6. Income Taxes

The components of income tax expense from continuing operations were as follows:



	Year Ended December 31,
	2012			2011			2010
				(In thousands)
Current income tax expense
U.S. Federal	$	(411	)	$	(404	)	$	—
State	(403		)	(661		)	(4,236		)
Total current income tax expense	(814		)	(1,065		)	(4,236		)
Deferred income tax (expense) benefit
U.S. Federal	(28,723		)	(23,254		)	(5,893		)
State	(1,419		)	(1,292		)	3,444
Total deferred income tax expense	(30,142		)	(24,546		)	(2,449		)
Total income tax expense from continuing operations	$	(30,956	)	$	(25,611	)	$	(6,685	)

The Company’s income tax expense from continuing operations differs from the income tax expense computed by applying the U.S. federal statutory corporate income tax rate of 35% to income from continuing operations before income taxes as follows:



	Year Ended December 31,
	2012			2011			2010
				(In thousands)
Income from continuing operations before income taxes	$	82,133		$	58,145		$	18,410
Income tax expense at the statutory rate	(28,747		)	(20,350		)	(6,444		)
State income taxes, net of U.S. federal income tax benefit	(1,681		)	(1,722		)	(792		)
Adjustment to prior period state income taxes, net of U.S. federal income tax benefit	—			(4,735		)	—
Previously unbenefitted capital loss associated with investment				1,171
Nondeductible expenses	(93		)	25			(46		)
Other	(435		)	—			597
Total income tax expense from continuing operations	$	(30,956	)	$	(25,611	)	$	(6,685	)

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. At December 31, 2012 and 2011, deferred tax assets and liabilities are comprised of the following:



	December 31,
	2012			2011
	(In thousands)
Deferred income tax assets
Net operating loss carryforward - Federal and State	$	53,648		$	42,442
Property and equipment	20,425			55,307
Stock-based compensation	4,245			4,469
Allowance for doubtful accounts	476			806
Fair value of derivative instruments	—			75
Valuation allowance	(1,188		)	(681		)
Other	1,755			1,335
	79,361			103,753
Deferred income tax liabilities
Unamortized discount on 4.375% Convertible Senior Notes	(382		)	(1,329		)
Capitalized interest	(55,410		)	(45,469		)
Fair value of derivative instruments	(10,222		)	(13,123		)
	(66,014		)	(59,921		)
Net deferred income tax asset	$	13,347		$	43,832

Deferred income tax assets and liabilities are classified as current or long term consistent with the classification of the related temporary difference. At December 31, 2012 and 2011, the net deferred income tax asset is classified as follows:



	December 31,
	2012			2011
	(In thousands)
Noncurrent deferred income tax asset	$	21,272		$	53,517
Current deferred income tax liability	(7,925		)	(9,685		)
Net deferred income tax asset	$	13,347		$	43,832

As of December 31, 2012, the Company had U.S. income tax loss carryforwards of approximately $176.9 million. The U.S. loss carryforwards expire between 2019 and 2032 if not utilized in earlier periods. The realization of the deferred tax assets related to the U.S. loss carryforwards is dependent on the Company’s ability to generate sufficient future taxable income in the U.S. within the applicable carryforward periods. As of December 31, 2011, the Company determined it was more likely than not that some of its state loss carryforwards would not be realized and accordingly, established a valuation allowance for which this totaled $1.2 million at December 31, 2012. The Company believes it will be able to generate sufficient future taxable income in the U.S. within the carryforward periods. As such, the Company believes that it is more likely than not that its net deferred income tax assets will be fully realized except for those state loss carryforwards for which valuation allowance has been established.

The ability of the Company to utilize its U.S. loss carryforwards to reduce future taxable income is subject to various limitations under the Internal Revenue Code of 1986, as amended (the “Code”). The utilization of such carryforwards may be limited upon the occurrence of certain ownership changes, including the purchase or sale of stock by 5% shareholders and the offering of stock by the Company during any three-year period resulting in an aggregate change of more than 50% in the beneficial ownership of the Company. In the event of an ownership change, Section 382 of the Code imposes an annual limitation on the amount of the Company’s taxable income that can be offset by these carryforwards. The limitation is generally equal to the product of (a) the fair market value of the equity of the Company multiplied by (b) a percentage approximately equivalent to the yield on long-term tax exempt bonds during the month in which an ownership change occurs. In addition, the limitation is increased if there are recognized built-in gains during any post-change year, but only to the extent of any net unrealized built-in gains inherent in the assets sold. As of December 31, 2012, the Company believes an ownership change occurred in February 2005, which imposed an annual limitation of $12.6 million of the Company’s taxable income that can be offset by the pre-change carryforwards. Because the Company’s aggregate pre-change loss carryforward is $9.8 million, the Company does not believe it has a Section 382 limitation on the ability to utilize its U.S. loss carryforwards as of December 31, 2012. Future equity transactions involving the Company or 5% shareholders of the Company (including, potentially, relatively small transactions and transactions beyond the Company’s control) could cause further ownership changes and therefore a limitation on the annual utilization of the U.S. loss carryforwards.

The Company receives a tax deduction during the period stock options are exercised, generally for the excess of the exercise date stock price over the exercise price of the option. The Company also receives a tax deduction during the period restricted stock awards and units vest, generally equal to the fair value on the date that the awards or units vest. Because these stock-based compensation tax deductions did not reduce current taxes payable as a result of U.S. loss carryforwards, the benefit of these tax deductions has not been reflected in the U.S. loss carryforward deferred tax asset. Stock-based compensation deductions included in the U.S. loss carryforwards of $176.9 million but not reflected in deferred tax assets were $29.2 million at December 31, 2012. The Company plans to recognize the $10.2 million deferred tax asset associated with these stock-based compensation tax deductions when all other components of the U.S. loss carryforward deferred tax asset have been fully utilized. If and when the stock-based compensation deduction related U.S. loss carryforward deferred tax asset is realized, the tax benefit of reducing current taxes payable will be credited directly to additional paid-in capital.

At December 31, 2012, the Company had no material uncertain tax positions and the tax years since 1999 remain open to review by federal and various state tax jurisdictions.