Income Taxes

The components of the income tax provision are as follows:



	2012		2011		2010
Federal - current	$	—	$	—	$	—
State and local - current	68		123		225
	$	68	$	123	$	225

The following reconciles the “statutory” federal income tax rate to the effective income tax rate:



	2012		2011		2010
Computed "expected" income tax (benefit) expense	(35	)%	(35	)%	35	%
Reduction (increase) in income tax benefit and increase (reduction) in income tax expense resulting from:
State tax, net of federal benefit	—		2		9
Change in federal valuation allowance	35		33		(33	)
Other	—		4		3
Effective income tax rate	—	%	4	%	14	%

The tax effects of temporary differences that give rise to the deferred tax assets and liabilities at December 31, 2012 and 2011 are as follows:



	2012			2011
Deferred tax assets:
Receivable allowance	$	259		$	204
Goodwill	6,459			8,630
Discontinued operations	215			18
Impairment and accumulated depreciation	675			—
Intangible assets	1,309			1,684
Capital loss	—			2,019
Compensation expense	1,399			1,537
Federal net operating loss carryforward	40,773			33,882
State net operating loss carryforward	5,109			4,204
Legal settlement	—			20
AMT credit carry forward	157			157
Accrued expenses	65			92
Deferred rent	177			212
Other	182			24
Gross deferred tax assets	$	56,779		$	52,683
Valuation allowance	(56,779		)	(51,790		)
	$	—		$	893
Deferred tax liabilities:
Accumulated depreciation	—			(893		)
Gross deferred tax liabilities	—			(893		)
Net deferred tax assets	$	—		$	—

The Company has significant deferred tax assets attributable to tax deductible intangibles and federal and state net operating loss carryforwards, which may reduce taxable income in future periods. Based on the continued decline in revenues, the cumulative tax and operating losses, the lack of taxes in the carryback period, and the uncertainty surrounding the extent or timing of future taxable income, the Company does not believe it will realize the tax benefits of its deferred tax assets. Accordingly, the Company continues to record a full valuation allowance on its net deferred tax assets of $56.8 million and $51.8 million as of December 31, 2012 and 2011, respectively. During 2012, capital loss carryforwards of $2.0 million, which had a full valuation allowance, expired and were written off.

There was no federal tax expense recorded in the year ended December 31, 2012. The income tax expense recorded for the year ended December 31, 2012 reflects a state tax liability to one state. There was no federal tax expense recorded in the year ended December 31, 2011. The income tax expense recorded in the year ended December 31, 2011 is primarily due to taxes on gross revenues related to two states, a liability, including interest, for amended tax returns for one of these states for the years 2006 through 2008 and the true-up of the 2010 tax provision for two states. There was no federal tax expense recorded in the year ended December 31, 2010, and the income tax expense recorded, including interest, is primarily due to a liability for amended tax returns filed in one state for tax years 2007 and 2008, and the true-up of the 2009 tax provision for this state.

As of December 31, 2012, no amounts were recorded for uncertain tax positions or for the payment of interest or penalties.

In July 2008, the Company received notification from the U.S. Internal Revenue Service (the “IRS”) that it had completed its audits of the Company’s tax returns for the years 2001 through 2006 with no adjustments. In February 2013, the Company was notified by the IRS that they were going to examine the Company's tax return for the year 2011. The exam has not yet begun. State income tax returns for the year 2008 and forward are subject to examination.

As of December 31, 2012, the Company had U.S. federal and state net operating loss carryforwards of approximately $116.5 million and $111.3 million, respectively. The net operating loss carryforwards, if not utilized, will expire in the years 2013 through 2032.