Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note C – Income Taxes

Our second quarter 2011 income tax provision of $6.1 million resulted in an effective income tax rate of 39.2%. Our first half 2011 income tax provision of $11.3 million resulted in an effective income tax rate of 39.4%. Our effective income tax rate is derived by estimating pretax income and income tax expense for the year ending December 31, 2011. The effective income tax rate calculated for the second quarter and first half of 2011 is higher than the federal statutory rate of 35.0%, primarily due to the addition of state income taxes.

Harte-Hanks or one of our subsidiaries files income tax returns at the federal level in the U.S., as well as in various U.S. state and foreign jurisdictions. For U.S. state and foreign returns, we are no longer subject to tax examinations for tax years prior to 2006. For U.S. federal returns, we are no longer subject to tax examinations for tax years prior to 2007.

The following is a reconciliation of the change in unrecognized tax benefits, excluding the effect of related penalties and interest and the federal effect of state unrecognized tax benefits (in thousands):

Balance at January 1, 2011	$	371
Additions for current year tax positions		0
Additions for prior year tax positions		41
Reductions for prior year tax positions		0
Lapse of statute		0
Settlements		(77	)
Balance at June 30, 2011	$	335

Included in the balance of unrecognized tax benefits as of June 30, 2011 are $0.3 million of federally effected tax benefits that, if recognized, would impact our effective tax rate. We anticipate that it is reasonably possible that we will have a reduction in our liability related to filing positions in the range of $0.2 million to $0.3 million within the next twelve months as a result of lapsing statutes.

We have elected to classify any interest expense and penalties related to income taxes within income tax expense in our Consolidated Statements of Operations. We had approximately $0.1 million of interest and penalties accrued at June 30, 2011 and December 31, 2010.