11. INCOME TAXES

Income tax expense on continuing operations for the periods presented differs from the “expected” federal income tax expense computed by applying the U.S. federal statutory rate of 34% to earnings before income taxes for the three months and nine ended June 30, as a result of the following:

	For the Three Months				For the Nine Months
	Ended June 30,				Ended June 30,
	2016		2015		2016		2015
Computed expected tax expense	$	1,570	$	4,257	$	4,763	$	4,508
State income taxes		733		18		860		166
Permanent differences		(67)		167		23		349
Section 45B credit		(250)		-		(2,000)		-
Total income tax expense	$	1,986	$	4,442	$	3,646	$	5,023

Included in the Company’s deferred tax liabilities at June 30, 2016 is approximately $16.4 million representing the tax effect of indefinite lived intangible assets from club acquisitions which are not deductible for tax purposes. These deferred tax liabilities will remain in the Company’s balance sheet until the related clubs are sold.

During the quarter ended March 31, 2016, the Company applied to claim certain additional IRC 45 B FICA Credits for prior years. As a result, $1.75 million was deducted from income tax expense in the quarter ended March 31, 2016 and $250,000 from the quarter ended June 30, 2016.

During the quarter ended June 30, 2016, the Company accrued $240,000 and $775,000 for additional income taxes owed New York State and New York City, respectively. As a result, $1.0 million was added to income tax expense in the quarter ended June 30, 2016.