Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

5. Income Taxes

The provision (benefit) for income taxes consisted of the following (in thousands).

	Three Months Ended June  30,					Six Months Ended June  30,
	2012			2011		2012			2011
Federal:
Current	$	—		$	—	$	—		$	—
Deferred		—			—		—			—
		—			—		—			—
State:
Current		(262	)		258		(184	)		55
Deferred		—			1		1			(98	)
		(262	)		259		(183	)		(43	)
	$	(262	)	$	259	$	(183	)	$	(43	)

The provision (benefit) for income taxes differs from the amounts computed by applying the statutory federal corporate tax rate of 35% to loss before income taxes as a result of the following (in thousands).

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Benefit for income taxes at statutory rate	$	(1,565	)	$	(18,625	)	$	(4,409	)	$	(19,294	)
Tax effect of:
Tax-exempt investment income		(1	)		(4	)		(2	)		(7	)
Change in the beginning of the period balance of the valuation allowance for deferred tax assets allocated to federal income taxes		1,545			3,775			4,372			4,331
Net operating loss carryforward expirations		—			735			—			735
Goodwill and identifiable intangible assets		—			14,084			—			14,084
Restricted stock		1			31			13			167
State income taxes, net of federal income tax benefit and valuation allowance		(262	)		259			(183	)		(43	)
Other		20			4			26			(16	)
	$	(262	)	$	259		$	(183	)	$	(43	)

The Company had a valuation allowance of $31.5 million and $27.2 million at June 30, 2012 and December 31, 2011, respectively, to reduce deferred tax assets to the amount that is more likely than not to be realized. The change in the total valuation allowance for the six months ended June 30, 2012 was an increase of $4.3 million. For the six months ended June 30, 2012, the change in the valuation allowance included a reduction of $0.4 million related to unrealized change in investments included in other comprehensive income (loss) and increases of $0.2 million related to deferred state income taxes.

In assessing the realization of deferred tax assets, management considered whether it was more likely than not that some portion or all of the deferred tax assets will not be realized. The Company is required to assess whether a valuation allowance should be established against the Company’s deferred tax assets based on the consideration of all available evidence using a more likely than not standard. In making such judgments, significant weight is given to evidence that can be objectively verified. In assessing the Company’s ability to support the realizability of its deferred tax assets, management considered both positive and negative evidence. The Company placed greater weight on historical results than on the Company’s outlook for future profitability and established a deferred tax valuation allowance at June 30, 2012 and December 31, 2011. The deferred tax valuation allowance may be adjusted in future periods if management determines that it is more likely than not that some portion or all of the deferred tax assets will be realized. In the event the deferred tax valuation allowance is adjusted, the Company would record an income tax benefit for the adjustment.

The Company’s policy is to consider all known income sources, including other comprehensive income, in determining the amount of tax benefit allocated to continuing operations. The Company has not recognized any benefit in its consolidated statements of operations for the three and six months ended June 30, 2012 given the current uncertainty related to whether the Company will have both a loss from continuing operations and income from other sources for the year ending December 31, 2012.