Income Taxes

Income tax expense attributable to continuing operations consists of the following components:



	Years Ended December 31,
	2013			2012			2011
Current (benefit) expense:
Federal	$	(10,137	)	$	148,495		$	2,333
State and foreign	7,507			18,836			6,489
	(2,630		)	167,331			8,822
Deferred (benefit) expense:
Federal	154,299			(77,360		)	62,131
State	17,205			(11,154		)	7,029
	171,504			(88,514		)	69,160
Tax expense relating to uncertain tax positions, including accrued interest	9,967			7,241			6,266
Income tax expense	$	178,841		$	86,058		$	84,248

Income tax expense attributable to discontinued operations is classified as current income tax expense for the year ended December 31, 2012 and deferred income tax expense for the year ended December 31, 2011.

A reconciliation of the federal statutory income tax rate to the effective income tax rate is as follows:



	Years Ended December 31,
	2013		2012		2011
U.S. federal statutory income tax rate	35	%	35	%	35	%
State and local income taxes, net of federal benefit	2		2		4
Changes in the valuation allowance	1		(1	)	(1	)
Domestic production activity deduction	(1	)	—		—
Tax expense relating to uncertain tax positions, including accrued interest, net of deferred tax benefits	2		2		2
Other	(1	)	1		—
Effective income tax rate	38	%	39	%	40	%

The tax effects of temporary differences that give rise to significant components of deferred tax assets or liabilities at December 31, 2013 and 2012 are as follows:



	December 31,
	2013			2012
Deferred Tax Asset (Liability)
Current
NOLs and tax credit carry forwards	$	5,130		$	687
Compensation and benefit plans	13,299			10,230
Allowance for doubtful accounts	316			392
Deferred litigation settlement proceeds	—			114,210
Other liabilities	1,280			1
Deferred tax asset	20,025			125,520
Valuation allowance	(2,623		)	(4,117		)
Net deferred tax asset, current	17,402			121,403
Other assets	(1,734		)	—
Deferred tax liability, current	(1,734		)	—
Net deferred tax asset, current	15,668			121,403
Noncurrent
NOLs and tax credit carry forwards	26,413			25,625
Compensation and benefit plans	18,713			13,768
Fixed assets and intangible assets	—			7,480
Interest rate swap contracts	3,577			4,971
Other liabilities	7,281			7,537
Deferred tax asset	55,984			59,381
Valuation allowance	(7,335		)	(1,947		)
Net deferred tax asset, noncurrent	48,649			57,434
Prepaid liabilities	(825		)	(668		)
Fixed assets and intangible assets	(8,595		)	—
Investments in partnerships	(131,116		)	(85,907		)
Other assets	(3,388		)	—
Deferred tax liability, noncurrent	(143,924		)	(86,575		)
Net deferred tax liability, noncurrent	(95,275		)	(29,141		)
Total net deferred tax (liability) asset	$	(79,607	)	$	92,262

At December 31, 2013, the Company had foreign tax credit carry forwards of approximately $23,000, expiring on various dates from 2014 through 2023, subject to a valuation allowance of approximately $2,000. As a result of the Chellomedia acquisition, the Company is in the process of evaluating its foreign tax credit carry forwards.

For the year ended December 31, 2013, excess tax benefits of $4,975 relating to share-based compensation awards and $1,613 relating to amortization of tax deductible second component goodwill were realized as a reduction in tax liability (as determined on a 'with-and-without' approach).

At December 31, 2013, the liability for uncertain tax positions was $26,333, excluding the related accrued interest liability of $3,109 and deferred tax assets of $7,760. All of such unrecognized tax benefits, if recognized, would reduce the Company's income tax expense and effective tax rate.

A reconciliation of the beginning to ending amount of the liability for uncertain tax positions (excluding related accrued interest and deferred tax benefit) is as follows:



Balance at December 31, 2012	$	16,721
Increases related to prior year tax positions	6,802
Increases related to current year tax positions	4,907
Decreases due to settlements of prior year tax positions	(1,810		)
Decreases due to payments related to prior year tax positions	(287		)
Balance at December 31, 2013	$	26,333

Interest expense (net of the related deferred tax benefit) of $796 offset by interest income of $746, related to the settlements of prior year tax positions, was recognized during the year ended December 31, 2013 and is included in income tax expense in the consolidated statement of income. At December 31, 2013 and 2012, the liability for uncertain tax positions and related accrued interest noted above are included in other liabilities in the consolidated balance sheets.

Under the Company's Tax Disaffiliation Agreement with Cablevision, Cablevision is liable for all income taxes of the Company for periods prior to the Distribution except for New York City Unincorporated Business Tax. The City of New York is currently auditing the Company's Unincorporated Business Tax Returns for the years 2008 through 2011. The Internal Revenue Service is currently auditing the Company’s U.S. Corporate Income Tax Return for 2011.

For periods prior to the Distribution, the Company’s taxable income or loss was included in the consolidated federal and certain state and local income tax returns of Cablevision. Consequently, income tax expense for such periods is based on the taxable income of the Company on a separate tax return basis. The reductions in taxes payable during such periods realized by the Company through the utilization of Cablevision’s NOLs or by Cablevision through the utilization of the Company’s NOLs or credits are reflected as deemed capital contributions or distributions, respectively, in the periods of utilization and are adjusted for true-ups in subsequent periods. Accordingly, deemed capital contributions, net of $36,867 was recorded in the consolidated statement of stockholders’ deficiency for the year ended December 31, 2011 to reflect the estimated NOLs of Cablevision used by the Company. In addition, deemed capital distributions, net of $2,942 and $2,586 were recorded in the consolidated statements of stockholders’ deficiency for the years ended December 31, 2012 and 2011, respectively, to reflect true-ups as of the Distribution date for utilization of Cablevision's NOLs and for adjustments to liabilities for uncertain tax positions and net deferred tax assets as a result of the Distribution and the estimated New York City Unincorporated Business Tax credits of the Company used by Cablevision, respectively.

As a result of the Distribution, the following adjustments to the deferred tax assets and liabilities were recorded as a deemed capital distribution, net in the consolidated statement of stockholders’ deficiency for the year ended December 31, 2011: (i) a decrease in the net deferred tax assets of $2,302 to reflect the lower stand-alone estimated applicable corporate tax rates, (ii) a decrease in the deferred tax asset for share-based awards of $7,292 to eliminate the portion of the deferred tax asset relating to share-based compensation expense attributable to Cablevision corporate employees that was allocated to the Company prior to the Distribution, and (iii) a decrease in the deferred tax asset of $1,314 to reflect that certain compensation awards are no longer anticipated to be realized as a tax deduction pursuant to Internal Revenue Code Section 162(m). In addition, as of the Distribution date, liabilities for uncertain tax positions of $56,409, accrued interest of $1,284, and the related deferred tax assets of $2,358 were eliminated and recorded as a deemed capital contribution, net in the consolidated statement of stockholders’ deficiency as the liability for such uncertain tax positions became an obligation of Cablevision.

Pursuant to the Company's Tax Disaffiliation Agreement with Cablevision, the Company is required to indemnify Cablevision for losses and taxes of Cablevision relating to the Distribution or any related debt exchanges resulting from the breach of certain covenants, including as a result of certain acquisitions of our stock or assets or as a result of modification or repayment of certain related debt in a manner inconsistent with the private letter ruling or letter ruling request.