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NOTE 12 - INCOME TAXES
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Text Block]
NOTE 12 – INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial and income tax reporting purposes and operating loss carryforwards.  For the years ended December 31, 2011, 2010 and 2009, we recognized $820,000, $576,000 and $443,000, respectively, of state income tax.

   
Years Ended
December 31,
 
   
2011
   
2010
   
2009
 
                   
Federal tax
    34.00 %     34.00 %     34.00 %
State franchise tax, net of federal benefit
    6.74 %     -2.24 %     -16.03 %
Non deductible expenses
    14.42 %     -7.76 %     -2.47 %
                         
                         
Changes in valuation allowance
    -44.79 %     -28.68 %     -39.78 %
Income tax expense
    10.37 %     -4.68 %     -24.28 %

Our deferred tax assets and liabilities comprise the following (in thousands):

   
December 31,
 
Deferred tax assets:
 
2011
   
2010
 
Net operating losses
  $ 79,874     $ 66,683  
                 
                 
Accrued expenses
    8,359       7,387  
Unfavorable contract liability
    3,559       3,578  
Equity compensation
    3,530       3,701  
Allowance for doubtful accounts
    1,820       3,608  
Other
    1,071       455  
Valuation allowance
    (65,883 )     (56,617 )
Total deferred tax assets
  $ 32,331     $ 28,795  
                 
Deferred tax liabilities:
               
Property & equipment
    (11,652 )     (7,615 )
Goodwill
    (12,212 )     (10,503 )
Unrealized gain on hedging agreement
    (2,478 )     -  
Intangibles
    (5,202 )     (10,326 )
Other
    (1,065 )     (628 )
                 
Total deferred tax liabilities
  $ (32,608 )   $ (29,072 )
                 
Net deferred tax asset (liability)
  $ (277 )   $ (277 )

As of December 31, 2011, we had federal and state net operating loss carryforwards of approximately $210.6 million and $152.0 million, respectively, which expire at various intervals from the years 2017 to 2031.  As of December 31, 2011, $30.3 million of our federal net operating loss carryforwards acquired in connection with the 1998 acquisition of Diagnostic Imaging Services, Inc., the 2006 acquisition of Radiologix Inc., the 2010 acquisition of Image Medical Corp. and the 2011 acquisition of Raven Holdings U.S., Inc. were subject to limitations related to their utilization under Section 382 of the Internal Revenue Code. Future ownership changes as determined under Section 382 of the Internal Revenue Code could further limit the utilization of net operating loss carryforwards.  Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.  Accordingly, the net deferred tax assets have been fully offset by a valuation allowance.  Cumulative excess tax benefits of $4.4 million, related to the exercise of nonqualified stock options, will be recorded in equity when realized.

We consider all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including tax planning strategies that would be employed to prevent an NOL from expiring unutilized. As of December 31, 2011, we have determined that deferred tax assets of $32.3 million are more-likely than not to be realized. We have also determined that deferred tax liabilities of $12.2 million are required related to book basis in goodwill that has an indefinite life.

For the next five years, and thereafter, federal net operating loss carryforwards expire as follows (in thousands):

Year Ended
 
Total Net Operating Loss Carryforwards
   
Amount Subject to 382 limitation
 
2011
    -       -  
2012
    -       -  
2013
    -       -  
2014
    -       -  
2015
    -       -  
Thereafter
    210,610       30,328  
    $ 210,610     $ 30,328  

We file consolidated income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. We continue to reinvest earnings of the non-US entities for the foreseeable future and therefore have not recognized any U.S. tax expense on these earnings. With limited exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 1998. We do not anticipate the results of any open examinations would result in a material change to its financial position.

In 2010, we acquired a subsidiary that recognized a liability for uncertain tax positions in a prior year. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance at December 31, 2009
  $ -  
Additional based on tax positions of acquired subsidiaries in prior years
    90  
Balance at December 31, 2011
  $ 90  

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized no penalties and interest during the years ended December 31, 2011, 2010 and 2009, and had assumed approximately $90,000 during the year ended December 31, 2010 for the payment of penalties and interest. The reserves for uncertain tax positions are included in accounts payable, accrued and other liabilities as of December 31, 2011 and 2010.