17. INCOME TAXES

The components of income tax benefit (provision) from continuing operations for the three and nine months ended September 30, 2011 and 2010 consisted of the following:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2011			2010			2011			2010
Current:
Federal	$	—		$	—		$	—		$	—
State		85			(268	)		136			(281	)
Foreign		(22	)		88			(49	)		(117	)

		63			(180	)		87			(398	)

Deferred:
Federal		3,593			—			3,635			—
State		482			—			439			—

		4,075			—			4,074			—

Total income tax benefit (provision)*	$	4,138		$	(180	)	$	4,161		$	(398	)


*		The income tax benefit from continuing operations for the three and nine months ended September 30, 2011 is offset by the income tax (provision) from discontinued operations of ($4.3) million for the three and nine months ended September 30, 2011.

We recorded net prepaid taxes totaling approximately $0.1 million and $0.2 million as of September 30, 2011 and December 31, 2010, respectively, comprised primarily of state tax refunds receivable, overpayments and state prepaid taxes.

As of December 31, 2010, federal net operating loss carryforwards in the amount of approximately $158.8 million were available to us, translating to a deferred tax asset of $55.6 million before valuation allowance as reported in our 2010 tax return filed on September 15, 2011. These NOLs will expire between 2027 and 2030. Approximately $77 million of these NOLs were generated by members of the Daymark group of companies. We have agreed with the buyer that these tax attributes will remain with the Daymark group after the sale.

We also have state net operating loss carryforwards from December 31, 2010 and previous periods totaling $227.2 million, translating to a deferred tax asset of $14.9 million before valuation allowances. These NOLs will begin to expire in 2017 and are exclusive of any state NOLs attributable to the Daymark group.

We regularly review our deferred tax assets for realizability and have established a valuation allowance based upon historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. Due to the cumulative pre-tax book loss in the past three years and the inherent volatility of our business in recent years, we believe that this negative evidence supports the position that a valuation allowance is required pursuant to ASC 740, Income Taxes, (“Income Taxes Topic”). Management determined that as of September 30, 2011, $53.6 million of deferred tax assets do not satisfy the recognition criteria set forth in the Income Taxes Topic. Accordingly, a valuation allowance has been recorded for this amount. If released, the entire amount would result in a benefit to continuing operations. The current period net change in valuation allowance also takes into consideration the reduction in deferred tax assets of $69 million attributable to the Daymark group.

The differences between the total income tax benefit (provision) from continuing operations for financial statement purposes and the income taxes computed using the applicable federal income tax rate of 35.0% for the three and nine months ended September 30, 2011 and 2010 were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2011			2010			2011			2010
Federal income taxes at the statutory rate	$	4,781		$	3,778		$	13,996		$	15,014
State income taxes, net of federal benefit		403			1,105			1,238			1,970
Foreign income taxes		(22	)		89			(50	)		(117	)
Other		163			—			371			—
Non-deductible expenses		(330	)		(691	)		(2,411	)		(1,273	)
Change in valuation allowance		(857	)		(4,461	)		(8,983	)		(15,992	)

Benefit (provision) for income taxes	$	4,138		$	(180	)	$	4,161		$	(398	)