INCOME TAXES

The Company’s Federal and state income tax expense (benefit) is summarized in the following table (in thousands):



	For the Years Ended December 31,
	2012			2011			2010
Current
Federal	$	(3,759	)	$	(167	)	$	299
State	(676		)	(122		)	91
Total current	(4,435		)	(289		)	390
Deferred
Federal	121			632			43,241
State	(125		)	92			5,069
Total deferred	(4		)	724			48,310
Total tax (benefit) provision	$	(4,439	)	$	435		$	48,700

The effect of temporary differences that give rise to a significant portion of deferred taxes is as follows (in thousands):



	December 31,
	2012			2011
Deferred tax assets:
Reserves not currently deductible	$	11,771		$	16,325
Net operating loss carryforwards	16,287			13,749
Goodwill and intangibles (tax deductible)	7,278			18,377
Accrued expenses	3,055			1,705
Stock based compensation	3,717			4,087
Other	1,778			1,671
Subtotal deferred tax assets	43,886			55,914
Deferred tax liabilities:
Property basis differences	(3,144		)	(3,312		)
Indefinite-lived goodwill and intangibles	(11,306		)	(10,673		)
Less: valuation allowance	(39,727		)	(52,224		)
Net deferred tax liability	$	(10,291	)	$	(10,295	)

During the fourth quarter of 2010, the Company concluded that it was more likely than not that its deferred tax assets would not be realized. Accordingly, a valuation allowance of $56.2 million was recorded against all of the Company's deferred tax assets as of December 31, 2010. The Company continually assesses the necessity of a valuation allowance. Based on this assessment, the Company concluded that a valuation allowance, in the amount of $39.7 million and $52.2 million, was required as of December 31, 2012 and 2011, respectively. If the Company determines in a future period that it is more likely than not that part or all of the deferred tax assets will be realized, the Company will reverse part or all of the valuation allowance.

At December 31, 2012, the Company had federal net operating loss (“NOL”) carry forwards of approximately $49.6 million, of which $26.6 million is subject to an annual limitation, which will begin expiring in 2026 and later. Of the Company’s $49.6 million of Federal NOLs, $14.6 million will be recorded in additional paid-in capital when realized as these NOLs are related to the exercise of non-qualified stock options and restricted stock grants. The Company has post-apportioned state NOL carry forwards of approximately $97.2 million, the majority of which will begin expiring in 2017 and later.

The Company’s reconciliation of the statutory rate to the effective income tax rate is as follows (in thousands):



	2012			2011			2010
Tax (benefit) provision at statutory rate	$	(4,473	)	$	4		$	(6,641	)
State tax (benefit) provision, net of federal taxes	(587		)	36			(517		)
Non-deductible transaction costs	—			—			725
Penalties	—			78			—
Change in tax contingencies	(633		)	(675		)	552
Valuation allowance changes affecting income tax expense	1,104			778			53,982
Other	150			214			599
Tax (benefit) provision	$	(4,439	)	$	435		$	48,700

As of December 31, 2012, the Company had $2.8 million of total gross unrecognized tax benefits, $1.1 million of which, if recognized, would favorably affect the effective income tax rate in future periods. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):



	2012			2011			2010
Unrecognized tax benefits balance at January 1,	$	2,605		$	2,869		$	1,948
Gross increases for tax positions of prior years	—			—			212
Gross increases for tax positions taken in current year	636			378			1,121
Settlements with taxing authorities	—			(212		)	—
Lapse of statute of limitations	(487		)	(430		)	(412		)
Unrecognized tax benefits balance at December 31,	$	2,754		$	2,605		$	2,869

The Company's policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income tax expense in the statement of operations. As of December 31, 2012 and December 31, 2011, the Company had approximately $0.3 million and $0.4 million of accrued interest related to uncertain tax positions, respectively.

The Company files income tax returns, including returns for its subsidiaries, with Federal, state and local jurisdictions. The Company's uncertain tax positions are related to tax years that remain subject to examination. As of December 31, 2012, U.S. tax returns for the years 2009 through 2012 remain subject to examination by Federal tax authorities. Tax returns for the years 2008 through 2012 remain subject to examination by state and local tax authorities for a majority of the Company's state and local filings.