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Income Taxes | 12 Months Ended
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Dec. 31, 2015
Income Taxes [Abstract] |
Income Taxes | 21. INCOME TAXES For tax purposes, AFN contributed its assets and certain of its liabilities to Cohen Brothers in exchange for an interest in Cohen Brothers on December 16, 2009. AFN was organized and had been operated as a REIT for United States federal income tax purposes. Accordingly, AFN generally was not subject to United States federal income tax to the extent of its distributions to stockholders and as long as certain asset, income, distribution, and share ownership tests were met. As a result of the consummation of the Merger, IFMI ceased to qualify as a REIT effective as of January 1, 2010, and is instead treated as a C corporation for United States federal income tax purposes. The components of income tax expense (benefit) included in the consolidated statements of operations for each year presented herein are shown in the table below.
INCOME TAX EXPENSE
(Dollars in Thousands)
|  | Year Ended December 31,
|  | 2015 |  | 2014 |  | 2013
Current income tax expense (benefit): |  |  |  |  |  |  |  |  |
Federal income tax expense (benefit) |  | $ | 61 |  | $ | - |  | $ | (1,442)
Foreign income tax expense (benefit) |  |  | 108 |  |  | 228 |  |  | 8
State and local income tax expense (benefit) |  |  | - |  |  | - |  |  | (58)
|  |  | 169 |  |  | 228 |  |  | (1,492)
Deferred income tax expense (benefit) |  |  |  |  |  |  |  |  |
Federal income tax expense (benefit) |  |  | (143) |  |  | (566) |  |  | (1,827)
Foreign income tax expense (benefit) |  |  | - |  |  | - |  |  | -
State and local income tax expense (benefit) |  |  | 59 |  |  | (76) |  |  | (246)
|  |  | (84) |  |  | (642) |  |  | (2,073)
Total |  | $ | 85 |  | $ | (414) |  | $ | (3,565)
The components of income (loss) bef ore income taxes is shown below.
INCOME (LOSS) BEFORE INCOME TAXES
(Dollars in Thousands)
|  | Year Ended December 31,
|  | 2015 |  | 2014 |  | 2013
Domestic |  | $ | (2,392) |  | $ | (2,583) |  | $ | (20,404)
Foreign |  |  | (3,191) |  |  | (1,503) |  |  | (3,080)
Total Income (loss) before income taxes |  | $ | (5,583) |  | $ | (4,086) |  | $ | (23,484)
As of December 31, 201 5, the Company had net prepaid taxes of $4 included as a component of other assets in the consolidated balance sheet. As of December 31, 2014, the Company had net current tax liability of $63 included as a component of accounts payable and other liabilities in the consolidated balance sheet. The expected income tax expense /(benefit) using the federal statutory rate differs from income tax expense / (benefit) pertaining to pre-tax income / (loss) as a result of the following for the years ended December 31, 2015, 2014, and 2013.
INCOME TAX RATE RECONCILIATION
(Dollars in Thousands)
|  | Year Ended December 31,
|  | 2015 |  | 2014 |  | 2013
Federal statutory rate - 35% |  | $ | (1,954) |  | $ | (1,430) |  | $ | (8,220)
Pass thru impact |  |  | 520 |  |  | 375 |  |  | 2,581
Deferred tax valuation allowance |  |  | 1,291 |  |  | 489 |  |  | 3,812
Recognition of previously unrecognized tax benefit |  |  | - |  |  | - |  |  | (1,231)
Other |  |  | 228 |  |  | 152 |  |  | (507)
Total |  | $ | 85 |  | $ | (414) |  | $ | (3,565)
Deferred tax assets and liabilities are determined based on the difference between the book basis and tax basis of assets and liabilities using tax rates in effect for the year in which the differences are expected to reverse. The recognition of deferred tax assets is reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. The components of the net deferred tax asset (liability) are as follows.
