NOTE P – INCOME TAXES

As of December 31, 2015, the Company had consolidated income tax net operating loss (“NOL”) carryforwards for federal tax purposes of approximately $143,723,339 and net operating loss carryforwards for foreign income tax purposes of approximately $19,620,883. The federal NOL carryforwards from 2005 forward will expire in various years beginning 2025 and ending through the year 2035. From 2025 through 2027, approximately $43 million of the NOL will expire, and from 2028 through 2035, approximately $101 million of the NOL will expire.

The components of the provision for income tax (benefits) are attributable to continuing operations as follows:


	December 31, 2015		December 31, 2014			December 31, 2013
Current
Federal	$	—	$	(481,055	)	$	481,055
State		—		—			15,000

	$	—	$	(481,055	)	$	496,055

Deferred
Federal	$	—	$	—		$	—
State		—		—			—

	$	—	$	—		$	—

Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:


Deferred tax assets:
Net operating loss and tax credit carryforwards	$	56,241,535
Capital loss carryforward		86,971
Accrued expenses		349,770
Reserve for accounts receivable		1,062,222
Start-up costs		107,153
Excess of book over tax depreciation		2,773,114
Stock option and restricted stock award expense		1,897,193
Investment in unconsolidated entity		2,229,210
Less: valuation allowance		(64,553,394	)

	$	193,774

Deferred tax liability:
Property and equipment basis	$	69,311
Prepaid expenses		124,463

	$	193,774

Net deferred tax asset	$	—

As reflected above, we have recorded a net deferred tax asset of $0 at December 31, 2015. As required by the Accounting for Income Taxes topic in the ASC, we have evaluated whether it is more likely than not that the deferred tax assets will be realized. Based on the available evidence, we have concluded that it is more likely than not that those assets would not be realized without the recovery and rights of ownership or salvage rights of high-value shipwrecks or other forms of taxable income, thus a valuation allowance has been recorded as of December 31, 2015.

The change in the valuation allowance is as follows:


December 31, 2015	$	64,553,394
December 31, 2014		60,312,726

Change in valuation allowance	$	4,240,668

Income taxes for the twelve month periods ended December 31, 2015, 2014 and 2013 differ from the amounts computed by applying the effective federal income tax rate of 34.0% to income (loss) before income taxes as a result of the following:


	December 31, 2015			December 31, 2014			December 31, 2013
Expected (benefit)	$	(6,190,436	)	$	(9,908,804	)	$	(3,483,374	)
Effects of:
U.S. income tax expense at the AMT 20% rate		—			—			(176,839	)
State income taxes net of federal benefits		(184,257	)		(294,933	)		509,495
Nondeductible expense		1,854,717			(126,601	)		31,640
Stock options and restricted stock awards		—			—			790,011
Derivatives		—			—			(783,994	)
Change in valuation allowance		4,900,061			10,469,108			(6,276,369	)
CFC Dividend Income		—			—			9,190,723
Change in rate estimate		—			—			15,767
Foreign Rate Differential		(380,085	)		(138,770	)		662,745
Reversal of Prior Year AMT Accrual		—			(481,055	)		—
Other, net		—			—			16,250

	$	—		$	(481,055	)	$	496,055

We have not recognized a material adjustment in the liability for unrecognized tax benefits and have not recorded any provisions for accrued interest and penalties related to uncertain tax positions.

The earliest tax year still subject to examination by a major taxing jurisdiction is 2012.