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Note 11 - Federal and State Income Taxes

12 Months Ended

Dec. 31, 2013

11. FEDERAL AND STATE INCOME TAXES

Under GAAP, deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax reporting purposes.

Significant components of the Company’s deferred tax liabilities and assets at December 31 are as follows:

	2013				2012
	(in thousands)
	Current		Long-Term		Current		Long-Term

Deferred tax liabilities:
Property and equipment	$	-	$	73,099	$	-	$	69,667
Unrealized gains on securities		3,769		-		2,591		-
Prepaid expenses and other		2,498		-		4,171		-

Total deferred tax liabilities		6,267		73,099		6,762		69,667

Deferred tax assets:
Allowance for doubtful accounts		561		-		439		-
Alternative minimum tax credit carryforward		-		318		-		193
QAFMV tax credit carryforward		-		864		-		864
New hire tax credit		-		124		-		124
Compensated absences		594		-		616		-
Self-insurance allowances		1,027		-		787		-
Share-based compensation		-		702		-		582
Goodwill		-		37		-		364
Marketable equity securities		767		-		723		-
Net operating loss carryover		-		21,255		-		23,115
Capital loss carryover		667		-		915		-
Non-competition agreement		-		30		-		47
Other		-		5		10		10
Total deferred tax assets		3,616		23,335		3,490		25,299
Net deferred tax liability	$	2,651	$	49,764	$	3,272	$	44,368

The reconciliation between the effective income tax rate and the statutory Federal income tax rate for the years ended December 31, 2013, 2012 and 2011 is presented in the following table:

	2013				2012				2011
	(in thousands)
	Amount		Percent		Amount		Percent		Amount			Percent

Income tax at the statutory federal rate	$	3,288		34.0	$	1,222		34.0	$	(1,901	)		34.0
Nondeductible expenses		127		1.3		138		3.8		171			(3.0	)
QAFMV credit		-		-		-		-		-			-
New hire credit		-		-		-		-		(124	)		2.2
State income taxes—net of federal benefit		341		3.6		56		1.6		(879	)		15.7
Total income tax expense (benefit)	$	3,756		38.9	$	1,416		39.4	$	(2,733	)		48.9

The provision (benefit) for income taxes consisted of the following:

	2013		2012		2011
	(in thousands)
Current:
Federal	$	124	$	-	$	-
State		35		51		35
		159		51		35
Deferred:
Federal		2,909		1,166		(1,904	)
State		688		199		(864	)
		3,597		1,365		(2,768	)
Total income tax expense (benefit)	$	3,756	$	1,416	$	(2,733	)

The Company has alternative minimum tax credits of approximately $318,000 at December 31, 2013, which have no expiration date under the current federal income tax laws and general business credits of approximately $988,000 which begin to expire after the year 2030. The Company also has net operating loss carryovers for federal income purposes of approximately $55,994,000 which begin to expire after the year 2030.

In determining whether a tax asset valuation allowance is necessary, management, in accordance with the provisions of ASC 740-10-30, weighs all available evidence, both positive and negative to determine whether, based on the weight of that evidence, a valuation allowance is necessary. If negative conditions exist which indicate a valuation allowance might be necessary, consideration is then given to what effect the future reversals of existing taxable temporary differences and the availability of tax strategies might have on future taxable income to determine the amount, if any, of the required valuation allowance. As of December 31, 2013, management determined that the future reversals of existing taxable temporary differences and available tax strategies would generate sufficient future taxable income to realize its tax assets and therefore a valuation allowance was not necessary.

The Company does not have any material accrued interest or penalties associated with any unrecognized tax benefits. The Company's policy is to account for interest and penalties related to uncertain tax positions, if any, in income tax expense. The Company did not have any unrecognized tax benefits at December 31, 2013 or December 31, 2012 and there was no change in total gross unrecognized tax benefit liabilities for the year ended December 31, 2013.

The Company and its subsidiaries are subject to U.S. and Canadian federal income tax laws as well as the income tax laws of multiple state jurisdictions. The major tax jurisdictions in which the Company operates generally provide for a deficiency assessment statute of limitation period of three years and as a result, the Company’s tax years 2010 and forward remain open to examination in those jurisdictions.

During 2007, the Company contracted with a third-party qualified intermediary in order to implement a like-kind exchange tax program. Under the program, dispositions of eligible trucks or trailers and acquisitions of replacement trucks or trailers are made in a form whereby any associated tax gains related to the disposal are deferred. To qualify for like-kind exchange treatment, we exchange, through our qualified intermediary, eligible trucks or trailers being disposed with trucks or trailers being acquired that allows us to generally carryover the tax basis of the trucks or trailers sold. The program is expected to result in a significant deferral of federal and state income taxes. Under the program, the proceeds from the sale of eligible trucks or trailers carry a Company-imposed restriction for the acquisition of replacement trucks or trailers. These proceeds may be disqualified under the program at any time and at the Company’s sole discretion, however income tax deferral would not be available for any sale for which the Company disqualifies the related proceeds. At December 31, 2013, the Company had $623,000 of restricted cash held by the third-party qualified intermediary. At December 31, 2012, the Company had $503,000 of restricted cash held by the third-party qualified intermediary. Restricted cash is accounted for in “Accounts receivable-other”.

- 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.

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