10. Income Taxes

Provision for Income Taxes

The provision for income taxes relating to continuing operations consists of the following (in thousands):

	December 31,

	2013		2012		2011
Current—
Federal	$	11,707	$	5,679	$	2,207
State and Puerto Rico		1,954		1,151		1,673


		13,661		6,830		3,880


Deferred—
Federal		3,254		2,897		(10,121	)
State and Puerto Rico		1,233		318		778


		4,487		3,215		(9,343	)


	$	18,148	$	10,045	$	(5,463	)

The difference in income taxes provided for and the amounts determined by applying the federal statutory tax rate to income before income taxes results from the following (in thousands):

	December 31,

	2013			2012			2011
Income tax expense (benefit) at the statutory rate of 35%	$	16,373		$	7,539		$	(13,278	)
Changes resulting from—
State income taxes, net of federal tax effect		1,910			1,011			(1,972	)
Increase (decrease) in valuation allowance		1,465			455			3,431
Increase (decrease) in tax contingency reserves		(145	)		198			28
Increase (decrease) from noncontrolling interests		(450	)		565			(118	)
Non-deductible expenses		594			481			386
Domestic production activity deduction		(520	)		(378	)		—
Goodwill impairment		—			—			9,223
Purchase accounting adjustments		(472	)		(210	)		(2,992	)
Other		(607	)		384			(171	)


	$	18,148		$	10,045		$	(5,463	)

Deferred Tax Assets (Liabilities)

Significant components of the net deferred tax assets and net deferred tax liabilities as reflected on the balance sheet are as follows (in thousands):

	Year Ended December 31,

	2013			2012
Deferred income tax assets—
Accounts receivable and allowance for doubtful accounts	$	1,660		$	2,293
Stock compensation		2,165			2,444
Accrued liabilities and expenses		19,290			19,661
Net operating loss carryforwards		7,794			6,562
Other		613			1,017


Total deferred income tax assets		31,522			31,977


Deferred income tax liabilities—
Property and equipment		(6,660	)		(5,357	)
Long-term contracts		(671	)		(306	)
Goodwill		(3,364	)		(1,124	)
Intangible assets		(2,803	)		(3,932	)
Other		(947	)		(1,131	)


Total deferred income tax liabilities		(14,445	)		(11,850	)


Less—Valuation allowance		(7,605	)		(6,140	)


Net deferred income tax assets	$	9,472		$	13,987

The deferred income tax assets and liabilities reflected above are included in the consolidated balance sheets as follows (in thousands):

	December 31,

	2013		2012
Deferred income tax assets—
Prepaid expenses and other	$	18,279	$	19,952
Other noncurrent assets		1,472		2,324


Total deferred income tax assets	$	19,751	$	22,276




Deferred income tax liabilities—
Other current liabilities	$	338	$	335
Deferred income tax liabilities		9,941		7,954


Total deferred income tax liabilities	$	10,279	$	8,289

As of December 31, 2013, we had $7.8 million of future tax benefits related to $106.4 million of available state and Puerto Rican net operating loss carryforwards ("NOLs") which expire between 2014 and 2033. A valuation allowance of $7.6 million has been recorded against net deferred tax assets of state and Puerto Rico. We recorded an increase in valuation allowances of $1.5 million for the year ended December 31, 2013. Our deferred tax assets for Puerto Rico are fully valued. A deferred tax asset for state NOLs, net of related valuation allowance, of $1.6 million reflects our conclusion that it is likely that this asset will be realized based upon expected future earnings in certain subsidiaries. We update this assessment of the realizability of deferred tax assets relating to state net NOLs annually. A return to profitability in our entities with valuation allowances on their NOL's and deferred tax assets would result in a reversal of a portion of the valuation allowance relating to realized deferred tax assets. A sustained period of profitability could cause a change in our judgment of the remaining deferred tax assets. If that were to occur then it is likely that we would reverse some or all of the remaining deferred tax asset valuation allowance.

As of December 31, 2013 and 2012, approximately $0.3 million and $0.3 million, respectively, of unrecognized tax benefits, if recognized in future periods, would impact our effective tax rate. This liability is included in "Other Long-Term Liabilities" in the consolidated balance sheets. We do not expect that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. Total interest and penalties decreased $0.4 million during the year ended December 31, 2013. We recognized $0.4 million in interest during the year ended December 31, 2012. We had accrued approximately $0.3 million and $0.7 million for the payment of interest and penalties at December 31, 2013 and 2012, respectively. Our tax records are subject to review by the Internal Revenue Service for the 2010 tax year forward and by various state authorities for the 2005 tax year forward.

Liabilities for Uncertain Tax Positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):

	Year Ended December 31,

	2013			2012			2011
Balance at beginning of year	$	499		$	696		$	696
Additions based on tax positions related to the current year		—			—			—
Additions for tax positions of prior years		—			—			—
Reductions for tax positions of prior years		(86	)		(197	)		—
Settlements		—			—			—


Balance at end of year	$	413		$	499		$	696