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Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
Income Taxes

12. Income Taxes

The University has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities is principally dependent upon achievement of projected future taxable income. The University has no valuation allowance at December 31, 2011 and 2010.

The components of income tax expense (benefit) are as follows:

 

 

      September 30,       September 30,       September 30,  
    Year Ended December 31,  
    2011     2010     2009  

Current:

                        

Federal

   $ 7,441     $ 22,522     $ 16,587  

State

     2,737       5,163       3,515  
   

 

 

    

 

 

    

 

 

  
      10,178       27,685       20,102  
   

 

 

    

 

 

    

 

 

  

Deferred:

                        

Federal

     18,125       (2,956 )      (1,498 ) 

State

     2,679       (2,480 )      (625 ) 
   

 

 

    

 

 

    

 

 

  
      20,804       (5,436 )      (2,123 ) 
   

 

 

    

 

 

    

 

 

  
    $ 30,982     $ 22,249     $ 17,979  
   

 

 

    

 

 

    

 

 

  

 

A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows:

 

 

      September 30,       September 30,       September 30,  
    Year Ended December 31,  
    2011     2010     2009  

Statutory U.S. federal income tax rate

     35.0 %      35.0 %      35.0 % 

State income taxes, net of federal tax benefit

     5.5       5.6       5.2  

State tax credits, net of federal effect

     (1.2 )      (1.7 )      (1.5 ) 

Non deductible expenses

     0.2       0.4       (0.1 ) 

Other

     (1.5 )      (0.6 )      1.1  
   

 

 

    

 

 

    

 

 

  

Effective income tax rate

     38.0 %      38.7 %      39.7 % 
   

 

 

    

 

 

    

 

 

  

Significant components of the Company’s deferred income tax assets and liabilities are as follows:

 

 

      September 30,       September 30,  
    As of December 31,  
    2011     2010  
     

Current deferred tax asset (liability):

                

Accounts receivable allowance for doubtful accounts

   $ 4,638     $ 14,713  

State taxes

     (764 )      (1,512 ) 

Estimated litigation loss

     76       2,275  

Other

     (597 )      602  
   

 

 

    

 

 

  

Current deferred tax asset

     3,353       16,078  
   

 

 

    

 

 

  

Non-current deferred tax asset (liability):

                

Depreciation and leases

     (18,763 )      (7,719 ) 

Share-based compensation

     6,664       4,561  

Deferred rent

     2,353       543  

Intangibles

     4,121       4,977  

Other

     291       438  
   

 

 

    

 

 

  

Non-current deferred tax (liability) asset

     (5,334 )      2,800  
   

 

 

    

 

 

  

Net deferred tax (liability) asset

   $ (1,981 )    $ 18,878  
   

 

 

    

 

 

  

In January 2008, the University began its accounting for uncertainty in tax positions. The University will recognize the impact of a tax position in its financial statements if that position is more-likely-than-not of being sustained on audit, based on the technical merits of the position. The University discloses all unrecognized tax benefits, which includes the reserves recorded for uncertain tax positions on filed tax returns and the unrecognized portion of affirmative claims. No adjustment was made to opening retained earnings. The University recognizes interest and penalties related to uncertain tax positions in income tax expense.

The reconciliation of the beginning and ending balance of unrecognized tax benefits at December 31 is as follows:

 

 

      September 30,       September 30,  
    2011     2010  

Unrecognized tax benefits, beginning of year

   $ 604     $ 1,066  

Tax positions taken during the current year

                

Increases

     —         34  

Decreases

     —         —    

Tax positions taken during a prior year

                

Increases

     1,628       235  

Decreases

     (304 )      (505 ) 

Decreases for settlements during the period

     (937 )      (226 ) 

Reductions for lapses of applicable statute of limitations

     (146 )      —    
   

 

 

    

 

 

  

Unrecognized tax benefits, end of year

   $ 845     $ 604  
   

 

 

    

 

 

  

As of December 31, 2011 and 2010, the unrecognized tax benefit recorded of $543 and $388, respectively, if reversed, would impact the effective tax rate. During the years ended December 31, 2011, 2010, and 2009, the University recognized approximately $123, $80 and $52, respectively, in interest and penalties. At December 31, 2011 and 2010, the University had accrued $121 and $160, respectively, in interest and $0 and $30, respectively, in penalties. It is reasonably possible that the amount of the unrecognized tax benefit will change during the next 12 months, however management does not expect the potential change to have a material effect on the results of operations or financial position.

 

The University’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities. As of December 31, 2011, the earliest tax year still subject to examination for federal and state purposes is 2008 and 2005, respectively. During 2008, the IRS commenced an examination of the University’s 2005 income tax return and subsequently opened 2006 for examination. The University finalized the federal income tax audits of 2005 and 2006 and as a result of the audit findings, paid $67 and $20 in tax and interest, respectively, for 2005 and $159 and $31 in tax and interest, respectively, for 2006 during 2010.