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INCOME TAXES
 12 Months Ended
Dec. 31, 2014
INCOME TAXES  
INCOME TAXES

NOTE 8.      INCOME TAXES

 

For tax periods ending before August 31, 2012, IOT was part of the ARL consolidated federal return.  After that date, IOT and the rest of the ARL group joined the MRHI consolidated group for tax purposes.  The income tax expense for the first part of the 2012 tax period was calculated under a tax sharing and compensating agreement between ARL, TCI and IOT.  That agreement continued until August 31, 2012 at which time a new tax sharing and compensating agreement was entered into by ARL, TCI, IOT and MRHI for the remainder of 2012 and subsequent years.  For 2014, MRHI, ARL, TCI and IOT had a combined net taxable loss and IOT recorded a current tax expense of $0.9 million.  The benefit or expense is calculated based on the amount of losses absorbed by taxable income multiplied by the statutory rate of 35% per the tax sharing and compensating agreements.

 

Current income tax expense is attributable to (dollars in thousands):

 

 

 

2014

 

 

2013

 

 

2012

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations

 

$

2,705

 

 

$

8,729

 

 

$

2,360

 

Income from discontinued operations

 

 

-

 

 

 

-

 

 

 

37

 

 

 

$

2,705

 

 

$

8,729

 

 

$

2,397

 

 

                                                                                        

 

The following table presents the principal reasons for the differences between the Company’s effective tax rate and the United States statutory income tax rate of 35% (dollars in thousands):

 

 

 

2014

 

 

2013

 

 

2012

 

 

 

 

 

 

 

 

 

 

 

Federal income tax at statutory rate

 

$

946

 

 

$

3,055

 

 

$

839

 

State tax expense

 

 

-

 

 

 

-

 

 

 

8

 

Gain on sale differences

 

 

-

 

 

 

-

 

 

 

-

 

Other

 

 

-

 

 

 

-

 

 

 

(8

)

Utilization of net operating loss and minimum tax credit carry forwards

 

 

-

 

 

 

-

 

 

 

-

 

Effective income tax rate

 

 

35

%

 

 

35

%

 

 

35

%

 

Deferred income taxes reflect the tax effects of temporary timing differences between carrying amounts of assets and liabilities reflected on the financial statements and the amounts used for income tax purposes.  IOT’s tax basis in its net assets differs from the amount at which its net assets are reported for financial statement purposes, principally due to the accounting for gains and losses on property sales, and depreciation on owned properties.  The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (dollars in thousands):

 

 

 

2014

 

 

2013

 

 

2012

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and amortization

 

$

(516

)

 

$

(514

)

 

$

(514

)

Allowance for loss

 

 

694

 

 

 

694

 

 

 

694

 

Other

 

 

-

 

 

 

-

 

 

 

38

 

Federal benefit of NOL carryforward

 

 

1,078

 

 

 

1,078

 

 

 

1,078

 

Federal benefit of AMT caryforward

 

 

164

 

 

 

164

 

 

 

164

 

Deferred tax asset

 

$

1,420

 

 

$

1,422

 

 

$

1,460

 

Less valuation allowance

 

 

(1,420

)

 

 

(1,422

)

 

 

(1,460

)

Total deferred tax asset

 

$

-

 

 

$

-

 

 

$

-

 

 

Recognition of the benefits of deferred tax assets will require IOT to generate future taxable income. There is no assurance that IOT will generate earnings in future years.  Therefore, IOT has established a valuation allowance for deferred tax assets of approximately $1.4 million, $1.4 million and $1.5 million as of December 31, 2014, 2013 and 2012, respectively.

 

In 2014, IOT used approximately $2.7 million of current losses from the consolidated group.  In 2013, the company used approximately $8.7 million of losses from the ARL consolidated group.  In 2012, IOT used approximately $2.4 million of losses from the consolidated group. The most recent loss year is 2010, which, if not used, will expire in 2030.  The alternative minimum tax credit balance did not change in 2014 and remains at approximately $0.2 million.  The credit has no expiration date.

 

IOT is subject to routine audits by taxing jurisdictions; however, there are currently no audits in progress for any tax periods.  Management believes IOT is no longer subject to income tax examinations for years prior to 2011.