|12 Months Ended|
Dec. 31, 2014
NOTE 11—INCOME TAXES
On May 29, 2012, we adopted ASC 740. There was no cumulative effect recorded as a charge to retained earnings from the adoption of ASC 740-10 for uncertain tax positions.
The income taxes by jurisdiction consist of the following for the period from January 1, 2013 to June 16, 2013, the period from June 17, 2013 to December 31, 2013 and for the year ended December 31, 2014:
Income taxes differ from the amounts computed by applying the U.S. federal income tax rate to pretax income (loss) before income taxes as a result of the following for the period from January 1, 2013 to June 16, 2013, the period from June 17, 2013 to December 31, 2013 and the year ended December 31, 2014:
For the period from January 1, 2013 to June 16, 2013, the period from June 17, 2013 to December 31, 2013 and the year ended December 31, 2014, income tax expense was $800, $1,256, and $1,256, respectively. Deferred income tax reflects the tax effects of temporary differences that gave rise to significant portions of our deferred tax assets and liabilities and consisted of the following as of December 31, 2013 and December 31, 2014:
We recorded a full valuation allowance against our net deferred tax assets at December 31, 2013 and December 31, 2014. In determining the need for a valuation allowance, we reviewed all available evidence pursuant to the requirements of FASB ASC 740. Based upon our assessment of all available evidence, we have concluded that it is more likely than not that the net deferred tax assets will not be realized. For the period from December 31, 2013 to December 31, 2014, the valuation allowance increased by $1,349,692. This net increase included a decrease in valuation allowance of $2,209,541 due to the reversal of the deferred tax asset associated with Derivatives, which were recorded to additional paid-in capital during the year.
For operations through June 17, 2013, we were treated as a partnership for federal and state income tax under the entity classification domestic default rules. Our losses passed through to the partners who receive the tax benefit.
As of December 31, 2014, we had federal net operating loss carryforwards of approximately $3.5 million and state net operating loss carryforwards of approximately $3.5 million. The federal net operating loss carryforwards will begin to expire in 2033, and the state net operating loss carryforwards will begin to expire in 2033. Our ability to utilize net operating loss carryforwards may be limited in the event that a change in ownership, as defined in Section 382 of the Internal Revenue Code, occurs in the future. In the event a change of ownership occurs, it will limit the annual usage of the carryforwards in future years. Management believes that certain changes in control have occurred which resulted in limitations on our net operating loss carryforwards; however, management has determined that these limitations will not impact the ultimate utilization of the net operating loss carryforwards.
We recognize interest and penalties related to income tax matters in income taxes, and there were none during the period from June 17, 2013 to December 31, 2013 and for the year ended December 31, 2014.
The adoption of ASC 740 guidance required us to identify, evaluate and measure all uncertain tax positions taken or to be taken on tax returns and to record liabilities for the amount of these positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities. Although we believe that our estimates and judgments were reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review by the taxing authorities. We have no significant uncertain tax positions for the period from June 17, 2013 to December 31, 2013 and for the year ended December 31, 2014.
Our annual income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of judgment. Our judgments, assumptions and estimates relative to current income taxes take into account current tax laws, their interpretation of current tax laws and possible outcomes of future audits conducted by domestic tax authorities. We operate within federal and state taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve. We are currently not being examined by any tax authorities.
The following table sets forth the changes in the valuation allowance, for all periods presented:
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef