8. Income Taxes

The components of the provision (benefit) for income taxes are as follows:


	Year Ended December 31,
	2011			2010		2009
	(In Thousands)
Current:
U.S. federal	$	485		$	1,081	$	3,272
Foreign		116			62		—
State and local		1,077			536		1,089
Total current		1,678			1,679		4,361
Deferred:
U.S. federal		2,430			941		(4,382	)
Foreign		—			33		(251	)
State and local		(83	)		205		(881	)
Total deferred		2,347			1,179		(5,514	)
Provision (benefit) for income taxes	$	4,025		$	2,858	$	(1,153	)

The reconciliation of income tax expense (benefit) computed at the U.S. federal statutory rate to income tax provision (benefit) for the years ended December 31, 2011, 2010 and 2009 are as follows:


	Year Ended December 31,
	2011			2010			2009
	(In Thousands)
Income taxes at federal statutory rate (35%)	$	3,506		$	2,279		$	(2,109	)
State income taxes, net of federal benefit		662			261			136
Income not taxed for U.S. federal tax purposes		(432	)		(90	)		(207	)
Expenses not deductible for U.S. tax purposes		451			345			613
Taxes outside the U.S.		116			99			(251	)
Other		(278	)		(36	)		665
Provision (benefit) for income taxes	$	4,025		$	2,858		$	(1,153	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:


	Year Ended December 31,
	2011			2010
	(In Thousands)
Deferred tax assets:
Net operating loss and tax credit carryforwards	$	15,356		$	18,077
Stock-based compensation		2,218			1,185
Property and equipment		(784	)		700
Accrued expenses		201			231
Allowance for doubtful accounts and other reserves		882			780
Other		747			462
Total deferred tax assets		18,620			21,435
Deferred tax liabilities:
Intangible assets		(2,397	)		(2,673	)
Capitalized software costs, net of amortization		(268	)		(415	)
Total deferred tax liabilities		(2,665	)		(3,088	)
Net deferred tax assets		15,955			18,347
Total net deferred tax assets	$	15,955		$	18,347

As of December 31, 2011, current and non-current deferred tax assets were approximately $3.0 million and $15.6 million, respectively, and non-current deferred tax liabilities were approximately $2.7 million. As of December 31, 2010, current and non-current deferred tax assets were approximately $2.7 million and $18.8 million, respectively, and non-current deferred tax liabilities were approximately $3.1 million.

As of December 31, 2011, the Company had net operating loss carryforwards of approximately $60.0 million for federal tax purposes which are set to expire in years 2019 through 2026. The majority of this amount represents acquired tax loss carryforwards of WeddingChannel.com, which are subject to limitation on future utilization under Section 382 of the Internal Revenue Code of 1986. Section 382 imposes limitations on the availability of a company’s net operating losses after a more than 50 percentage point ownership change occurs. It is estimated that the effect of Section 382 will generally limit the amount of the net operating loss carryforwards of WeddingChannel.com that is available to offset future taxable income to approximately $3.6 million annually. The overall determination of the annual loss limitation is subject to interpretation, and, therefore, the annual loss limitation could be subject to change.

As of December 31, 2011, the Company had approximately $4.2 million in unrecognized tax benefits related to certain acquired net operating loss carryforwards of WeddingChannel.com arising from a tax position taken in the 2006 income tax filings related to losses associated with the dissolution of a subsidiary. This amount has been netted against the related deferred tax assets and, if recognized, would be reported as a reduction of income tax expense. However, a portion of these unrecognized tax benefits could be subject to a valuation allowance if and when recognized in a future period.

None of the Company’s net operating loss carryforwards for tax purposes is attributable to tax deductions generated from the exercise of employee stock options, vesting of restricted stock and the exercise of stock warrants in excess of related stock-based compensation, non-cash services expense and non-cash sales and marketing expense recorded for financial reporting purposes. In accordance with the accounting standard for stock-based compensation, the related tax benefits for these net operating loss carryforwards are recognized when they result in a reduction to current taxes payable and are accounted for as additional paid-in-capital. In 2011 and 2010, the Company recognized approximately $4.2 million and $2.3 million, respectively, in benefits associated with these tax deductions.

The following is a reconciliation of the Company’s unrecognized tax benefits for 2011 and 2010:


	2011		2010
	(in thousands)
Balances of unrecognized tax benefits as of January 1	$	4,403	$	4,403
Increases for positions taken in prior years		—		—
Increases for positions related to the current year		—		—
Amounts of decreases related to the settlements		—		—
Reductions due to lapse of statutes of limitations		—		—
Balance of unrecognized tax benefits as of December 31	$	4,403	$	4,403

At December 31, 2011, the unrecognized tax benefits of $4.4 million would affect the Company’s effective income tax rate, if and when recognized in future years.

The Company is subject to taxation in the United States and various state and local jurisdictions. In December 2007, the Internal Revenue Service completed its audit of the Company’s 2005 U.S. federal tax return with no adjustment. On June 17, 2009 the Company received notification that its New York State franchise tax returns would be audited for the year ended December 31, 2005. As of December 31, 2010, none of the Company’s other tax returns have been examined by any income taxing authority. As a result of the ongoing use of tax loss carryforwards, all of the Company’s U.S. federal tax returns from 1998 through 2006, its state and local returns, as well as all tax returns of WeddingChannel.com remain subject to examination.

The Company does not presently anticipate such uncertain income tax positions will significantly increase or decrease in the next 12 months; however, actual developments could differ from those currently expected.

The Company records interest on unrecognized tax benefits, which amounts were not material in 2011 and 2010, in its provision for income taxes.