Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
The Company utilizes the asset and liability approach to measuring deferred tax assets and liabilities based on temporary differences existing at each balance sheet date using currently enacted tax rates. A valuation allowance for the Company’s deferred tax assets is established if, in management’s opinion, it is more likely than not that a valuation allowance is needed, looking at both positive and negative factors.  Due to uncertainty surrounding the realization of its deferred tax assets, the Company has continued to record a valuation allowance against its net deferred tax assets.

The income tax provision (benefit) for the three and nine months ended September 30, 2019 and 2018 consists of the following:

  Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands) 2019 2018 2019 2018
Current Income Tax Provision (Benefit) $ —    $ —    $ —    $ —   
Deferred Income Tax Provision (Benefit)        
Federal 19,328    3,812    6,431    (14,748)  
State 4,248    840    1,420    (3,251)  
Valuation Allowance (23,576)   (4,652)   (7,851)   17,999   
Total Income Tax Provision (Benefit) $ —    $ —    $ —    $ —   

Income tax provision (benefit) during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income (loss), plus any unusual or infrequently occurring items that are recorded in the interim period.  The provision for the three and nine months ended September 30, 2019, differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to income before income taxes.  The lower effective tax rate in 2019 and 2018 relates to the valuation allowance placed on the net deferred tax assets, in addition to state income taxes and estimated permanent differences.

A valuation allowance is established to reduce deferred tax assets if it is determined that it is more likely than not that the related tax benefit will not be realized.  On a quarterly basis, management evaluates the need for and adequacy of valuation allowances based on the expected realizability of the deferred tax assets and adjusts the amount of such allowances, if necessary.  During 2019, in evaluating whether it was more likely than not that the Company’s net deferred tax assets were realized through future net income, management considered all available positive and negative evidence, including (i) its earnings history, (ii) its ability to recover net operating loss carry-forwards, (iii) the projected future income and results of operations, and (iv) its ability to use tax planning strategies.  Based on all the evidence available, management determined it was more likely than not that the net deferred tax assets, other than the deferred tax asset related to the Company’s alternative minimum tax credit, were not realizable, therefore a valuation allowance of $115.9 million was recorded at September 30, 2019.

Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.  The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement.  Unrecognized tax benefits are tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. The Company has no liabilities for unrecognized tax benefits.

The Company’s policy is to recognize potential interest and penalties accrued related to unrecognized tax benefits within income tax expense.  For the three and nine months ended September 30, 2019 and 2018, the Company did not recognize any interest or penalties in its condensed statements of operations, nor did it have any interest or penalties accrued in its condensed balance sheets at September 30, 2019 and 2018 relating to unrecognized benefits.