Salem Media Group, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Dec. 31, 2013

NOTE 8. INCOME TAXES

We account for income taxes in accordance with FASB ASC Topic 740 “Income Taxes.” Deferred income taxes are determined based on the difference between the consolidated financial statement and income tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Our evaluation was performed for tax years that remain subject to examination by major tax jurisdictions, which range from 2009 through 2012.

The consolidated provision (benefit) for income taxes from continuing operations for Salem consisted of the following:


	December 31,
	2011			2012			2013
	(Dollars in thousands)
Current:
Federal	$	(8	)	$	8		$	—
State		282			198			193

		274			206			193

Deferred:
Federal		4,425			3,649			(1,075	)
State		1,411			(3,702	)		(3,310	)

		5,836			(53	)		(4,385	)

Provision for (benefit from) income taxes	$	6,110		$	153		$	(4,192	)

Discontinued operations are reported net of the tax benefit of $0.5 million in 2011, $(0.06) million in 2012 and $(0.02) million in 2013.

The consolidated deferred tax asset and liability consisted of the following:


	December 31,
	2012			2013
	(Dollars in thousands)
Deferred tax assets:
Financial statement accruals not currently deductible	$	6,146		$	6,786
Net operating loss, AMT credit and other carryforwards		58,702			71,246
State taxes		103			90
Other		3,014			3,322

Total deferred tax assets		67,965			81,444
Valuation allowance for deferred tax assets		(2,913	)		(2,868	)

Net deferred tax assets	$	65,052		$	78,576

Deferred tax liabilities:
Excess of net book value of property, plant, equipment and software for financial reporting purposes over tax basis	$	5,032		$	3,840
Excess of net book value of intangible assets for financial reporting purposes over tax basis		100,040			109,133
Interest rate swap		—			1,251
Unrecognized tax benefits		1,325			933

Total deferred tax liabilities		106,397			115,157

Net deferred tax liabilities	$	(41,345	)	$	(36,581	)

The following table reconciles the above net deferred tax liabilities to the financial statements:


	December 31,
	2012			2013
	(Dollars in thousands)
Deferred income tax asset per balance sheet	$	6,248		$	6,876
Deferred income tax liability per balance sheet		(47,593	)		(43,457	)

	$	(41,345	)	$	(36,581	)

A reconciliation of the statutory federal income tax rate to the provision for income tax is as follows:


	Year Ended December 31,
	2011			2012			2013
	(Dollars in thousands)
Statutory federal income tax rate (at 35%)	$	4,364		$	1,637		$	(2,411	)
Effect of state taxes, net of federal		1,102			(2,278	)		(2,025	)
Permanent items		696			788			270
ISO benefit		—			—			—
Other, net		(52	)		6			(26	)

Provision for income taxes	$	6,110		$	153		$	(4,192	)

At December 31, 2013, we had net operating loss carryforwards for federal income tax purposes of approximately $155.6 million that expire in 2020 through 2033 and for state income tax purposes of approximately $974.6 million that expire in years 2014 through 2033. For financial reporting purposes at December 31, 2013, we had a valuation allowance of $2.9 million, net of federal benefit, to offset a portion of the deferred tax assets related to state net operating loss carryforwards that may not be realized.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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