NOTE 7: INCOME TAXES

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


(In Thousands)	2012			2011			2010
Current Income Tax Expense:
Federal	$	116,234		$	—		$	—
State		10,819			9,797			8,932

		127,053			9,797			8,932
Deferred Income Tax (Benefit) Expense:
Federal		(23,035	)		62,015			64,679
State		(206	)		(2,202	)		(1,201	)

		(23,241	)		59,813			63,478

	$	103,812		$	69,610		$	72,410

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 entire NOL carryforward was absorbed during 2012.

As a result of the bonus depreciation provisions in the Small Business Jobs Act of 2010 and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the Company paid more than anticipated for the 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)	2012			2011
Deferred Tax Liabilities:
Lease Merchandise and Property, Plant and Equipment	$	279,926		$	329,497
Other, Net		34,014			29,607

Total Deferred Tax Liabilities		313,940			359,104
Deferred Tax Assets:
Accrued Liabilities		25,365			33,826
Advance Payments		15,834			16,432
Federal Net Operating Loss		—			10,936
Other, Net		9,677			11,760

Total Deferred Tax Assets		50,876			72,954
Less Valuation Allowance		(657	)		(812	)

Net Deferred Tax Liabilities	$	263,721		$	286,962

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


	2012			2011			2010
Statutory Rate		35.0	%		35.0	%		35.0	%
Increases in United States Federal Taxes
Resulting From:
State Income Taxes, Net of Federal Income Tax Benefit		2.5			2.7			2.7
Other, Net		0.0			0.3			0.3

Effective Tax Rate		37.5	%		38.0	%		38.0	%

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


(In Thousands)	2012			2011			2010
Balance at January 1,	$	1,412		$	1,315		$	1,342
Additions based on tax positions related to the current year		178			178			149
Additions for tax positions of prior years		83			22			18
Prior year reductions		(315	)		(13	)		(26	)
Statute expirations		(83	)		(90	)		(63	)
Settlements		(17	)		—			(105	)

Balance at December 31,	$	1,258		$	1,412		$	1,315

As of December 31, 2012 and 2011, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $1.0 million and $1.2 million, respectively, including interest and penalties. During the year ended December 31, 2012, the Company recognized a net benefit of $126,000 related to interest and penalties. During the years ended December 31, 2011 and 2010, the Company recognized interest and penalties of $41,000 and $35,000, respectively. The Company had $234,000 and $374,000 of accrued interest and penalties at December 31, 2012 and 2011, respectively. The Company recognizes potential interest and penalties related to uncertain tax benefits as a component of income tax expense.