Income Taxes

The jurisdictional components of income (loss) before income taxes consist of the following (amounts in thousands):



	Year ended December 31,
	2012		2011			2010
Domestic	$	42,194	$	23,396		$	(48,650	)
Foreign	4,192		(2,563		)	1,092
Income (loss) before income tax	$	46,386	$	20,833		$	(47,558	)

The components of our income tax expense (benefit) consist of the following (amounts in thousands):



	Year ended December 31,
	2012			2011			2010
Current tax:
Federal	$	236		$	716		$	(2,547	)
State	1,214			1,090			32
Foreign	1,479			1,301			931
	2,929			3,107			(1,584		)
Deferred taxes:
Federal	15,013			7,199			(13,046		)
State	(749		)	102			1,366
Foreign	(839		)	(752		)	(1,033		)
	13,425			6,549			(12,713		)
Income tax expense (benefit)	$	16,354		$	9,656		$	(14,297	)

The difference between the income tax expense (benefit) and the amount computed by applying the federal statutory income tax rate of 35% to income (loss) before income taxes consists of the following (amounts in thousands):



	Year ended December 31,
	2012			2011			2010
Expected tax expense (benefit)	$	16,235		$	7,291		$	(16,645	)
State income taxes	302			775			909
Incentive stock options	43			41			266
Net tax benefits and nondeductible expenses in foreign jurisdictions	(881		)	1,391			(207		)
Nontaxable interest income	—			(1		)	(23		)
Nondeductible expenses for tax purposes	770			567			349
Valuation allowance	(206		)	—			1,248
Other, net	91			(408		)	(194		)
Income tax expense (benefit)	$	16,354		$	9,656		$	(14,297	)

Income tax expense (benefit) was allocated as follows (amounts in thousands):



	Year ended December 31,
	2012		2011		2010
Results of operations	$	16,354	$	9,656	$	(14,297	)
Stockholders' equity	449		254		1,332
Income tax expense (benefit)	$	16,803	$	9,910	$	(12,965	)

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. The components of our deferred income tax assets and liabilities were as follows (amounts in thousands):



	Year ended December 31,
	2012			2011
Deferred tax assets:
Auction rate preferred securities	$	1,008		$	1,239
Intangibles	19,917			20,829
Employee benefits and insurance claims accruals	8,273			9,126
Accounts receivable reserve	370			369
Employee stock-based compensation	8,224			6,914
Accrued expenses not deductible for tax purposes	1,066			1,149
Accrued revenue not income for book purposes	1,399			2,212
Federal and state net operating loss and AMT credit carryforward	69,160			39,310
Foreign net operating loss carryforward	5,361			6,782
	114,778			87,930
Valuation allowance	(1,008		)	(1,239		)
Total deferred tax assets	113,770			86,691
Deferred tax liabilities:
Property and equipment	206,033			165,268
Total deferred tax liabilities	206,033			165,268
Net deferred tax liabilities	$	92,263		$	78,577

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on the expectation of future taxable income and that the deductible temporary differences will offset existing taxable temporary differences, we believe it is more likely than not that we will realize the benefits of these deductible temporary differences, with the exception of the valuation allowance recorded to fully offset our deferred tax asset related to the unrealized loss on the impairment of our ARPS securities.

As of December 31, 2012, we had a $1.0 million deferred tax asset related to the impairment of our ARPSs which will represent a capital loss for tax treatment purposes. We can recognize a tax benefit associated with this impairment to the extent of capital gains we expect to earn in future periods. We recorded a valuation allowance to fully offset our deferred tax asset relating to this capital loss since we believe capital gains are not likely in future periods.

As of December 31, 2012, we had $69.2 million and $5.4 million of deferred tax assets related to domestic and foreign net operating losses, respectively, that are available to reduce future taxable income. In assessing the realizability of our deferred tax assets, we only recognize a tax benefit to the extent of taxable income that we expect to earn in the jurisdiction in future periods. We estimate that our operations will result in taxable income in excess of our net operating losses and we expect to apply the net operating losses against taxable income that we have estimated in future periods. The domestic net operating losses can be used to offset future domestic taxable income through 2032, while the majority of the foreign net operating losses can be carried forward indefinitely.

Deferred income taxes have not been provided on the future tax consequences attributable to difference between the financial statements carrying amounts of existing assets and liabilities and the respective tax bases of our foreign subsidiary based on the determination that such differences are essentially permanent in duration in that the earnings of the subsidiary is expected to be indefinitely reinvested in foreign operations. As of December 31, 2012, the cumulative undistributed earnings/loss of the subsidiary was approximately a $22.8 million loss. If earnings were not considered indefinitely reinvested, deferred income taxes would have been recorded after consideration of foreign tax credits. It is not practicable to estimate the amount of additional tax that might be payable on earnings, if distributed.

On December 26, 2012, Colombia enacted a tax reform bill that, among other things, decreased the corporate tax rate from 33% to 25%, but also added a new 9% tax for equality, which results in a combined tax rate of 34%. Net operating losses cannot be utilized against the new 9% tax for equality, and therefore the associated deferred tax asset must now be based on the lower 25% corporate tax rate only. Other deferred tax assets and liabilities must now be based on the higher combined tax rate of 34%. Included in deferred foreign tax expense (benefit) is a $1.7 million expense to adjust our Colombian net deferred tax assets and liabilities for the change in rates.

We have no unrecognized tax benefits relating to ASC Topic 740 and no unrecognized tax benefit activity during the year ended December 31, 2012.

We adopted a policy to record interest and penalty expense related to income taxes as interest and other expense, respectively. At December 31, 2012, no interest or penalties have been or are required to be accrued. Our open tax years for our federal income tax returns in the United States are for the years ended December 31, 2010 and 2011. Our open tax years for our income tax returns in Colombia are for the years ended December 31, 2007 to 2011.