Quarterly report pursuant to Section 13 or 15(d)

8. Income Taxes

8. Income Taxes

3 Months Ended

Mar. 31, 2016

The Company recognized no income tax expense or benefit for the three months ended March 31, 2016. The Company recognized income tax expense of $977,500 for the three months ended March 31, 2015. The Company’s effective income tax rates for the three months ended March 31, 2016 and 2015 were 0.0% and 49.3%, respectively.

Changes to the effective tax rates relate primarily to the recognition of a valuation allowance on 100% of net deferred tax assets for the three months ended March 31, 2016.

The Company applies a “more likely than not” threshold to the recognition and nonrecognition of tax positions. A change in judgment related to prior years’ tax positions is recognized in the quarter of such change. The Company had no reserve for uncertain tax positions as of March 31, 2016 or December 31, 2015. The Company recognizes interest and/or penalties related to income tax matters in income tax expense and in income taxes payable.

The table below presents a reconciliation of statutory income tax rates to our effective rates:

	Three Months Ended March 31,
	2016		2015
Expected federal income tax at statutory rate		35.0%		34.0%
State income taxes, net of federal deduction		2.1%		4.7%
Permanent differences		-0.1%		10.6%
Change in valuation allowance		-37.0%		0.0%

		0.0%		49.3%