Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

E.  Income Taxes

GBL and its greater than 80% owned subsidiaries file a consolidated federal income tax return.  Accordingly, the income tax provision represents the aggregate of the amounts provided for all companies.

The provision for income taxes for the years ended December 31, 2012, 2011 and 2010 consisted of the following:

	2012		2011			2010
(In thousands)
Federal:
Current	$	28,362	$	37,293		$	28,140
Deferred		8,386		(1,417	)		7,432
State and local:
Current		4,855		4,995			3,633
Deferred		118		(104	)		121
Total	$	41,721	$	40,767		$	39,326

A reconciliation of the Federal statutory income tax rate to the effective tax rate is set forth below:

	2012			2011			2010
Statutory Federal income tax rate		35.0	%		35.0	%		35.0	%
State income tax, net of Federal benefit		2.3			2.6			2.2
Other		(1.7	)		(0.7	)		(1.2	)
Effective income tax rate		35.6	%		36.9	%		36.0	%

Significant components of our deferred tax assets and liabilities are as follows:

	2012			2011
(In thousands)
Deferred tax assets:
Stock compensation expense	$	307		$	1,620
Deferred compensation		848			2,193
Intangible asset amortization		145			229
Capital lease obligation		768			718
Other		143			221
Total deferred tax assets		2,211			4,981
Deferred tax liabilities:
Investments in securities available for sale		(7,408	)		(5,166	)
Investments in securities and partnerships		(12,502	)		(6,213	)
Contingent deferred sales commissions		(496	)		(1,050	)
Total deferred tax liabilities		(20,406	)		(12,429	)
Net deferred tax assets (liabilities)	$	(18,195	)	$	(7,448	)

As a result of the accelerated vesting of the RSAs and in accordance with GAAP, a reduction to deferred tax assets of $1.9 million was recorded in additional paid in capital for the year ended December 31, 2010 as the previously recorded deferred tax benefit for the RSA was greater than the actual tax benefit realized by the Company and the Company had a sufficient additional paid in capital pool, while an increase of $108,000 was recorded in additional paid in capital for the year ended December 31, 2012 as the actual tax benefit realized by the Company was greater than the previously recorded deferred tax benefit.

As of December 31, 2012 and 2011, the total amount of gross unrecognized tax benefits related to uncertain tax positions was approximately $10.6 million and $9.1 million, respectively, of which recognition of $7.0 million and $6.0 million, respectively, would impact the Company's effective tax rate.

As of December 31, 2012 and 2011, the net liability for unrecognized tax benefits related to uncertain tax positions was $9.9 million and $8.3 million, respectively, and is included in accrued expenses and other liabilities on the consolidated statements of financial condition.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits related to uncertain tax positions is as follows:

	(in millions)
Balance at January 1, 2010	$	7.9
Additions based on tax positions related to the current year		1.4
Additions for tax positions of prior years		-
Reductions for tax positions of prior years		(0.4	)
Settlements		(0.1	)
Balance at December 31, 2010		8.8
Additions based on tax positions related to the current year		0.7
Additions for tax positions of prior years		-
Reductions for tax positions of prior years		(0.4	)
Settlements		-
Balance at December 31, 2011		9.1
Additions based on tax positions related to the current year		1.1
Additions for tax positions of prior years		0.5
Reductions for tax positions of prior years		-
Settlements		(0.1	)
Balance at December 31, 2012	$	10.6

The Company records penalties and interest related to tax uncertainties in income taxes.  As of December 31, 2012 and 2011, the Company had recognized gross liabilities of approximately $4.3 million and $3.4 million, respectively, related to interest and penalties.  For the years ended December 31, 2012, 2011 and 2010, the Company recorded income tax expenses related to an increase in its liability for interest and penalties of $0.6 million, $0.6 million and $0.1 million, respectively.

The Company is currently being audited by New York State for its income tax returns filed between 2001 and 2007 but does not expect that any potential assessments will be material to its results of operations.  The Company's Federal tax returns are subject to potential future audit for 2009, 2010, 2011 and 2012.  The Company's state income tax returns are subject to potential future audit for all years after 2007.