NOTE 17.

INCOME TAXES

The provisions for income tax benefit (expense) are summarized as follows:

 

		2013								2012								2011
		Current				Deferred				Current				Deferred				Current				Deferred
Federal		$	(1,817,112	)		$	264,121			$	58,443			$	(269,712	)		$	394,305			$	2,597,799
State			(354,061	)			15,372				335,361				(95,370	)			326,844				413,705
Total		$	(2,171,173	)		$	279,493			$	393,804			$	(365,082	)		$	721,149			$	3,011,504

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The sources of these differences and the related deferred income tax assets (liabilities) are summarized as follows:

 

		Deferred Tax
		2013				2012
Deferred Income Tax Assets
Depreciation		$	1,899,202			$	2,142,204
Deferred Compensation			147,588				319,786
Charitable Contributions Carryforward			—				252,619
Deferred Oil Lease Income			922,254				256,716
Deferred Lease Expense			1,288,555				1,428,121
Pension and Other Post Retirement Benefits			(48,342	)			593,489
Stock Options			837,156				766,042
Impairment Reserves			1,688,979				1,688,979
Other - Net			40,259				95,856
Gross Deferred Income Tax Assets			6,775,651				7,543,812
Less - Valuation Allowance			(415,453	)			(621,528	)
Net Deferred Income Tax Assets			6,360,198				6,922,284
Deferred Income Tax Liabilities
Sales of Real Estate		$	(37,810,005	)		$	(38,937,151	)
Commercial Mortgage Purchase Discount			(504,886	)			—
Basis Difference in Joint Venture			(342,015	)			(342,638	)
Other - Net			(255,360	)			—
Total Deferred Income Tax Liabilities			(38,912,266	)			(39,279,789	)
Net Deferred Income Tax Liabilities		$	(32,552,068	)		$	(32,357,505	)

In assessing the realizability of deferred income tax assets, Management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the realization of future taxable income during the periods in which those temporary differences become deductible. We consider past history, the scheduled reversal of taxable temporary differences, projected future taxable income, and tax planning strategies in making this assessment. As of December 31, 2013 and 2012, we believe it is more likely than not that a portion of the Company’s deferred income tax assets will not be realized, and accordingly, a valuation allowance has been provided. As of December 31, 2013 and 2012, the valuation allowance was $415,453 and $621,528, respectively.

As of December 31, 2012, the valuation allowance was related to charitable contribution carryforwards and a basis difference in a joint venture with a wholly owned and fully consolidated subsidiary. During the year ended December 31, 2012, the valuation allowance was increased by $14,175 related to charitable contributions. During the year ended December 31, 2013, the valuation allowance decreased by $206,075 due to the expiration of charitable contribution carryforwards, which had previously been reserved. As of December 31, 2013, the valuation allowance relates solely to a basis difference in a joint venture with a wholly owned and fully consolidated subsidiary, and no valuation allowance is provided for charitable contribution carryforwards due to the expectation of full utilization during 2013.

 

Following is a reconciliation of the income tax computed at the federal statutory rate of 35% for 2013, 2012, and 2011:

 

		Year ended December 31,
		2013				2012				2011
Income Tax (Expense) Benefit Computed at Federal Statutory Rate		$	(1,558,626	)		$	10,158			$	3,335,956
Increase (Decrease) Resulting from:
State Income Tax, Net of Federal Income Tax Benefit			(149,791	)			8,360				335,779
Tax Exempt Interest Income			—				—				55,922
Adjustment to Valuation Allowance			—				—				(28,810	)
Other Reconciling Items			(183,263	)			10,204				33,806
Benefit (Expense) for Income Taxes		$	(1,891,680	)		$	28,722			$	3,732,653

The effective income tax rate for each of the three years ended December 31, 2013, 2012, and 2011, including income taxes attributable to the discontinued operations, was 41.3%, 36.7% and 39.3%, respectively. There were no changes to unrecognized tax benefits during the years ended December 31, 2013 or 2012. The tax amounts recognized during the year ended December 31, 2011 were impacted by the recognition of previously unrecognized tax benefits of approximately $29,000.

The Company files a consolidated income tax return in the United States Federal jurisdiction and the States of Arizona, Colorado, California, Florida, Illinois, Georgia, Maryland, North Carolina, and Washington. The Internal Revenue Service has audited the federal and state tax returns through the year 2007, with all proposed adjustments settled. The Company recognizes all potential accrued interest and penalties to unrecognized tax benefits in income tax expense. For the year ended December 31, 2013, 2012, and 2011 the Company recognized no uncertain tax positions or accrued interest and penalties for uncertain tax positions.

Net income taxes paid during the year ended December 31, 2013 totaled $1,645,939, with net income taxes refunded during the year ended December 31, 2012 of $177,500.