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The provision for income taxes consists of the following:

 

  

The provision for income taxes using the U.S. Federal statutory tax rate as compared to the Company’s effective tax rate is summarized as follows:

 

 

The Company files income tax returns for Towerstream Corporation and its subsidiaries in the U.S. federal and various state principle jurisdictions. As of the tax returns for Towerstream Corporation for the years through remain open to examination by the Internal Revenue Service and various state authorities.

The Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:

 

ASC Topic clarifies the accounting and reporting for uncertainties in income tax law. ASC Topic prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The guidance also provides direction on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

 

As of and the Company has evaluated and concluded that there were material uncertain tax positions requiring recognition in the Company’s financial statements. The Company’s policy is to classify assessments, if any, for tax related interest as interest expense, and penalties as general and administrative expenses. interest and penalties were recorded during the years ended and The Company does expect its unrecognized tax benefit position to change during the next months.

 

The Company’s utilization of net operating loss (“NOL”) carryforwards is subject to an annual limitation due to ownership changes that have occurred previously or that could occur in the future as provided in Section of the Internal Revenue Code, as well as similar state provisions. Section limits the utilization of NOLs when there is a greater than change of ownership as determined under the regulations. Since its formation, the Company has raised capital through the issuance of capital stock and various convertible instruments which, combined with the purchasing shareholders’ subsequent disposition of these shares, has resulted in an ownership change as defined by Section and also could result in an ownership change in the future upon subsequent disposition.

As of the Company had approximately of federal and state NOL carryovers. As of the company had a greater than change in ownership under Section of the Internal Revenue Code. Based on the calculations under Section the NOL carryforward as of that date is limited to approximately After the ownership change and through the Company had a taxable loss of approximately The total federal and state NOLs of approximately as of begin to expire starting in the year ending

 

 

In assessing the realizability of deferred tax assets, the Company has considered whether it is more likely than that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, under the applicable financial reporting standards, the Company has considered the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. Since both goodwill and the FCC licenses are considered to be assets with indefinite lives for financial reporting purposes, the related deferred tax liabilities cannot be used as a source of future taxable income for purposes of determining the need for a valuation allowance. Based upon this evaluation, a full valuation allowance has been recorded as of and The change in valuation allowance was () and respectively, for the years ended and of which and respectively, pertains to discontinued operations.