Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

5. Income Taxes

The following table presents the components of our income tax expense for the following periods (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Current:
Federal	$	6		$	(353	)	$	11		$	(328	)
State and local		69			21			105			56
Total Current		75			(332	)		116			(272	)
Deferred:
Federal	$	—		$	322		$	—		$	322
State and local		—			46			—			46
Total Deferred		—			368			—			368
Income tax expense	$	75		$	36		$	116		$	96
Effective income tax rate		2.8	%		0.9	%		18.5	%		2.0	%

Our effective tax rate for the three and six month periods ended June 30, 2011 was impacted by a full valuation allowance against all of our deferred tax assets, net of deferred tax liabilities. The effective tax rate of 18.5% for the six months ended June 30, 2011 is higher than previous periods due to the decrease in our loss before taxes.

As of June 30, 2011 and December 31, 2010, deferred tax assets net of deferred tax liabilities totaled $21.7 million and $21.1 million, respectively, offset by full valuation allowances. We increased both the gross deferred tax asset and the associated valuation allowance by $600,000 as a result of the increase of net operating loss carryforward based on our loss in the first half of 2011. Since it is not more-likely-than-not that we will realize our deferred tax assets, we will be unable to record tax benefits in the United States and state jurisdictions during 2011. Income tax expense for the six month periods ended June 30, 2011 and 2010 includes interest on unrecognized tax benefits and state taxes in certain jurisdictions.

During the three and six month periods ended June 30, 2011, there were no significant changes to the liability for unrecognized tax benefits or potential interest and penalties recorded as a component of income tax. The total amount of unrecognized tax benefits at each of June 30, 2011 and December 31, 2010 was approximately $539,000. It is reasonably possible that the amount of the total unrecognized tax benefits may change in the next 12 months. However, we do not believe that any anticipated change will be material to the Condensed Consolidated Financial Statements. In January 2011, the Internal Revenue Service initiated a review of the 2009 tax year. Based on the early status of the review, we cannot estimate the impact, if any, to previously recorded unrecognized tax benefits.