Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

13. Income Taxes

The Company records an income tax provision or benefit based upon its estimated annual effective tax rate, which is estimated at 36.3% and 36.6% for the nine months ended September 30, 2011 and 2010, respectively.

The Company recognizes tax expense related to uncertain tax provisions as part of its income tax provision and recognizes interest and penalties related to uncertain tax positions in interest expense. As of September 30, 2011 and December 31, 2010, the Company had not accrued any amounts for interest or penalties related to uncertain tax positions.

The U.S. federal statute of limitations remains open for the year 2007 and onward. The IRS recently completed a field examination of the Company's 2008 and 2009 U.S. tax returns, and the Company agreed upon and paid a final settlement. The State of California and the State of Oregon are currently conducting an examination of the Company's 2007 and 2008 state tax returns.

In November 2011, the Company received a Proposed Auditor's Report from the State of Oregon seeking approximately $800,000 in unpaid taxes and penalties in connection with the Company's treatment of the proceeds from its 2007 and 2008 sales of Safeco Corporation stock. The Company intends to oppose the State of Oregon's position. The final disposition of the proposed audit adjustments could require the Company to make additional tax payments, which could materially affect its effective tax rate.

The determination of the Company's provision for income taxes and valuation allowance requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. In assessing whether and to what extent deferred tax assets can be realized, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

The Company assesses the likelihood of the realizability of its deferred tax assets on a quarterly basis. Consistent with prior years, the Company recorded a full valuation allowance against the Company's state deferred tax assets, as it is more likely than not that a tax benefit for the deferred tax assets will not be recognized based upon all available evidence. As a result, the Company's effective tax rate is not affected by changes in state rates. At September 30, 2011 and December 31, 2010, the Company has not recorded a valuation allowance on its federal deferred tax assets as management believes that it is more likely than not that the Company's federal deferred tax assets are realizable. The amount of net deferred tax assets considered realizable, however, could be reduced in the future if the Company's projections of future taxable income are reduced or if the Company does not perform at the levels that it is projecting. This could result in an increase in the Company's valuation allowance for federal deferred tax assets.