NOTE 21 - INCOME TAXES
The following table details the components of income taxes (in thousands):
|
| | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
Income tax expense (benefit): | | | | | | |
Current: | | | | | | |
Federal | | $ | 994 |
| | $ | 1,733 |
| | $ | 1,705 |
|
State | | 856 |
| | 966 |
| | 430 |
|
Total current | | 1,850 |
| | 2,699 |
| | 2,135 |
|
| | | | | | |
Deferred: | | | | | | |
Federal | | 3,475 |
| | 6,707 |
| | (423 | ) |
State | | 1,288 |
| | 1,586 |
| | (358 | ) |
Total deferred | | 4,763 |
| | 8,293 |
| | (781 | ) |
Income tax expense (benefit) | | $ | 6,613 |
| | $ | 10,992 |
| | $ | 1,354 |
|
A reconciliation of the income tax expense (benefit) based upon the statutory tax rate to the effective income tax rate is as follows for the periods presented (in thousands):
|
| | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2017 | | 2016 | | 2015 |
Income tax expense (benefit) | | | | | | |
Statutory tax | | $ | 9,301 |
| | $ | (1,103 | ) | | $ | 945 |
|
State and local taxes, net of federal benefit | | 1,415 |
| | 1,005 |
| | (271 | ) |
Permanent adjustments | | 37 |
| | — |
| | 149 |
|
True-up of prior period tax expense | | (2,010 | ) | | (256 | ) | | 530 |
|
Valuation allowance | | (2,203 | ) | | 11,294 |
| | — |
|
Tax reform | | 4,918 |
| | — |
| | — |
|
Tax reform - valuation allowance | | (4,918 | ) | | — |
| | — |
|
Other items | | 73 |
| | 52 |
| | 1 |
|
Income tax expense (benefit) | | $ | 6,613 |
| | $ | 10,992 |
| | $ | 1,354 |
|
The components of deferred tax assets and liabilities are as follows (in thousands):
|
| | | | | | | | |
| | December 31, |
| | 2017 | | 2016 |
Deferred tax assets related to: | | | | |
Federal, state and local loss carryforwards | | $ | 2,261 |
| | $ | 7,933 |
|
Reserve on MSR valuation | | — |
| | 237 |
|
Accrued expenses | | 393 |
| | 118 |
|
Amortization of intangibles | | 416 |
| | — |
|
Unrealized gains (losses) | | 1,702 |
| | 1,673 |
|
CLCO carryforwards | | — |
| | 5,680 |
|
Partnership investment | | 5,301 |
| | 2,902 |
|
Total deferred tax assets | | 10,073 |
| | 18,543 |
|
Valuation allowance | | (9,927 | ) | | (11,294 | ) |
Total deferred tax assets, net of valuation allowance | | $ | 146 |
| | $ | 7,249 |
|
| | | | |
Deferred tax liabilities related to: | | | | |
Amortization of intangibles | | $ | — |
| | $ | (1,589 | ) |
Investment in securities | | (89 | ) | | (1,320 | ) |
Depreciation | | (57 | ) | | (85 | ) |
Total deferred tax liabilities | | $ | (146 | ) | | $ | (2,994 | ) |
| | | | |
Deferred tax assets, net | | $ | — |
| | $ | 4,255 |
|
At December 31, 2017, excluding discontinued operations, the Company had $4.8 million of gross federal and $1.6 million of gross state and local net operating tax loss carryforwards, or $6.4 million (deferred tax asset of $2.3 million) in total. Due to changes in management's focus regarding the non-core asset classes, the Company determined that it no longer expected to have sufficient forecasted taxable income to completely realize the tax benefits of the deferred tax assets at December 31, 2017. Therefore, a gross valuation allowance of $37.0 million (tax effected expense of $9.9 million) has been recorded against the deferred tax asset at December 31, 2017. Management will continue to assess its estimate of the amount of deferred tax assets that the Company will be able to utilize.
The Company is subject to examination by the Internal Revenue Service ("IRS") for calendar years including and subsequent to 2015, and is subject to examination by state and local jurisdictions for calendar years including and subsequent to 2013. The IRS audit of RCC Residential, Inc., for the tax year 2014, was finalized in October 2017 with no adjustments.