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Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Taxes [Abstract]  
INCOME TAXES
11.INCOME TAXES

 

Our income tax (benefit) expense aggregated ($88,292), $87,865 and $102,640 (amounting to 35%, 43% and 53% of the (loss) income before income taxes, respectively) for the years ended December 31, 2014, 2013 and 2012, respectively. The income tax provision consisted of the following:

 

  Year Ended December 31, 
  2014  2013  2012 
Current $252  $301  $708 
             
Federal  (77,986)  74,713   89,788 
State  (10,558)  12,851   12,144 
Deferred  (88,544)  87,564   101,932 
Total ($88,292) $87,865  $102,640 

 

The actual income tax (benefit) expense differs from the expected tax computed by applying the U.S. federal corporate tax rate of 34% to income before income tax as follows:

 

  Year Ended December 31, 
  2014  2013  2012 
Computed expected tax (benefit) expense ($86,853) $69,788  $65,332 
State income taxes, net of federal (benefit) expense  (6,968)  8,482   8,015 
Share-based compensation  10,201   10,526   9,766 
Research and development tax credit  (19,405)  (21,887)  (10,813)
Other  14,733   20,956   30,340 
Total income tax (benefit) expense ($88,292) $87,865  $102,640 

 

The significant components of our deferred tax asset consisted of the following:

 

  As of December 31, 
  2014  2013 
Product rights $130,036  $165,527 
Property, plant and equipment  225,229   52,094 
Research and development tax credit  266,078   235,567 
Federal net operating loss carryforward  464,998   525,012 
State net operating loss carryforward  165,901   201,698 
Interest rate swap  15,486   13,166 
Prepaid expenses and other  (6,925)  (23,171)
Deferred tax asset $1,260,803  $1,169,893 

 

We have a state net operating loss carryforward of approximately $1,858,000 that expires in 2028 through 2031, if not utilized before then, and a federal net operating loss carryforward of approximately $1,368,000 that expires in 2029 through 2031, if not utilized before then. The $965,000 licensing payment that we made during the fourth quarter of 2004 was treated as an intangible asset and is being amortized over 15 years, for tax return purposes only. Approximately $1,112,000 of our investment to produce pharmaceutical-grade Nisin for Mast Out® was expensed as incurred for our books. Included in this amount is approximately $820,000 ($65,000 during the fourth quarter of 2013 and $755,000 during the year ended December 31, 2014) that will be capitalized and depreciated over statutory periods for tax return purposes only.

 

Deferred tax assets are recognized only when it is probable that sufficient taxable income will be available in future periods against which deductible temporary differences and credits may be utilized. However, the amount of the deferred tax asset could be reduced if projected income is not achieved due to various factors, such as unfavorable business conditions. If projected income is not expected to be achieved, we would decrease the deferred tax asset to the amount that we believe can be realized.

 

Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership, as defined.

 

The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2011. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements.