Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
Income Taxes

11. Income Taxes

 

The following summarizes the income tax (benefit) expense at for the years ended December 31,

2011, 2010, and 2009:

 

    2011   2010   2009
Current:          
  Federal  $              -       $         6,500    $       11,605
  State             2,100             12,871             12,000
             
                2,100             19,371             23,605
             
Deferred      1,419,500          (394,800)          (401,400)
             
     $   1,421,600    $    (375,429)    $    (377,795)

 

The deferred tax expense (benefit) recognized in 2011, 2010, and 2009 represents the effect of changes in temporary differences and net operating loss carryforwards, along with related changes in the valuation allowance for deferred tax assets.

 

The deferred tax expense (benefit) resulting from the utilization of net operating loss carryfowards was $(4,157,419), $222,400, and $(993,100) for the years ended December 31, 2011, 2010, and 2009, respectively.

 

 

A reconciliation of the statutory federal income tax rate with the Company’s effective income tax

rate was as follows:

 

  2011   2010   2009
                       
  Amount   Percent   Amount   Percent   Amount   Percent
Taxes at Federal                      
Statutory Rate  $    (2,060,435)   34.0%    $         139,686   34.0%    $       (769,313)   34.0%
                       
State Taxes Net of                      
Federal Tax Expense           (321,185)   5.3%                 21,775   5.3%             (119,922)   5.3%
                       
Increase (Decrease)                      
in Valuation Allowance          3,523,000   -58.1%             (550,000)   -133.9%               500,000   -22.1%
                       
Non-deductible                      
Expenses               20,377   -0.3%                 18,614   4.5%                 13,939   -0.6%
                       
Other             259,843   -4.3%                 (5,504)   -1.3%                 (2,499)   10.0%
                       
   $      1,421,600   -23.4%    $       (375,429)   -91.4%    $       (377,795)   26.6%

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

 

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2011 and 2010 are as follows:

 

      2011   2010
  Deferred tax liabilities:      
    Property and equipment  $      (179,100)    $      (296,800)
  Deferred tax assets:      
    Net operating loss carryforward        4,047,000          2,494,100
    Accounts receivables reserves           155,800             235,100
    Accrued expenses             81,400               77,800
    Interest rate swap liability                     -                    3,500
    Accrued future project losses           487,900                       -   
             4,772,100          2,810,500
           
  Net deferred tax asset        4,593,000          2,513,700
  Valuation allowance for deferred tax assets       (3,773,000)            (250,000)
    Net deferred tax asset, net of valuation allowance           820,000          2,263,700

 

As of December 31, 2011, the Company has federal net operating loss (“NOL”) carryforwards of approximately $10,376,923. These expire at various times beginning in 2012 and through the year ending December 31, 2031 as follows:

 

2012           1,148,600
2018           1,482,900
Post 2020           7,745,423
          10,376,923

 

The Company will establish a valuation allowance if it is more likely than not that these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. Periodically, the valuation allowance is reviewed and adjusted based on management’s assessments of realizable deferred tax assets. The valuation allowance as of December 31, 2011 and December 31, 2010 is related to the portion of the net operating losses that based on taxable income projections may expire before being utilized. The net change in the total valuation allowance for the years ended December 31, 2011 and 2010, was an increase of $3,523,000 and a decrease of $550,000, respectively.

 

Management believes that it is more likely than not that the Company will not be able to use a significant portion of the net operating loss carryforwards expiring through 2012 and post 2020. As a result, the valuation allowance was increased during the year ended December 31, 2011 to offset deferred tax assets. A current deferred tax asset has been recorded at December 31, 2011 based on anticipated income for the year ended December 31, 2012. A long-term deferred tax asset has been recorded at December 31, 2011 based on the reasonable anticipation of income during the years 2013 through 2018.

 

The valuation allowance was decreased during the year ended December 31, 2010 as result of taxable income for the year that utilized a large portion of the NOL due to expire in upcoming years the Company did not utilize a portion of the NOL as planned during the year and future income projections were reduced, resulting in additional projected expiration of amounts expiring through

2012.

 

Income taxes and franchise taxes paid were approximately $4,400, $13,000, and $12,000 in the year ended December 31, 2011, 2010, and 2009, respectively. There were no taxes currently payable at December 31, 2011. Interest expense and penalties on tax payments are included in income tax expense in the period recognized.