The Company accounts for income taxes in accordance with ASC Topic 740. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. In determining the need for a valuation allowance, management reviews both positive and negative evidence pursuant to the requirements of ASC Topic 740, including current and historical results of operations, future income projections and the overall prospects of the Company's business.

 

The income tax (benefit) provision for federal and state and local income taxes in the consolidated statements of operations consists of the following:

 

($ in thousands)		Year Ended December 31,
		2017			2016
Current:
Federal		$	-		$	(57)
State and local			79			204
Total current			79			147
Deferred:
Federal			(883)			6
State and local			357			162
Total deferred			(526)			168
Total (benefit) provision		$	(447)		$	315

 

The reconciliation of income tax computed at the federal and state and local statutory rates to the Company’s income before taxes is as follows:

 

		Year Ended December 31,
		2017			2016
U.S. statutory federal rate			(34.00)	%		34.00	%
State and local rate, net of federal tax			1.09			10.45
Gain on reduction of contingent obligation			-			(38.40)
Stock compensation			9.37			(7.31)
Excess compensation deduction			4.49			11.03
Foreign tax credits			(0.30)			(0.94)
Life insurance			0.57			2.04
Tax Rate Change due to Tax Cuts and Jobs Act			(24.88)			-
Goodwill impairment			39.50			-
Other permanent differences			(0.03)			(0.41)
Income tax (benefit) provision			(4.19)	%		10.46	%

 

The significant components of net deferred tax liabilities of the Company consist of the following:

 

($ in thousands)		December 31,
		2017			2016
Deferred tax assets
Stock-based compensation		$	4,097		$	7,337
Federal, state and local net operating loss carryforwards			312			407
Accrued compensation and other accrued expenses			1,132			1,694
Basis difference arising from discounted note payable			387			611
Foreign tax credit			95			63
Charitable contribution carryover			47			54
Other			10			9
Total deferred tax assets		$	6,080		$	10,175
Deferred tax liabilities
Property and equipment		$	220		$	(39)
Basis difference arising from intangible assets of acquisition			(12,675)			(17,037)
Total deferred tax liabilities			(12,455)			(17,076)
Net deferred tax liabilities		$	(6,375)		$	(6,901)

 

During the Prior Year, the Company recorded a $3.4 million gain on the reduction of contingent obligations related to the acquisition of the Ripka Brand (see Note 5). This gain was not subject to U.S. Federal income tax.

  

As of December 31, 2017 and 2016, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its consolidated financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its consolidated financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.