| Summary of the Components of the (Benefit) Provision for Income Taxes |
The following is a summary of the components of the (benefit) provision for income taxes for Verso: | | | | | | | | | | | | | | Year Ended December 31, | (Dollars in thousands) | 2014 | | 2013 | | 2012 | Current tax provision (benefit): | | | | | | U.S. federal | $ | — |
| | $ | — |
| | $ | — |
| U.S. state and local | (594 | ) | | 38 |
| | (96 | ) | Total current tax provision (benefit) | (594 | ) | | 38 |
| | (96 | ) | Deferred tax (benefit) provision: | |
| | |
| | |
| U.S. federal | (111,899 | ) | | (120,029 | ) | | (58,563 | ) | U.S. state and local | (14,371 | ) | | (12,621 | ) | | (6,486 | ) | Total deferred tax (benefit) provision | (126,270 | ) | | (132,650 | ) | | (65,049 | ) | Less: valuation allowance | 123,875 |
| | 132,050 |
| | 63,721 |
| Total income tax (benefit) provision | $ | (2,989 | ) | | $ | (562 | ) | | $ | (1,424 | ) |
|
| Reconciliation of Income Tax Expense using the Statutory Federal Income Tax Rate Compared with Actual Income Tax Expense |
A reconciliation of income tax expense using the statutory federal income tax rate compared with actual income tax expense follows: | | | | | | | | | | | | | | Year Ended December 31, | (Dollars in thousands) | 2014 | | 2013 | | 2012 | Tax at Statutory U.S. Rate of 34% | $ | (121,019 | ) | | $ | (38,001 | ) | | $ | (59,586 | ) | Increase resulting from: | |
| | |
| | |
| Nondeductible transaction costs | 9,274 |
| | 1,756 |
| | — |
| Meals and entertainment | 173 |
| | 173 |
| | 197 |
| Nondeductible lobbying expenses | 162 |
| | 80 |
| | 46 |
| Disallowed compensation | — |
| | — |
| | 680 |
| Other disallowed expenses | 3 |
| | 4 |
| | 36 |
| Net permanent differences | 9,612 |
| | 2,013 |
| | 959 |
| Valuation allowance | 123,875 |
| | 132,050 |
| | 63,721 |
| Benefit from change in prior tax position | — |
| | (93,039 | ) | | — |
| State income taxes (benefit) | (14,763 | ) | | (3,740 | ) | | (6,550 | ) | Other | (694 | ) | | 155 |
| | 32 |
| Total income tax (benefit) provision | $ | (2,989 | ) | | $ | (562 | ) | | $ | (1,424 | ) |
|
| Summary of the Significant Components of Deferred Tax Position |
The following is a summary of the significant components of our deferred tax position: | | | | | | | | | | Year Ended December 31, | (Dollars in thousands) | 2014 | | 2013 | Deferred tax assets: | | | | Net operating loss and credit carryforwards | $ | 479,569 |
| | $ | 417,536 |
| Pension | 14,547 |
| | 9,606 |
| Payment-in-kind interest | 10,142 |
| | 10,211 |
| Compensation reserves | 10,025 |
| | 8,348 |
| Inventory reserves | 9,875 |
| | 7,546 |
| Inventory capitalization | 3,343 |
| | 2,885 |
| Capitalized expenses | 5,143 |
| | — |
| Bad debt reserves | 761 |
| | 841 |
| Other | 2,230 |
| | 2,046 |
| Gross deferred tax assets | 535,635 |
| | 459,019 |
| Less: valuation allowance | (453,729 | ) | | (323,335 | ) | Deferred tax assets, net of allowance | $ | 81,906 |
| | $ | 135,684 |
| Deferred tax liabilities: | |
| | |
| Property, plant, and equipment | $ | (52,183 | ) | | $ | (100,507 | ) | Cancellation of debt income deferral | (17,335 | ) | | (21,878 | ) | Deferred repair charges | (7,631 | ) | | (6,188 | ) | Intangible assets | (5,578 | ) | | (8,241 | ) | Unrealized hedge income | (345 | ) | | (4,046 | ) | Prepaid expenses | (2,613 | ) | | (998 | ) | Total deferred tax liabilities | (85,685 | ) | | (141,858 | ) | Net deferred tax liabilities | $ | (3,779 | ) | | $ | (6,174 | ) |
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