Quarterly report pursuant to Section 13 or 15(d)

INCOME TAXES

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INCOME TAXES
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES

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.  At March 31, 2016, a valuation allowance of $277.7 million had been provided for our net deferred tax assets based on the uncertainty regarding whether these assets may be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The income tax provision (benefit) for the three months ended March 31, 2016 and 2015 consists of the following:

 
Three Months Ended
March 31,
 
2016
 
2015
Current Income Taxes (Benefit)
$

 
$

Deferred Income Taxes (Benefit)
 

 
 

Federal
(41,820,000
)
 
(123,429,000
)
State
(3,638,000
)
 
(12,051,000
)
Valuation Allowance
45,458,000

 

Total Provision (Benefit)
$

 
$
(135,480,000
)


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 month periods ended March 31, 2016, presented above, differ from the amount that would be provided by applying the statutory U.S. federal income tax rate of 35% to income before income taxes.  The lower effective tax rate in 2016 relates to the valuation allowance placed on the net deferred tax assets in the second quarter of 2015, in addition to state income taxes and estimated permanent differences.  The higher effective tax rate in 2015 relates to the addition of state income taxes and estimated permanent differences.

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 months ended March 31, 2016 and 2015, 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 sheet at March 31, 2016 and December 31, 2015 relating to unrecognized benefits.

The tax years 2015, 2014, 2013, 2012, 2011 and 2010 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which the Company is subject.