Annual report pursuant to Section 13 and 15(d)

Income taxes

v2.4.1.9
Income taxes
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income taxes
Income taxes:
The provision for income tax expense consists of the following:             

 
Year Ended
 
December 31, 2014
 
December 31, 2013
Current tax expense:
 

 
 

Federal
$
110,966

 
$
—

State and local
361,281

 
237,237

Foreign
258,731

 
165,000

Total current tax expense
730,978

 
402,237

Deferred tax expense (benefit):
 

 
 

Federal
(110,966
)
 
—

State and local
197,276

 
116,690

Total deferred tax expense (benefit)
86,310

 
116,690

Total income tax expense
$
817,288

 
$
518,927



The difference between the reported income tax expense and taxes determined by applying the applicable U.S. federal statutory income tax rate to (loss) income before taxes from continuing operations is reconciled as follows: 

 
Year ended
 
December 31,
2014
 
December 31,
2013
Income (loss) from continuing operations before
Provision for income taxes
 

 
 

Domestic
$
6,128,992

 
$
(16,323,206
)
Foreign
1,220,924

 
1,101,614

Total
$
7,349,916

 
$
(15,221,592
)

 
Year ended
 
December 31,
2014
 
December 31,
2013
Income tax expense at federal statutory rate
$
2,498,973

 
34.0
 %
 
$
(5,433,527
)
 
34
 %
State and local taxes – current
238,445

 
3.3
 %
 
165,427

 
(0.9
)%
State and local taxes – deferred
351,459

 
4.8
 %
 
(1,818,068
)
 
11.4
 %
Transaction costs
21,320

 
0.3
 %
 
923,179

 
(5.8
)%
FICA tip credit
(654,968
)
 
9.0
 %
 
—

 
—
 %
Foreign rate differential
(156,383
)
 
(2.14
)%
 
—

 
—
 %
Nondeductible control premium
—

 
—
 %
 
1,700,000

 
(10.6
)%
Goodwill
—

 
—
 %
 
(3,018,444
)
 
18.9
 %
Deferred tax from rate change from LLC to C corporation
1,617,800

 
22.1
 %
 
(2,104,370
)
 
13.2
 %
Change in valuation allowance
(3,061,841
)
 
41.9
 %
 
10,249,612

 
(64.1
)%
Other items, net
(37,517
)
 
0.5
 %
 
(144,882
)
 
0.8
 %
Total income tax expense
$
817,288

 
11.2
 %
 
$
518,927

 
(3.1
)%

 
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In 2014 the Company decreased its valuation allowance by $3.1 million, the decrease in the valuation allowance represents $2.5 million from continuing operations and $520,000 from discontinued operations at December 31, 2014. In 2013 the Company increased its valuation allowance by $10,300,000.
 
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are presented below:
 
 
Year ended
 
December 31, 2014
 
December 31, 2013
Deferred tax assets:
 

 
 

State and local net operating loss carryforwards
$
—

 
$
1,042

Deferred rent liabilities
2,441,728

 
787,362

Lease incentives
350,817

 
34,893

Depreciation and amortization
—

 
1,454,206

Stock compensation
249,690

 
23,329

FICA tip credit carryforward
767,816

 
126,010

Net operating loss
84,833

 
4,427

Goodwill
3,349,761

 
3,687,236

Derivative expense
2,622,848

 
4,239,900

Restricted stock grant
—

 
123,900

Inventory
4,904

 
—

 
 
 
 
Total deferred tax assets
9,872,397

 
10,482,305

 
 
 
 
Deferred tax liabilities:
 
 
 
Depreciation and amortization
(2,129,646
)
 
—

Total deferred tax liabilities
(2,129,646
)
 
—

 
 
 
 
Valuation allowance
(7,707,333
)
 
(10,249,611
)
 
 
 
 
Net deferred tax assets
$
35,418

 
$
232,694


  
The Company accounts for unrecognized tax benefits in accordance with the provisions of FASB guidance which, among other directives, requires uncertain tax positions to be recognized only if they are more likely than not to be upheld based on their technical merits. The measurement of the uncertain tax position is based on the largest benefit amount that is more likely than not (determined on a cumulative probability basis) to be realized upon settlement. The Company believes that its tax return positions are appropriate and supportable under relevant tax law. The Company believes the estimates and assumptions used to support its evaluation of tax benefit realization are reasonable. Accordingly, no adjustments have been made to the consolidated financial statements for the years ended December 31, 2014 and 2013.
 
The Company may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company’s financial results. In the event the Company receives an assessment for interest and penalties, it has been classified in the consolidated financial statements as income tax expense. The Company’s U.S. Federal, state and local income tax returns prior to fiscal year 2010 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. The Company’s foreign income tax returns prior to fiscal year 2011 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

Undistributed earnings of the Company’s foreign subsidiaries are considered to be indefinitely reinvested and therefore, no provision for domestic taxes has been provided thereon. Upon repatriation of those earnings, in the form of dividends or otherwise, the Company would be subject to domestic income taxes, offset (in whole or in part) by foreign tax credits, related to income and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred domestic income tax liability is impracticable due to the complexities associated with its hypothetical calculation.
 
As of December 31, 2014, the Company has a Federal and state net operating loss carryovers of $201,984.