DEFERRED TAX ASSET AND LIABILITY
(Dollars in Thousands)
|  | December 31, 2015 |  | December 31, 2014
|  | Asset |  | Liability |  | Net |  | Asset |  | Liability |  | Net
Federal net operating loss carry-forward |  | $ | 33,577 |  | $ | - |  | $ | 33,577 |  | $ | 34,788 |  | $ | - |  | $ | 34,788
State net operating loss carry-forward |  |  | 5,372 |  |  | - |  |  | 5,372 |  |  | 5,791 |  |  | - |  |  | 5,791
Federal capital loss carry-forward |  |  | 54,445 |  |  | - |  |  | 54,445 |  |  | 10,597 |  |  | - |  |  | 10,597
Unrealized gain on debt |  |  | - |  |  | (11,938) |  |  | (11,938) |  |  | - |  |  | (12,426) |  |  | (12,426)
Unrealized loss on investment in Operating LLC |  |  | 49,736 |  |  | - |  |  | 49,736 |  |  | 68,813 |  |  | - |  |  | 68,813
Other |  |  | 834 |  |  | - |  |  | 834 |  |  | 754 |  |  | - |  |  | 754
Gross deferred tax asset / (liability) |  |  | 143,964 |  |  | (11,938) |  |  | 132,026 |  |  | 120,743 |  |  | (12,426) |  |  | 108,317
Less: valuation allowance |  |  | (135,830) |  |  | - |  |  | (135,830) |  |  | (112,205) |  |  | - |  |  | (112,205)
Net deferred tax asset / (liability) |  | $ | 8,134 |  | $ | (11,938) |  | $ | (3,804) |  | $ | 8,538 |  | $ | (12,426) |  | $ | (3,888)
As of December 31, 2015, the Company had a federal net operating loss (“NOL”) of approximately $95,932, which will be available to offset future taxable income, subject to limitations described below. If not used, this NOL will begin to expire in 2028. The Company also had net capital losses (“NCLs”) in excess of capital gains of $132,656 as of December 31, 2015, which can be carried forward to offset future capital gains, subject to the limitations described below. If not used, this carry forw ard will begin to expire in 2017. No assurance can be made that the Company will have future taxable income or future capital gains to benefit from its NOL and NCL carryovers. The Company has determined that its NOL and NCL carryovers are not currently limited by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). However, the Company may experience an ownership change as defined in that section (“Ownership Change”) in the future. If an Ownership Change were to occur in the future, the Company’s ability to use its NOLs, NCLs, and certain recognized built-in losses to reduce its taxable income in a future year would generally be limited to an annual amount (the “Section 382 Limitation”) equal to the fair value of the Company immediately prior to the Ownership Change multiplied by the “long term tax-exempt interest rate.” In the event of an Ownership Change, NOLs and NCLs that exceed the Section 382 Limitation in any year will continue to be allowed as carry forwards for the remainder of the carry forward period, and such NOLs and NCLs can be used to offset taxable income for years within the carry forward period subject to the Section 382 Limitation in each year. However, if the carry forward period for any NOL or NCL were to expire before that loss is fully utilized, the unused portion of that loss would be lost. See discussion of stockholder rights plan in note 19. Notwithstanding the facts that the Company has determined that the use of its remaining NOL and NCL carry forwards are not currently limited by Section 382 of the Code, the Company recorded a valuation allowance for a significant portion of its NOLs and NCLs when calculating its net deferred tax liability as of December 31, 2015. The valuation allowance was recorded because the Company determined it is not more likely than not that it will realize these benefits. In determining its federal income tax provision for 2015, the Company has assumed that it will retain the valuation allowance applied against its deferred tax asset related to the NOL and NCL carry forwards as of December 31, 2015. The Company’s determination that it is not more likely than not that it will realize future tax benefits from the NOLs and NCLs may change in the future. In the future, the Company may conclude that it is more likely than not that it will realize the benefit of all or a portion of the NOL and NCL carry forwards. If it makes this determination in the future, the Company would reduce the valuation allowance and record a tax benefit as a component of the statements of operations in the period it makes this determination. From that point forward, the Company would begin to record net deferred tax expense for federal and state income taxes as a component of its provision for income tax expense as it utilizes the NOLs and NCLs, for which the valuation allowance was removed. A reconciliation of the beginning and ending unrecognized tax benefits for years ended December 31, 2015, 2014, and 2013 follows.
UNRECOGNIZED TAX BENEFITS
(Dollars in Thousands)
|  | Year Ended
|  | (Dollars in Thousands)
|  | 2015 |  | 2014 |  | 2013
Unrecognized tax benefits as of January 1 |  | $ | - |  | $ | - |  | $ | 1,231
Increases due to tax positions taken during prior periods |  |  | - |  |  | - |  |  | -
Increases due to tax positions taken in current period |  |  | - |  |  | - |  |  | -
Decreases due to settlements with tax authorities |  |  | - |  |  | - |  |  | -
Reductions due to lapse of applicable statute of limitations |  |  | - |  |  | - |  |  | (1,231)
Unrecognized tax benefits as of December 31 |  | $ | - |  | $ | - |  | $ | -
During the years ended December 31, 2015, 2014, and 2013, the Company recognized interest expense of $0, $0, and $79, respectively, included as a component of the provision for income tax. The Company files tax returns in the U.S. federal jurisdiction, various states or local jurisdictions, the United Kingdom, Spain, and France. With few exceptions, the Company is no longer subject to exa mination for years prior to 2011. Pennsylvania Income Tax Assessment In October 2013, the Company received a Pennsylvania corporate net income tax assessment from the Pennsylvania Department of Revenue in the amount of $4,683 (including penalties) plus interest related to a subsidiary of AFN for the 2009 tax year. The assessment denied this subsidiary’s Keystone Opportunity Zone (“KOZ”) credit for that year. The Company filed an administrative appeal of this assessment with the Pennsylvania Department of Revenue Board of Appeals, which was denied in June 2014. The Company filed an appeal with the Pennsylvania Board of Finance and Revenue, which was also denied in May 2015. The Company has filed an appeal with the Pennsylvania Commonwealth Court. The Company has evaluated the assessment in accordance with the provisions of ASC 740 and determined not to record any reserve for this assessment.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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