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Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

6. Income Taxes:

Solitario's income tax expense from continuing operations consists of the following as allocated between foreign and United States components:

(in thousands)	2015	2014
Current:
Federal	$ -	$ -
State	-	-
Foreign	-	-
Deferred:
Federal	662	-
State	(102)	-
Foreign	-	-
Income tax expense	$ 560	$ -

Income tax expense is included in the financial statements as follows:

(in thousands)	2015	2014
Continuing Operations	$ 560	$ -
Discontinued Operations	998	-
Other Comprehensive Income	(1,558)	-
Total Income tax expense	$ -	$ -

Consolidated loss before income taxes includes losses from foreign operations of $98,000 and $262,000 in 2015 and 2014, respectively.

As discussed in Note 1, the Transaction resulted in a $13,307,000 before tax gain reported in discontinued operations. Solitario recorded $998,000 of tax expense in discontinued operations which was net of $3,930,000 tax benefit for the release of valuation allowance. Income taxes have been allocated between discontinued operations and continuing operations in accordance with ASC No. 740 “Income Taxes” (“ASC 740”).

See Note 3, “Marketable Equity Securities” for detail of the deferred taxes associated with the sale of marketable equity securities and the deferred taxes associated with unrealized gains and losses associated with other comprehensive income related to marketable equity securities.

The net deferred tax assets/liabilities in the December 31, 2015 and 2014 consolidated balance sheets include the following components:

(in thousands)	2015	2014
Deferred tax assets:
Loss carryovers	$6,982	$11,168
Deferred gain	-	2,376
Stock option compensation expense	7	350
Royalty	1,482	1,387
Unrealized loss on derivative securities	38	-
Earnings in Unconsolidated Subsidiary	-	865
Other	105	105
Valuation allowance	(8,571)	(12,431)
Total deferred tax assets	43	3,820
Deferred tax liabilities:
Unrealized gain on derivative securities	-	238
MH-LLC investment	-	2,305
Exploration costs	-	845
Unrealized gains on marketable equity securities	41	152
Capitalized interest	-	277
Other	2	3
Total deferred tax liabilities	43	3,820
Net deferred tax liabilities	$ -	$ -

A reconciliation of expected federal income taxes on income (loss) from continuing operations at statutory rates, with the expense for income taxes is as follows:

(in thousands)	2015	2014
Expected income tax benefit	$(976)	$(627)
Reversal of disproportionate Tax Effect in other comprehensive income	1,558	-
Equity based compensation	575	850
Foreign tax rate differences	3	(101)
State income tax	(606)	(146)
True-up of deferred taxes	267	-
Tax attributes of disposed subsidiary	3,941	-
Previously unrecognized basis in disposed subsidiary	(4,170)	-
Change in valuation allowance	(40)	(5)
MH-LLC investment	1	3
Permanent differences and other	7	26
Income tax expense	$ 560	$ -

During 2015 the valuation allowance was decreased primarily due to the utilization of loss carryforwards for which no tax benefit was previously realized. During 2014, the valuation allowance was increased primarily as a result of increases in Solitario foreign net operating loss carryforwards, for which it was more likely than not that the deferred tax benefit would not be realized, as well as a decrease in unrealized gains available to offset the future reversal of deferred tax assets.

During 2015 and 2014, other comprehensive income/(loss) was recognized in the amounts of approximately ($327,000) and ($1,580,000), respectively. In 2015 and 2014, no tax benefit was recorded in other comprehensive income/(loss) as a $111,000 and $535,000 valuation allowance fully offset the attendant tax benefit.

At December 31, 2015, Solitario has unused US Federal Net Operating Loss ("NOL") carryovers of $58,000 and unused US State NOL carryovers of $1,601,000 which expire in 2034. Solitario has unused Capital Loss carryovers of $5,902,000 for US Federal and US State purposes which begin expiring in 2019. Solitario has foreign loss carryforwards for which Solitario has provided a full valuation allowance and which expire over various periods from five years to no expiration depending on the foreign jurisdiction.

Solitario adopted the provisions ASC 740, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 requires that Solitario recognize in its consolidated financial statements, only those tax positions that are “more-likely-than-not” of being sustained as of the adoption date, based on the technical merits of the position. As a result of the implementation of ASC 740, Solitario performed a comprehensive review of its material tax positions in accordance with recognition and measurement standards established by ASC 740. The provisions of ASC 740 had no effect on Solitario’s financial position, cash flows or results of operations at December 31, 2015 or December 31, 2014, or for the years then ended as Solitario had no unrecognized tax benefits.

Solitario and its subsidiaries are subject to the following material taxing jurisdictions: United States Federal, State of Colorado, Mexico and Peru. Solitario’s policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. Solitario has no accrued interest or penalties related to uncertain tax positions as of December 31, 2015, or December 31, 2014 or for the years then ended.