Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.3.0.814
Income Taxes
 9 Months Ended
Sep. 30, 2015
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes. Components of the Company’s deferred tax assets and liabilities as of September 30, 2015, and December 31, 2014, are as follows:
Deferred Tax Assets and Liabilities
 
 
September 30, 2015
 
December 31, 2014
Deferred Tax Assets:
 
 
 
 
Net operating loss carryforwards
 
$
(462,847
)
 
$
(679,692
)
Net unrealized loss on investment securities
 
(200,267
)
 
—

Cost recovery of leased and fixed assets
 
(200,897
)
 
(1,042,207
)
Loan Loss Provision
 
(1,283,314
)
 
—

Other loss carryforwards
 
(1,458,096
)
 
—

Sub-total
 
$
(3,605,421
)
 
$
(1,721,899
)
Deferred Tax Liabilities:
 
 
 
 
Basis reduction of investment in partnerships
 
$
2,645,302

 
$
2,842,332

Net unrealized gain on investment securities
 
—

 
142,154

Sub-total
 
2,645,302

 
2,984,486

Total net deferred tax (asset) liability
 
$
(960,119
)
 
$
1,262,587


For the quarter ended September 30, 2015, the total deferred tax liability presented above relates to assets held in the Company's TRSs. The Company recognizes the tax benefits of uncertain tax positions only when the position is “more likely than not” to be sustained upon examination by the tax authorities based on the technical merits of the tax position. The Company’s policy is to record interest and penalties on uncertain tax positions as part of tax expense. Tax years subsequent to the year ending November 30, 2007, remain open to examination by federal and state tax authorities.
Total income tax expense differs from the amount computed by applying the federal statutory income tax rate of 35 percent for the three and nine months ended September 30, 2015, and September 30, 2014, to income or loss from operations and other income and expense for the years presented, as follows:
Income Tax Expense (Benefit)
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Application of statutory income tax rate
 
$
(497,607
)
 
$
775,982

 
$
2,492,537

 
$
3,004,593

State income taxes, net of federal tax (benefit)
 
(141,807
)
 
15,321

 
(113,744
)
 
118,090

Federal Tax Attributable to Income of Real Estate Investment Trust
 
(1,209,539
)
 
(466,420
)
 
(3,956,244
)
 
(1,541,408
)
Total income tax expense (benefit)
 
$
(1,848,953
)
 
$
324,883

 
$
(1,577,451
)
 
$
1,581,275


Total income taxes are computed by applying the federal statutory rate of 35 percent plus a blended state income tax rate. Corridor Public Inc. and Corridor Private Inc. had a blended state rate of approximately 3.92 percent for the three and nine months ended September 30, 2015 and 3.11 percent for the three and nine months ended September 30, 2014. CorEnergy BBWS Inc. does not record a provision for state income taxes because it operates only in Wyoming, which does not have state income tax. Because Mowood Corridor Inc. and Corridor MoGas Inc. primarily only operate in the state of Missouri, a blended state income tax rate of 5 percent was used for the operations of both TRSs for the three and nine months ended September 30, 2015 and 2014. The restructuring done in December 2012 causes us to hold and operate certain of our assets through one or more TRSs. A TRS is a subsidiary of a REIT that is subject to applicable corporate income tax. For the three and nine months ended September 30, 2015, all of the income tax expense presented above relates to the assets and activities held in the Company's TRSs. The components of income tax expense include the following for the periods presented:
Components of Income Tax Expense (Benefit)
 
 
For the Three Months Ended
 
For the Nine Months Ended
 
 
September 30, 2015
 
September 30, 2014
 
September 30, 2015
 
September 30, 2014
Current tax expense
 
 
 
 
 
 
 
 
Federal
 
$
94,277

 
$
446,391

 
$
580,535

 
$
1,230,768

State (net of federal tax benefit)
 
10,743

 
39,663

 
64,720

 
109,361

Total current tax expense
 
105,020

 
486,054

 
645,255

 
1,340,129

Deferred tax expense (benefit)
 
 
 
 
 
 
 
 
Federal
 
(1,801,423
)
 
(136,829
)
 
(2,044,242
)
 
232,417

State (net of federal tax benefit)
 
(152,550
)
 
(24,342
)
 
(178,464
)
 
8,729

Total deferred tax expense (benefit)
 
(1,953,973
)
 
(161,171
)
 
(2,222,706
)
 
241,146

Total income tax expense (benefit), net
 
$
(1,848,953
)
 
$
324,883

 
$
(1,577,451
)
 
$
1,581,275


As of December 31, 2014, the TRSs had a net operating loss of $1.7 million. The net operating loss may be carried forward for 20 years. If not utilized, this net operating loss will expire in the year ending December 31, 2033 and 2034. The amount of deferred tax asset for net operating losses as of September 30, 2015, includes amounts for the nine months ended September 30, 2015. The aggregate cost of securities for federal income tax purposes and securities with unrealized appreciation and depreciation, were as follows:
Aggregate Cost of Securities for Income Tax Purposes
 
 
September 30, 2015
 
December 31, 2014
Aggregate cost for federal income tax purposes
 
$
5,106,054

 
$
4,218,986

Gross unrealized appreciation
 
6,272,386

 
7,436,696

Net unrealized appreciation
 
$
6,272,386

 
$
7,436,696