13) Income Taxes

Income tax expense is comprised of the following for the indicated periods (in thousands):


	Years Ended September 30,
	2011		2010		2009
Current:
Federal	$	3,216	$	726	$	2,068
State		3,676		1,575		1,690
Deferred		15,831		13,331		(61,355	)

	$	22,723	$	15,632	$	(57,597	)

The provision for income taxes differs from income taxes computed at the Federal statutory rate as a result of the following:


	Years Ended September 30,
	2011		2010			2009
Income from continuing operations before taxes	$	47,067	$	43,952		$	73,441
Tax at Federal statutory rate		16,473		15,383			25,704
Less impact of Partnership income or loss not subject to federal income taxes		1,631		1,239			(2,447	)
State taxes net of federal benefit		3,493		3,087			4,319
Permanent Differences		54		(44	)		52
Change in valuation allowance		672		(3,928	)		(86,445	)
Change in unrecognized tax benefit and other		400		(105	)		1,220

Provision (benefit) for income taxes per income statement	$	22,723	$	15,632		$	(57,597	)

The components of the net deferred taxes and the related valuation allowance for the years ended September 30, 2011 and September 30, 2010 using current tax rates are as follows (in thousands):


	Years Ended September 30,
	2011			2010
Deferred Tax Assets:
Net operating loss carryforwards	$	9,263		$	19,958
Vacation accrual		2,687			2,624
Pension accrual		6,308			6,889
Allowance for bad debts		4,328			2,909
Fair value of derivative instruments		3,060			2,016
Insurance accrual		17,520			15,530
Inventory		702			968
Alternative minimum tax credit carryforward		261			3,077
Other, net		2,523			2,692

Total deferred tax assets		46,652			56,663
Valuation allowance		(672	)		—

Net deferred tax assets	$	45,980		$	56,663

Deferred Tax Liabilities:
Property and equipment	$	1,077		$	927
Intangibles		14,102			8,937

Total deferred tax liabilities	$	15,179		$	9,864

Net deferred taxes	$	30,801		$	46,799

As of the calendar tax year ended December 31, 2010, Star Acquisitions, a wholly-owned subsidiary of the Partnership, had an estimated Federal net operating loss carry forward ("NOL") of approximately $17.5 million. The Federal NOLs, which will expire between 2018 and 2024, are generally available to offset any future taxable income but are also subject to annual limitations on the amount that can be used.

FASB ASC 740-10-05-6 Income Taxes topic, Uncertain Tax Position subtopic (SFAS No. 109 and FIN 48), provides financial statement accounting guidance for uncertainty in income taxes and tax positions taken or expected to be taken in a tax return. At September 30, 2011, we had unrecognized income tax benefits totaling $2.5 million including related accrued interest and penalties of $0.4 million. These unrecognized tax benefits are primarily the result of Federal tax uncertainties. If recognized, these tax benefits and related interest and penalties would be recorded as a benefit to the effective tax rate.

Tax Uncertainties (in thousands)


Balance at September 30, 2010	$	2,234
Additions based on tax positions related to the current year		197
Additions for tax positions of prior years		100
Reduction for tax positions of prior years		—
Reductions due to lapse in statue of limitations/settlements		(7	)

Balance at September 30, 2011		2,524

We believe that the total liability for unrecognized tax benefits will not materially change during the next 12 months ending September 30, 2012. Our continuing practice is to recognize interest and penalties related to income tax matters as a component of income tax expense.

We file U.S. Federal income tax returns and various state and local returns. A number of years may elapse before an uncertain tax position is audited and finally resolved. For our Federal income tax returns we have four tax years subject to examination. In our major state tax jurisdictions of New York, Connecticut, Pennsylvania and New Jersey, we have four, four, five, and five tax years, respectively, that are subject to examination. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, based on our assessment of many factors including past experience and interpretation of tax law, we believe that our provision for income taxes reflect the most probable outcome. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events.