G.	Income Taxes

The provision for income taxes on continuing operations consisted of the following for the years ended September 30:

(in thousands)	2013		2012		2011
Current	$	5,240	$	2,519	$	1,627
Deferred		261		1,855		3,776
Total income tax expense	$	5,501	$	4,374	$	5,403

Income tax expense on continuing operations differs from the “expected” income tax expense computed by applying the U.S. federal statutory rate of 34% to earnings before income taxes for the years ended September 30 as a result of the following:

(in thousands)	2013		2012		2011
Computed expected tax expense	$	5,116	$	4,194	$	5,323
State income taxes, net of federal benefit		146		140		140
Stock-based compensation and other permanent differences		239		40		(60)
Total income tax expense	$	5,501	$	4,374	$	5,403

Deferred income taxes 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.The significant components of the Company’s deferred tax assets and liabilities at September 30 were as follows:

	(in thousands)	2013		2012
Deferred tax assets (liabilities):
Definite and indefinite lived intangibles		$	(16,481)	$	(14,954)
Property and equipment			(9,873)		(8,627)
Patron tax			4,351		3,447
Net operating loss carryforward and other			267		(194)
Net deferred tax liabilities		$	(21,736)	$	(20,328)

The net deferred taxes are recorded in the balance sheets as follows:

	2013		2012
Current assets	$	4,618	$	3,635
Long-term liabilities		(26,354)		(23,963)
Net deferred tax liabilities	$	(21,736)	$	(20,328)

Included in the Company’s deferred tax liabilities at September 30, 2013 is approximately $17.2 million representing the tax effect of indefinite lived intangible assets from club acquisitions which are not deductible for tax purposes. These deferred tax liabilities will remain in the Company’s balance sheet until the related clubs are sold.

The Company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. We recognize accrued interest related to unrecognized tax benefits as a component of interest expense. We recognize penalties related to unrecognized tax benefits as a component of miscellaneous income (expense) in accordance with regulatory requirements.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended September 30, 2013, 2012 and 2011, the Company recognized no interest and penalties for unrecognized tax benefits. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states. The last three years remain open to tax examination. The Company’s income tax returns for the years ended September 30, 2012 and 2011 are currently under examination.

For tax purposes, the Company has recognized a loss for tax purposes of approximately $13.5 million for the year ended September 30, 2011 upon the closing of the Las Vegas club. The loss resulted in a loss for tax purposes for the year of approximately $2.3 million. This loss was carried forward to the subsequent year for tax purposes.