Income Taxes

A comparative analysis of the provision for income taxes follows (in thousands):



	For the Year Ended
	December 31, 2013			December 31, 2012			December 31, 2011
Current:
Federal	$	(3,968	)	$	(7,784	)	$	7,784
State and local	1,063			1,522			2,460
Current income tax expense (benefit)	(2,905		)	(6,262		)	10,244
Deferred:
Federal	(30,302		)	20,211			(70,978		)
State and local	(6,358		)	3,302			(15,034		)
Deferred income tax (benefit) expense	(36,660		)	23,513			(86,012		)
Income tax (benefit) expense	$	(39,565	)	$	17,251		$	(75,768	)

A reconciliation of the differences between federal statutory tax rate and the Company’s effective tax rate for 2013, 2012 and 2011 is as follows:



	For the Year Ended
	December 31, 2013		December 31, 2012		December 31, 2011
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Impairment	(29.2	)	—		(23.6	)
State income taxes, net of Federal benefit	0.6		4.6		1.7
Change in tax reserve	(0.1	)	(3.4	)	(0.5	)
Net change in state valuation allowance	—		(0.6	)	(0.1	)
Other	(0.1	)	0.9		0.1
Effective tax rate	6.2	%	36.5	%	12.6	%

Deferred income tax assets and deferred tax liabilities are as follows (in thousands):



	December 31, 2013			December 31, 2012
Deferred tax assets
Current:
Reserves and allowances	$	18,840		$	8,833
Payroll and related accruals	5,343			5,953
Net operating loss carryforwards, state	6,216			—
Other	409			446
Less: valuation allowance	(777		)	(511		)
Total current deferred tax assets	30,031			14,721
Noncurrent:
Equity compensation	17,376			16,940
Deferred rent	2,241			2,935
Net operating loss carryforwards, federal	12,141			—
Capital loss carryforward	232			—
Federal tax credit carryforwards	4,408			4,809
Other	5,920			3,669
Less: valuation allowance	(2,864		)	(2,367		)
Total noncurrent deferred tax assets	39,454			25,986
Total deferred tax assets	69,485			40,707
Deferred tax liabilities:
Current:
Prepaid assets	(1,873		)	(2,458		)
Other	(5		)	—
Total current deferred tax liabilities	(1,878		)	(2,458		)

Noncurrent:
Fixed assets	(2,684		)	(1,409		)
Intangible assets	(40,544		)	(51,546		)
Developed software	(3,568		)	(4,559		)
Financing fees	(1,940		)	(10,637		)
Other	(543		)	—
Total non-current deferred tax liabilities	(49,279		)	(68,151		)
Total deferred tax liabilities	(51,157		)	(70,609		)
Net deferred tax assets (liabilities)	$	18,328		$	(29,902	)

At December 31, 2013 and 2012, current net deferred tax assets were $28.2 million and $12.3 million, respectively and non-current net deferred tax liabilities were $9.8 million and $42.2 million, respectively.

At December 31, 2013, the Company had a federal tax credit carryforwards of $4.4 million, a federal net operating loss of $34.7 million, and a federal capital loss carryforward of $0.7 million. The Company had a deferred tax asset of $4.4 million for the federal tax credit carryforwards, $12.1 million for the federal net operating loss, and $0.2 million for the federal capital loss carryforwards. A valuation allowance of $0.2 million has been recorded to reduce the deferred tax asset for the capital loss carryforward to its estimated realizable value. The Company had state net operating loss carryforwards of approximately $133.0 million that expire beginning in 2014. Deferred tax assets relating to the state net operating loss carryforward approximate $6.2 million. A valuation allowance of $3.4 million has been recorded to reduce this deferred tax asset to its estimated realizable value since certain state net operating loss carryforwards may expire before realization. The majority of the federal carryforwards and approximately $15.6 million of the state net operating losses are from the Harden Healthcare Holdings, Inc. acquisition and are subject to Internal Revenue Code §382 limitations.

Authoritative guidance requires that the realization of an uncertain income tax position must be more likely than not (i.e., greater than 50 percent likelihood of receiving a benefit) before it can be recognized in the financial statements. At December 31, 2013 and 2012, the Company had $7.7 million and $8.4 million, respectively, of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



Balance at December 31, 2010	$	3,651
Additions for tax positions of the current year	9,039
Additions for tax positions of prior year	2,316
Changes in judgment	(584		)
Reductions for tax positions of prior years for:
Settlements during the period	(3,184		)
Lapses of applicable statute of limitations	(211		)
Balance at December 31, 2011	11,027
Additions for tax positions of the current year	126
Additions for tax positions of prior year	245
Changes in judgment	(2,312		)
Reductions for tax positions of prior years for:
Settlements during the period	(274		)
Lapses of applicable statute of limitations	(456		)
Balance at December 31, 2012	8,356
Additions for tax positions of the current year	456
Additions for tax positions of acquired companies	910
Reductions for tax positions of prior years for:
Settlements during the period	(1,898		)
Lapses of applicable statute of limitations	(148		)
Balance at December 31, 2013	$	7,676

The Company recognizes interest and penalties on uncertain tax positions in income tax expense. The Company had approximately $1.4 million and $0.6 million of accrued interest related to uncertain tax positions as of December 31, 2013 and 2012, respectively.

The Company continues to participate in the IRS’ Compliance Assurance Process (“CAP”). As a result of the Company’s participation in CAP, management has closed federal tax years prior to 2012 and anticipates closing 2012 in early 2014. The Company is still open under statute of limitations for examination of income and non-income tax filings in various state and local jurisdictions from 2009 through current filings.