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Income Taxes
 6 Months Ended
Jun. 30, 2011
Income Taxes  
Income Taxes

(8) Income Taxes

Ambac files a consolidated Federal income tax return with its subsidiaries. Ambac and its subsidiaries also file separate or combined income tax returns in various states, local and foreign jurisdictions. The following are the major jurisdictions in which Ambac and its affiliates operate and the earliest tax years subject to examination:

 

Jurisdiction

    Tax Year  

United States

      2005   

New York State

      2008   

New York City

      2000   

United Kingdom

      2005   

Italy

      2006   

As of June 30, 2011 and December 31, 2010, the liability for unrecognized tax benefits is approximately $23,150 and $23,050, respectively. Included in these balances at June 30, 2011, and December 31, 2010 are $23,150 and $23,050, respectively, of unrecognized tax benefits that, if recognized, would affect the effective tax rate.

Ambac accrues interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the six months ended June 30, 2011 and 2010, Ambac recognized interest of approximately $100 and $100 respectively. During the three months ended June 30, 2011 and 2010, Ambac recognized interest of approximately $50 and $50 respectively. Ambac had approximately $15,320 and $15,220 for the payment of interest accrued at June 30, 2011 and December 31, 2010, respectively.

As a result of the development of additional losses and the related impact on the Company's cash flows, management believes it is more likely than not that the Company will not generate sufficient taxable income to recover the deferred tax operating asset. As of June 30, 2011 a full valuation allowance of $2,700,000 has been established against the deferred tax asset. As of December 31, 2010, the company had a valuation allowance of $2,411,107.