NOTE 11. TCI INCOME TAXES
For 2016, TCI had taxable loss for federal tax purposes, while it had taxable income for 2015 and a loss for 2014. For 2016, MRHI, ARL, TCI and IOT had a combined net taxable income. For 2015, MRHI, ARL, TCI and IOT had a combined net taxable income and TCI recorded no current tax benefit or expense. For 2014, TCI, with the consolidation of IOT, had a net taxable loss and the remainder of the group had net taxable income resulting in a tax benefit to TCI. The expense benefit in each year was calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory rate of 35%.
Current expense (benefit) is attributable to (dollars in thousands):
| 2016 | 2015 | 2014 | ||||||||||
| Income (loss) from continuing operations | $ | 24 | $ | 517 | $ | (20,390 | ) | |||||
| Income (loss) from discontinued operations | (1) | 483 | 20,390 | |||||||||
| Tax expense (benefit) | $ | 23 | $ | 1,000 | $ | — | ||||||
The Federal income tax expense differs from the amount computed by applying the corporate tax rate of 35% to the income before income taxes as follows (dollars in thousands):
| 2016 | 2015 | 2014 | ||||||||||
| Computed “expected” income tax (benefit) expense | $ | 121 | $ | 2,276 | $ | 14,762 | ||||||
| Book to tax differences for partnerships not consolidated for tax purposes | 93 | 5,152 | (23,900 | ) | ||||||||
| Book to tax differences of depreciation and amortization | (477 | ) | (160 | ) | 1,461 | |||||||
| Book to tax differences in gains on sale of property | (2,757 | ) | (4,073 | ) | (2,350 | ) | ||||||
| Book provision for loss | — | 1,855 | — | |||||||||
| Partial valuation allowance against current net operating loss benefit | (69 | ) | (9,596 | ) | 7,069 | |||||||
| Other | 3,112 | 5,546 | 2,958 | |||||||||
| Total | $ | 23 | $ | 1,000 | $ | — | ||||||
| Alternative minimum tax | $ | — | $ | — | $ | — | ||||||
Deferred income taxes reflect the tax effects of temporary timing differences between carrying amounts of assets and liabilities reflected on the financial statements and the amounts used for income tax purposes. TCI’s tax basis in its net assets differs from the amount at which its net assets are reported for financial statement purposes, principally due to the accounting for gains and losses on property sales and depreciation on owned properties. The tax effects of temporary differences and net operating loss carry forwards that give rise to the deferred tax assets are presented below (amounts in thousands):
| 2016 | 2015 | 2014 | ||||||||||
| Net operating losses | $ | 42,585 | $ | 46,497 | $ | 56,897 | ||||||
| AMT credits | 1,591 | 1,900 | 1,374 | |||||||||
| Basis difference of: | ||||||||||||
| Real estate holdings | (7,580 | ) | (17,912 | ) | 876 | |||||||
| Notes receivable | 5,432 | 694 | 757 | |||||||||
| Investments | (4,328 | ) | (4,709 | ) | (4,693 | ) | ||||||
| Notes payable | 2,315 | 2,792 | 6,932 | |||||||||
| Deferred gains | 14,200 | 11,984 | 10,146 | |||||||||
| Total | $ | 54,215 | $ | 41,246 | $ | 72,289 | ||||||
| Deferred tax valuation allowance | (54,215 | ) | (41,246 | ) | (72,289 | ) | ||||||
| Net deferred tax asset | $ | — | $ | — | $ | — | ||||||
There is no assurance that TCI will generate earnings in future years. Therefore, TCI has established a valuation allowance for deferred tax assets of approximately $54.2 million, $41.2 million and $72.3 million as of December 31, 2015, 2014 and 2013, respectively.
TCI has tax net operating loss carryforwards of approximately $122.0 million expiring through the year 2033. The alternative minimum tax credit balance increased in 2016 to approximately $1.59 million. The credit has no expiration date.