(5) INCOME TAXES

The provision for income taxes is recorded at the end of each interim period based on the Company’s best estimate of its effective income tax rate expected to be applicable for the full fiscal year. The Company’s effective income tax rate was 2% for the three and nine months ended September 30, 2017, and resulted in income tax expense of $44,000 and $89,000 respectively, due to alternative minimum taxes. There was no income tax expense during the three or nine months ended September 30, 2016.

The Company has generated a net operating loss carryforward (NOL) for federal income tax purposes of approximately $5.3 million as of September 30, 2017, which is available to offset taxable income in the future at various dates through 2035. The Company also has available NOL carryforwards of approximately $14.7 million for state purposes, which begin to expire at various dates ranging from five to seven years.

As of September 30, 2017 and December 31, 2016, the Company has a valuation allowance on all deferred tax assets. The Company has generated taxable income in 2017 and projects income in future periods. Based on these factors, the Company is currently evaluating the realization of its deferred tax assets and may have an adjustment to its valuation allowance in the future.

The Company paid no income taxes during the three or nine months ended September 30, 2017 or 2016.