follows (in thousands):
Year Ended | Total Net Operating Loss Carryforwards |  |  | Amount Subject to 382 limitation |
2015 |  | – |  |  |  | – |
2016 |  | – |  |  |  | – |
2017 |  | 15,185 |  |  |  | 1,501 |
2018 |  | 12,284 |  |  |  | – |
2019 |  | 7,178 |  |  |  | – |
Thereafter |  | 213,929 |  |  |  | 40,610 |
| $ | 248,576 |  |  | $ | 42,111 |
For the next five years, and thereafter, California net operating loss carryforwards expire as follows (in thousands):
Year Ended | Total Net Operating Loss Carryforwards |
2015 |  | 13,741 |
2016 |  | 5,629 |
2017 |  | 9,172 |
2018 |  | – |
2019 |  | – |
Thereafter |  | 18,964 |
| $ | 47,506 |
We file consolidated income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010. We do not anticipate the results of any open examinations would result in a material change to its financial position. A reconciliation of the total gross amounts of unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012 is as follows (in thousands):
|  | 2014 |  |  | 2013 |  |  | 2012 |
Balance at beginning of year |  | $ | 3,970 |  |  | $ | 4,184 |  |  | $ | 3,756 |
Increases (Decreases) related to prior year tax positions |  |  | – |  |  |  | (214 | ) |  |  | 428 |
Expiration of the statute of limitations for the assessment of taxes |  |  | (209 | ) |  |  | – |  |  |  | – |
Balance at end of year |  | $ | 3,761 |  |  | $ | 3,970 |  |  | $ | 4,184 |
The Company believes it is reasonably possible it will reduce its unrecognized tax benefits by $3.8 million within the next twelve months. We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. During the year ended December 31, 2014 we accrued an insignificant amount of interest expense. As of December 31, 2014, accrued interest and penalties were insignificant.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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