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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2012
Income Taxes |
Income Taxes | 10. Income Taxes Provision for Income Taxes The provision for income taxes relating to continuing operations consists of the following (in thousands):
|  | December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Current— |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 5,679 |  | $ | 2,207 |  | $ | 9,474 |
State and Puerto Rico |  |  | 1,151 |  |  | 1,673 |  |  | 1,954 |
|  |  | 6,830 |  |  | 3,880 |  |  | 11,428 |
Deferred— |  |  |  |  |  |  |  |  |  |
Federal |  |  | 2,897 |  |  | (10,121 | ) |  | 1,501 |
State and Puerto Rico |  |  | 318 |  |  | 778 |  |  | (1,736 | )
|  |  | 3,215 |  |  | (9,343 | ) |  | (235 | )
|  | $ | 10,045 |  | $ | (5,463 | ) | $ | 11,193 |
The difference in income taxes provided for and the amounts determined by applying the federal statutory tax rate to income before income taxes results from the following (in thousands):
|  | December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Income tax expense (benefit) at the statutory rate |  | $ | 7,539 |  | $ | (13,278 | ) | $ | 11,115 |
Changes resulting from— |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal tax effect |  |  | 1,011 |  |  | (1,972 | ) |  | 924 |
Increase (decrease) in valuation allowance |  |  | 455 |  |  | 3,431 |  |  | (846 | )
Increase in contingency reserves |  |  | 198 |  |  | 28 |  |  | 95 |
Increase (decrease) from noncontrolling interests |  |  | 565 |  |  | (118 | ) |  | — |
Non-deductible expenses |  |  | 481 |  |  | 386 |  |  | 452 |
Production activity deduction |  |  | (378 | ) |  | — |  |  | (391 | )
Goodwill impairment |  |  | — |  |  | 9,223 |  |  | — |
Purchase accounting adjustments |  |  | (210 | ) |  | (2,992 | ) |  | — |
Other |  |  | 384 |  |  | (171 | ) |  | (156 | )
|  | $ | 10,045 |  | $ | (5,463 | ) | $ | 11,193 |
Deferred Tax Assets (Liabilities) Significant components of the net deferred tax assets and net deferred tax liabilities as reflected on the balance sheet are as follows (in thousands):
|  | Year Ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |
Deferred income tax assets— |  |  |  |  |  |  |
Accounts receivable and allowance for doubtful accounts |  | $ | 2,293 |  | $ | 1,692 |
Goodwill |  |  | — |  |  | 4,519 |
Stock compensation |  |  | 2,444 |  |  | 2,583 |
Accrued liabilities and expenses |  |  | 19,661 |  |  | 20,809 |
State net operating loss carryforwards |  |  | 4,668 |  |  | 4,604 |
Other |  |  | 1,224 |  |  | 1,186 |
Total deferred income tax assets |  |  | 30,290 |  |  | 35,393 |
Deferred income tax liabilities— |  |  |  |  |  |  |
Property and equipment |  |  | (5,357 | ) |  | (5,828 | )
Long-term contracts |  |  | (306 | ) |  | (237 | )
Goodwill |  |  | (1,124 | ) |  | — |
Intangible assets |  |  | (3,932 | ) |  | (4,762 | )
Tax accounting method change (Section 481 adjustments) |  |  | — |  |  | (2,978 | )
Other |  |  | (1,131 | ) |  | (671 | )
Total deferred income tax liabilities |  |  | (11,850 | ) |  | (14,476 | )
Less—Valuation allowance |  |  | (4,453 | ) |  | (3,999 | )
Net deferred income tax assets |  | $ | 13,987 |  | $ | 16,918 |
The deferred income tax assets and liabilities reflected above are included in the consolidated balance sheets as follows (in thousands):
|  | December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |
Deferred income tax assets— |  |  |  |  |  |  |
Prepaid expenses and other |  | $ | 19,952 |  | $ | 19,294 |
Other noncurrent assets |  |  | 2,324 |  |  | 2,594 |
Total deferred income tax assets |  | $ | 22,276 |  | $ | 21,888 |
Deferred income tax liabilities— |  |  |  |  |  |  |
Other current liabilities |  | $ | 335 |  | $ | 328 |
Deferred income tax liabilities |  |  | 7,954 |  |  | 4,642 |
Total deferred income tax liabilities |  | $ | 8,289 |  | $ | 4,970 |
As of December 31, 2012, we had $4.9 million of future tax benefits related to $99.9 million of available state and Puerto Rican net operating loss carryforwards ("NOLs") which expire between 2013 and 2032. A valuation allowance of $4.5 million has been recorded against net deferred tax assets of state and Puerto Rican NOLs and other state and Puerto Rican deferred tax assets. We recorded an increase in valuation allowances of $0.5 million for the year ended December 31, 2012. A deferred tax asset for state NOLs, net of related valuation allowance, of $1.9 million reflects our conclusion that it is likely that this asset will be realized based upon expected future earnings in certain subsidiaries. We update this assessment of the realizability of deferred tax assets relating to state net NOLs annually. A return to profitability in our entities with valuation allowances on their NOL's and deferred tax assets would result in a reversal of a portion of the valuation allowance relating to realized deferred tax assets. A sustained period of profitability could cause a change in our judgment of the remaining deferred tax assets. If that were to occur then it is likely that we would reverse some or all of the remaining deferred tax asset valuation allowance. As of December 31, 2012 and 2011, approximately $0.3 million and $0.5 million, respectively, of unrecognized tax benefits, if recognized in future periods, would impact our effective tax rate. This liability is included in "Other Long-Term Liabilities" in the consolidated balance sheets. We do not expect that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months. We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. We recognized $0.4 million in interest during the year ended December 31, 2012. We did not recognize any interest or penalties during the year ended December 31, 2011. We had accrued approximately $0.7 million and $0.3 million for the payment of interest and penalties at December 31, 2012 and 2011, respectively. Our tax records are subject to review by the Internal Revenue Service for the 2009 tax year forward and by various state authorities for the 2004 tax year forward. We are currently under examination for our U.S. federal income taxes for the 2009 tax year. Liabilities for Uncertain Tax Positions A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | Year Ended December 31, |
--- | --- | --- | ---
|  | 2012 |  | 2011 |  | 2010 |
Balance at beginning of year |  | $ | 696 |  | $ | 696 |  | $ | 634 |
Additions based on tax positions related to the current year |  |  | — |  |  | — |  |  | 189 |
Additions for tax positions of prior years |  |  | — |  |  | — |  |  | — |
Reductions for tax positions of prior years |  |  | (197 | ) |  | — |  |  | (127 | )
Settlements |  |  | — |  |  | — |  |  | — |
Balance at end of year |  | $ | 499 |  | $ | 696 |  | $ | 696 |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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