Note 16 – Income Taxes

The components of income taxes for the years ended December 31, 2016, 2015 and 2014 are as follows (in thousands):

 

The Company’s income tax expense differed from the statutory federal rate of 35% for the years ended December 31, 2016, 2015 and 2014 as follows (in thousands):

 

Deferred tax (liabilities) assets, net in the accompanying consolidated balance sheets as of December 31, 2016 and 2015 include the following amounts of deferred tax assets and liabilities (in thousands):

At December 31, 2016 and 2015, the accumulation of prior year’s earnings representing tax bad debt deductions was approximately $3.1 million for both years. If these tax bad debt reserves were charged for losses other than bad debt losses, the Company would be required to recognize taxable income in the amount of the charge. It is not expected that such tax‑restricted retained earnings will be used in a manner that would create federal income tax liabilities.

The Company had no material federal or state net operating loss carryforwards at December 31, 2016.

The Company has a federal alternative minimum tax credit carryforward of $1.5 million that can be carried forward indefinitely.

The Company has state tax credit carryforwards of $920,000 with a five year carryforward period and expiring between 2016 and 2021. Any amounts that are expected to expire before being fully utilized have been accounted for through a valuation allowance as discussed below.

We had no unrecognized tax benefits as of December 31, 2016 and 2015, and did not recognize any increase of unrecognized benefits during 2016 relative to any tax positions taken during the year.

Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in other income or expense; no such accruals existed as of December 31, 2016 and 2015.

Future realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryback or carryforward period available under the tax law. All available evidence, both positive and negative, should be considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. The Company has concluded, based on all available evidence, a valuation allowance is needed for the Company’s deferred tax asset related to state tax credit carryforwards.  A valuation allowance of $631,000 was established for the state tax credit carryforwards. For the Company’s remaining deferred tax assets, based on our taxpaying history and estimates of taxable income over the years in which the items giving rise to the deferred tax assets are deductible, management believes it is more likely than not that we will realize the benefits of these deductible differences.

The Company is subject to U.S. federal income tax as well as income tax of various states. Years that remain open for potential review by the Internal Revenue Service are 2013 through 2015 and for state taxing authorities are 2012 through 2015.

A company that was purchased in a recent acquisition is under examination by the state of Missouri for tax years 2012, 2013, and 2014.