Income Taxes

The components of the Company's net deferred tax assets at December 31 are as follows:



	2015			2014

Deferred Tax Assets
Net operating loss and tax credits	$	2,274,994		$	2,205,260
Property and equipment and intangibles	326,499			300,301
Allowance for accounts receivable	145,200			172,008
Reserve for expired product	849,579			817,736
Inventory	1,154,507			1,412,477
Deferred charges	660,973			1,504,835
Cumulative compensation costs incurred on deductible equity awards	1,675,757			1,676,729
Total deferred tax assets	7,087,509			8,089,346

Deferred Tax Liabilities
Intangible assets	(3,162,502		)	(3,707,535		)
Net deferred tax assets, before valuation allowance	3,925,007			4,381,811
Less: deferred tax asset valuation allowance	(185,497		)	(152,074		)
Net deferred tax assets	$	3,739,510		$	4,229,737

The following table summarizes the amount and year of expiration of the Company's federal and state net operating loss carryforwards as of December 31, 2015:



Years of expiration	Federal		State

2016 - 2018	$	—	$	562,865
2019 - 2028	—		38,585,151
2029	42,973,043		10,266,915
2030 - 2035	1,984,927		1,615,752
Total federal and state net operating loss carryforwards	$	44,957,970	$	51,030,683

The Company has total recognized carryforward tax assets of $0.2 million for foreign tax credits and AMT carryforwards. In addition, the Company has recognized as of December 31, 2015 federal Orphan Drug and Research and Development tax credits of $1.1 million that expire between 2021 and 2035.

The Company has unrecognized federal net operating loss carryforwards as a result of the exercise of nonqualified options of approximately $43.0 million. These benefits occurred as a result of the actual tax benefit realized upon an employee's exercise exceeding the cumulative book compensation charge associated with the awards and will be recognized in the year in which they are able to reduce current income taxes payable. Accordingly, deferred tax assets are not recognized for these net operating loss carryforwards or credit carryforwards resulting from the exercise of nonqualified options. The Company's utilization of these net operating loss carryforwards and a net operating loss in 2013, resulted in minimal income taxes paid in each of the years 2009 through 2015. The Company expects to pay minimal income taxes in 2016 through utilization of these net operating loss carryforwards. The Company has $51.0 million of state net operating loss carryforwards. This amount includes $45.1 million from the exercise of nonqualified options during 2009 and 2015. The state net operating loss carryforwards above include approximately $3.9 million that is subject to a valuation allowance at December 31, 2015.

Income tax (expense) benefit includes the following components for the years ended December 31:



	2015			2014			2013

Current:
Federal	$	(41,326	)	$	(1,440,010	)	$	(45,287	)
State and other	(44,276		)	(250,064		)	(11,580		)
Total current income tax expense	(85,602		)	(1,690,074		)	(56,867		)

Deferred:
Federal	(385,723		)	213,552			1,426,701
State	(104,504		)	95,778			153,217
Total deferred income tax benefit (expense)	(490,227		)	309,330			1,579,918
Total income tax benefit (expense)	$	(575,829	)	$	(1,380,744	)	$	1,523,051

Deferred income tax is comprised of the following components for the years ended December 31:



	2015			2014			2013

Deferred tax (expense) benefit, excluding items below	$	26,193		$	85,844		$	60,739
Inventory	(257,970		)	(83,418		)	310,477
Operating loss carryforwards	34,465			17,424			788,342
Tax credit carryforwards	35,272			43,398			196,631
Valuation allowance due to changes in net deferred tax asset balances	(33,405		)	(20,457		)	(23,299		)
Deductible equity awards	(972		)	298,039			127,308
Allowance for accounts receivable	(26,808		)	(63,438		)	161,084
Deferred charges	(59,028		)	838,556			83,755
Reserve for expired product	31,784			217,330			(106,554		)
Intangible assets	(239,758		)	(1,023,948		)	(18,565		)
Deferred income tax benefit (expense)	$	(490,227	)	$	309,330		$	1,579,918

The valuation allowance at December 31, 2015, 2014 and 2013 is primarily related to state tax benefits at CET and CPSC that will likely not be realized.

The Company’s effective income tax rate for 2015, 2014 and 2013 reconciles with the federal statutory tax rate as follows:



	2015		2014		2013

Federal tax expense at statutory rate	34	%	34	%	34	%
State income tax expense (net of federal income tax benefit)	4	%	5	%	4	%
Permanent differences associated with general business credits	(3	)%	(1	)%	5	%
Other permanent differences	10	%	1	%	—	%
Other	1	%	(2	)%	(1	)%
Net income tax expense	46	%	37	%	42	%

During 2012, the Company’s 2009 federal tax return was examined with no significant findings or adjustments. Federal tax years that remain open to examination are 2010 through 2014. Due to a 2009 net operating loss carryback, federal tax years 2006 through 2008 remain open to the extent of net operating losses utilized in those years. State tax years that remain open to examination are 2008 to 2014. The Company has no unrecognized tax benefits in 2015, 2014 and 2013.

Excluding the alternative minimum tax (AMT) tax credits, the Company will need to generate future taxable income in order to realize its deferred tax assets. Based upon the level of taxable income over the last three years and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2015. The amount of deferred tax assets considered realizable, however, could be reduced in the future periods if estimates of future taxable income during the carryforward period are reduced.