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Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

5. Income Taxes:

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

(in thousands)	2016	2015
Current:
Federal	$ -	$ -
State	-	-
Foreign	-	-
Deferred:
Federal	(309)	662
State	(44)	(102)
Foreign	-	-
Income tax (benefit) expense	$ (353)	$560

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

(in thousands)	2016	2015
Continuing Operations	$ (353)	$ 560
Discontinued Operations	-	998
Other Comprehensive Income	353	(1,558)

Consolidated loss before income taxes includes losses from foreign operations of $154,000 and $98,000 in 2016 and 2015, respectively.

As discussed in Note 1, “Business and Summary of Significant Accounting Policies,” during 2015, 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 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, 2016 and 2015 consolidated balance sheets include the following components:

(in thousands)	2016	2015
Deferred tax assets:
Loss carryovers	$8,168	$6,982
Stock option compensation expense	-	7
Royalty	1,482	1,482
Unrealized loss on derivative securities	-	38
Other	105	105
Valuation allowance	(9,118)	(8,571)
Total deferred tax assets	637	43
Deferred tax liabilities:
Unrealized gain on derivative securities	196	-
Unrealized gains on marketable equity securities	395	41
Other	46	2
Total deferred tax liabilities	637	43
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)	2016	2015
Expected income tax benefit	$(701)	$(976)
Reversal of disproportionate tax effect in other comprehensive income	-	1,558
Equity based compensation	366	575
Foreign tax rate differences	6	3
State income tax	(237)	(606)
True-up of deferred taxes	-	267
Tax attributes of disposed subsidiary	1,652	3,941
Previously unrecognized basis in disposed subsidiary	(1,884)	(4,170)
Change in valuation allowance	547	(40)
MH-LLC investment	-	1
Permanent differences and other	(102)	7
Income tax (benefit) expense	$ (353)	$ 560

During 2016, the valuation allowance was decreased primarily due to the removal of deferred tax assets related to abandoned properties in Mexico. During 2015, the valuation allowance was decreased primarily due to the utilization of loss carryforwards for which no tax benefit was previously realized.

During 2016 and 2015, other comprehensive income/(loss) was recognized in the amounts of approximately $954,000 and ($327,000), respectively. In 2016 we recognized an income tax benefit of $353,000 and in 2015 no tax benefit was recorded in other comprehensive income/(loss) as a $111,000 valuation allowance fully offset the attendant tax benefit.

At December 31, 2016, Solitario has unused US Federal Net Operating Loss ("NOL") carryovers of $1,658,000 and unused US State NOL carryovers of $3,191,000 which begin expiring in 2034. Solitario has unused Capital Loss carryovers of $11,845,000 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 five years related to its prior exploration in Peru.

Solitario adopted 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, 2016 or December 31, 2015, 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 and Peru. Solitario’s United States federal return for years 2013 and forward and our United States state and Peru returns for tax years 2012 and forward are subject to examination. 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, 2016, or December 31, 2015 or for the years then ended.