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16. Income Tax
 12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
16. Income Tax

 

The Company files a consolidated federal income tax return including all its domestic subsidiaries. State tax returns are filed on a consolidated, combined or separate basis depending on the applicable laws relating to the Company and its subsidiaries.

 

Components of tax expense (benefit) consist of the following:

 

    Year Ended December 31,
    2013     2012  
Current:            
Federal     —       —  
State and local   $ 5,765     $ 4,000  
Foreign     —       —  
      5,765       4,000  
                 
Deferred:                
Federal     —       (933,849 ) 
State and local     —       (151,408 ) 
Foreign     —       —  
Income tax expense/(benefit)   $ 5,765     $ (1,081,257 ) 

 

The income tax benefit recognized for the year ended December 31, 2012 was the result of the recognition of a deferred tax liability in the acquisition of Cilion. During the year ended December 31, 2013, there is minimal tax expense recognized. The deferred tax liability resulted in a reduction in the valuation allowance of the Company, as the Company believes the reversal of the deferred tax liability will occur prior to the expiration of the NOL carryforward. During the year ended December 31, 2013, there is minimal tax expense recognized due to state minimum taxes and the Company's valuation allowance. U.S. loss and foreign loss before income taxes are as follows:

 

    Year Ended December 31,
    2013     2012  
United States   $ (25,712,533 )   $   (2,981,086 )
Foreign     281,089       (2,382,436) ) 
Loss before income taxes   $ (24,431,444 )    $ (5,363,522 )

 

 

 

 

Income tax benefit differs from the amounts computed by applying the statutory U.S. federal income tax rate (34%) to loss before income taxes as a result of the following:

 

    Year Ended December 31,
    2013     2012  
Income tax expense/(benefit) at the federal statutory rate   $  (8,306,690 )    $  (1,823,598 ) 
Increase/(decrease) resulting from:                
    State tax expense/(benefit)     (695,240 )     (476,437 )
    Stock-based compensation     555,883       25,464  
    Foreign tax rate differential     219,762       475,342  
    Interest expense     327,647       429,673  
    Credits     —       (150,452 )
    Gain on bargain purchase     —       (16,727,979)  
    Loss on debt extinguishment     1,162,032       3,707,620  
    Cilion transaction costs     —       302,271  
    Other     69,195     196,721  
    Valuation allowance     6,673,176       12,960,118  
    Income tax expense/(benefit)     5,765       (1,081,257 )
                 
Effective tax rate     -0.02 %     20.16 % 

 

 

The components of the net deferred tax asset or (liability) are as follows:

 

 

    Year Ended December 31,
    2013     2012  
Deferred tax assets/(liabilities):            
    Organization, start-up costs & intangible assets     $ 9,302,636       $ 9,898,832  
   Stock-based compensation     114,946       233,365  
   Property, plant and equipment     (18,929,925)       (14,546,837 ) 
   Net operating loss carryforward     49,139,117       38,790,667  
    Convertible debt     (5,325)       (9,382 ) 
    Credit carryforward     1,500,000       1,500,000  
    Debt extinguishment     2,535,798       1,822,458  
    Other, net     1,544,586       839,555  
Total deferred tax assets (liabilities)     45,201,833       38,528,658  
  Less valuation allowance    $ (45,201,833)      $ (38,528,658 )
Deferred tax assets (liabilities)     —        —   

 

Based on the Company’s evaluation of current and anticipated future taxable income, the Company believes it is more likely than not that insufficient taxable income will be generated to realize the net deferred tax assets, and accordingly, a valuation allowance has been set against these net deferred tax assets.

 

The Company does not provide for U.S. income taxes for any undistributed earnings of the Company’s foreign subsidiaries, as the Company considers these to be permanently reinvested in the operations of such subsidiaries and have a cumulative foreign loss.  At December 31, 2013 and 2012, these undistributed losses totaled ($9,169,651) and ($9,494,738), respectively. If any earnings were distributed, some countries may impose withholding taxes. However, due to the Company’s overall deficit in foreign cumulative earnings and its U.S. loss position, the Company does not believe a material net unrecognized U.S. deferred tax liability exists.

 

ASC 740 Income Taxes provides that the tax effects from an uncertain tax position can be recognized in the Company’s financial statements only if the position is more-likely-than-not of being sustained on audit, based on the technical merits of the position. Tax positions that meet the recognition threshold are reported at the largest amount that is more-likely-than-not to be realized. This determination requires a high degree of judgment and estimation. The Company periodically analyzes and adjusts amounts recorded for the Company’s uncertain tax positions, as events occur to warrant adjustment, such as when the statutory period for assessing tax on a given tax return or period expires or if tax authorities provide administrative guidance or a decision is rendered in the courts. The Company does not reasonably expect the total amount of uncertain tax positions to significantly increase or decrease within the next 12 months. As of December 31, 2013, the Company’s uncertain tax positions were not significant for income tax purposes.

 

We conduct business globally and, as a result, one or more of the Company’s subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as India, Mauritius, and the United States. The Company files a U.S. federal income tax return and tax returns in three U.S. states, as well as in two foreign jurisdictions. Penalties and interest are classified as general and administrative expenses.

 

 

The following describes the open tax years, by major tax jurisdiction, as of December 31, 2013:

 

United States — Federal   2009 – present  
United States — State   2009 – present  
India   2007 – present  
Mauritius   2007 – present  

 

As of December 31, 2013, the Company had federal net operating loss carryforwards of approximately $115,000,000 and state net operating loss carryforwards of approximately $115,000,000.  The Company also has approximately $1,500,000 of alcohol and cellulosic biofuel credit carryforwards. The federal net operating loss and other tax credit carryforwards that expire in 2014. The state net operating loss carryforwards expire on various dates between 2027 through 2032. Under the current tax law, net operating loss and credit carryforwards available to offset future income in any given year may be limited by US or India statute regarding net operating loss carryovers and timing of expirations or upon the occurrence of certain events, including significant changes in ownership interests. The Company’s India subsidiary also will have net operating loss carryforwards as of March 31, 2014, its tax fiscal year end, of approximately $9,000,000 in US dollars, which expire from March 30, 2016 to March 30, 2023.