Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2014
INCOME TAXES [Abstract]  
INCOME TAXES

NOTE 9. 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 2010 through 2013.

 

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

 

December 31,
2012 2013     2014  
(Dollars in thousands)
Current:                
Federal   $ 8     $ —     $  —   
State     198       193       269   
      206       193       269   
Deferred:                        
Federal     3,649       (1,075 )     3,932   
State     (3,702 )     (3,310 )      564  
      (53 )     (4,385 )     4,496   
Provision for (benefit from) income taxes   $ 153     $ (4,192 )   $  4,765   


 Discontinued operations are reported net of the tax benefit of  $(0.02) million in 2013.

 

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

 

December 31,
2013 2014
(Dollars in thousands)
Deferred tax assets:        
Financial statement accruals not currently deductible   $ 6,786     $  8,045   
Net operating loss, AMT credit and other carryforwards     71,246       72,618   
State taxes     90       108   
Other     3,322       3,821   
Total deferred tax assets     81,444       84,592   
Valuation allowance for deferred tax assets     (2,868 )     (2,952  )
Net deferred tax assets   $ 78,576     $ 81,640   
Deferred tax liabilities:                
Excess of net book value of property and equipment and software for financial reporting purposes over tax basis   $ 3,840       3,000   
Excess of net book value of intangible assets for financial reporting purposes over tax basis     109,133       118,773   
Interest rate swap     1,251       187   
Unrecognized tax benefits     933       110   
Other — 526
Total deferred tax liabilities     115,157       122,596   
Net deferred tax liabilities   $ (36,581 )   $  (40,956  )

 

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

 

December 31,
2013 2014
(Dollars in thousands)
Deferred income tax asset per balance sheet $ 6,876     $ 8,153   
Deferred income tax liability per balance sheet     (43,457 )     (49,109  )
    $ (36,581 )   $  (40,956  )

 

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

 

Year Ended December 31,
2012   2013     2014  
(Dollars in thousands)
Statutory federal income tax rate (at 35%) $ 1,637     $ (2,411 )   $ 3,584   
Effect of state taxes, net of federal     (2,278 )     (2,025 )     542   
Permanent items     788       270       613   
Other, net     6       (26 )     26   
Provision for income taxes   $ 153     $ (4,192 )   $ 4,765   


At December 31, 2014, we had net operating loss carryforwards for federal income tax purposes of approximately $159.0 million that expire in 2021 through 2034 and for state income tax purposes of approximately $972.8 million that expire in years 2019 through 2034. For financial reporting purposes at December 31, 2014, we had a valuation allowance of $3.0 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.