RMG Networks Holding Corp

6. Income Taxes

The following table summarizes the tax provision for U.S. federal, state, and foreign taxes on income for the years noted below:


(in thousands)	2016		2015
Current
Federal	$	—	$	—
State		25		57
Foreign		139		58
Current tax expense		164		115
Deferred
Federal		(7)		—
State		—		—
Foreign		(14)		7
Deferred tax expense		(21)		7
Total income tax expense	$	143	$	122

Income taxes differed from the amounts computed by applying the U.S. federal income tax rate of 34% to income (loss) before income taxes as follows:


(in thousands)	2016		2015
Computed expected tax benefit	$	(1,485)	$	(3,385)
State tax benefit, net of federal benefit		(141)		(431)
Non-taxable income charge		(231)		(1,241)
Nondeductible expenses, principally goodwill & impairment		14		60
Change in valuation allowance		1,861		5,054
Foreign income tax		125		65
Total	$	143	$	122

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets (liabilities) at December 31 and inclusive of discontinued operations are as follows:


(in thousands)	2016		2015
Deferred revenue	$	321	$	(396)
Deferred rent		699		788
Accrued wages		34		119
Deferred state sales tax		30		19
Bad debt reserve		22		62
Foreign currency loss		39		40
Other		73		106
Current deferred tax assets		1,218		738
Depreciation and Amortization		(443)		(393)
Equity Based Compensation		2,432		2,131
Intangible Assets		(2,564)		(3,478)
Net operating loss carryforwards		25,654		25,078
Other		—		239
Non-current deferred tax assets		25,079		23,577
Total Deferred tax assets		26,297		24,315
Valuation allowance		(26,297)		(24,315)
Net deferred tax assets	$	—	$	—

The Company evaluates the recoverability of the deferred income tax assets and the associated valuation allowances on a regular basis. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. The increase in the valuation allowance from 2015 to 2016 was $2.0 million and is primarily due to changes in net operating loss carryforwards.

At December 31, 2016, the Company had federal net operating loss carryforwards of approximately $68.4 million, which expire in 2032-2035. Of the $25.6 million in non-current net operating losses above, approximately $2.4 million relates to state net operating losses. The Company evaluates a variety of factors on a regular basis to determine the amount of deferred income tax assets to recognize in the financial statements. These factors include the Company’s recent earnings history, projected future taxable income, the number of years the Company’s net operating loss and tax credits can be carried forward, the existence of taxable temporary differences, and available tax planning strategies.

The Company accounts for uncertain tax positions in accordance with FASB ASC Topic 740. This guidance prescribes a comprehensive model as to how a company should recognize, present, and disclose in its financial statement uncertain tax positions that a company has taken or expects to take on its tax return. Symon’s open tax years are for the years ended January 31, 2012 and 2013 and the short period ending April 19, 2013. All Reach Media Group tax years within the statute of limitations are open. As of December 31, 2016 and 2015, the Company had no accruals recorded for uncertain tax positions. The Company has elected to recognize accrued interest and penalties related to income tax matters as a component of income tax expense if incurred. For the years ended December 31, 2016 and 2015, there were no such costs related to income taxes. It is determined not to be reasonably likely for the amounts of unrecognized tax benefits to significantly increase or decrease within the next 12 months. The Company is currently subject to a three year statute of limitation by major tax jurisdictions.