Note E: Income Taxes

Following is a summary of the Company’s income tax expense for the years ended December 31:


(In Thousands)	2011			2010			2009
Current Income Tax Expense:
Federal	$	—		$	—		$	40,697
State		9,797			8,932			7,832

		9,797			8,932			48,529
Deferred Income Tax Expense (Benefit):
Federal		62,015			64,679			15,169
State		(2,202	)		(1,201	)		(137	)

		59,813			63,478			15,032

	$	69,610		$	72,410		$	63,561

At December 31, 2011, the Company had a federal net operating loss (“NOL”) carryforward of approximately $31.2 million available to offset future taxable income. The NOLs expires in 2030 and 2031 and utilization is subject to applicable annual limitations for U.S. federal and U.S. state tax purposes, including Section 382 of the Internal Revenue Code of 1986, as amended. The Company intends to carryforward the NOLs to offset future taxable income and does not anticipate that the utilization will be impacted by the applicable limitations.

As a result of the bonus depreciation provisions in the 2010 tax acts the Company paid more than it’s anticipated 2010 federal tax liability. The 2010 acts provided an estimated tax deferral of approximately $127.0 million. The Company filed for a refund of overpaid federal tax of approximately $80.9 million in January 2011 and received that refund in February 2011.

Significant components of the Company’s deferred income tax liabilities and assets at December 31 are as follows:


(In Thousands)	2011			2010
Deferred Tax Liabilities:
Lease Merchandise and Property, Plant and Equipment	$	329,497		$	248,775
Other, Net		29,607			24,777

Total Deferred Tax Liabilities		359,104			273,552
Deferred Tax Assets:
Accrued Liabilities		33,826			15,859
Advance Payments		16,432			15,231
Federal Net Operating Loss		10,936			6,423
Other, Net		11,760			9,386

Total Deferred Tax Assets		72,954			46,899
Less Valuation Allowance		(812	)		(860	)

Net Deferred Tax Liabilities	$	286,962		$	227,513

The Company’s effective tax rate differs from the statutory United States Federal income tax rate for the years ended December 31 as follows:


	2011			2010			2009
Statutory Rate		35.0	%		35.0	%		35.0	%
Increases (Decreases) in United States Federal Taxes
Resulting From:
State Income Taxes, Net of Federal Income Tax Benefit		2.7			2.7			2.8
Other, Net		0.3			0.3			(1.8	)

Effective Tax Rate		38.0	%		38.0	%		36.0	%

The Company files a federal consolidated income tax return in the United States and the separate legal entities file in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2008. The lower effective tax rate in 2009 was due to the favorable impact of a $2.3 million reversal of previously recorded liabilities for uncertain tax positions.

The following table summarizes the activity related to the Company’s uncertain tax positions:


(In Thousands)	2011			2010			2009
Balance at January 1,	$	1,315		$	1,342		$	3,110
Additions based on tax positions related to the current year		178			149			172
Additions for tax positions of prior years		22			18			523
Prior year reductions		(13	)		(26	)		(46	)
Statute expirations		(90	)		(63	)		(2,231	)
Settlements		—			(105	)		(186	)

Balance at December 31,	$	1,412		$	1,315		$	1,342

As of December 31, 2011 and 2010, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $1.2 million and $1.3 million, respectively, including interest and penalties. During the years ended December 31, 2011, 2010 and 2009, the Company recognized interest and penalties of $41,000, $35,000, and $276,000, respectively. The Company had $374,000 and $332,000 of accrued interest and penalties at December 31, 2011 and 2010, respectively. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of income tax expense.