Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

(5) Income Taxes

        The provision for income taxes includes the following components (in thousands):

	Year ended December 31,
	2012		2011			2010
Current tax provision (benefit):
Federal	$	—	$	—		$	(1,600	)
State		441		396			451
		441		396			(1,149	)
Deferred tax provision (benefit):
Federal		31,791		(21,533	)		46,994
State		2,507		(1,698	)		3,706
		34,298		(23,231	)		50,700
Provision (benefit) for income taxes		34,739		(22,835	)		49,551

        The following is a reconciliation between the statutory Federal income tax rate of 35% and the effective rate which is derived by dividing the provision (benefit) for income taxes by income (loss) before for income taxes (in thousands):

	Year ended December 31,
	2012			2011			2010
Computed "expected" provision (benefit) for income taxes at the statutory rates	$	32,983		$	(14,683	)	$	52,888
Increase (decrease) in income taxes resulting from:
Purchase accounting (gain) adjustment		—			1,999			(5,455	)
State income tax provision (benefit), net of Federal income tax benefit		2,220			(1,810	)		3,485
Valuation allowance changes affecting the provision for income taxes		1,614			—			—
Other, net		(2,078	)		(8,341	)		(1,367	)
Provision (benefit) for income taxes		34,739			(22,835	)		49,551

        For the year ended December 31, 2012, the Company recorded a $1.6 million valuation allowance against certain deferred tax assets associated with capital losses with a limited carryforward period. The Company anticipates the carryforward period will lapse prior to utilization of the deferred tax assets.

        For the year ended December 31, 2011 in conjunction with preparing the 2010 income tax return, the Company revised its estimate of the 2010 ExpressJet post-acquisition tax losses recorded as a deferred tax asset as of December 31, 2010. The change in estimate resulted in a tax benefit of $7.2 million, which is reflected in "Other, net" in the reconciliation above.

        The significant components of the net deferred tax assets and liabilities are as follows (in thousands):

	As of December 31,
	2012			2011
Deferred tax assets:
Intangible Asset	$	37,031		$	37,404
Accrued benefits		40,469			35,460
Net operating loss carryforward		118,448			128,134
AMT credit carryforward		15,882			15,882
Deferred aircraft credits		48,124			49,867
Accrued reserves and other		31,846			24,538
Total deferred tax assets		291,800			291,285
Valuation allowance		(1,614	)		—
Deferred tax liabilities:
Accelerated depreciation		(823,487	)		(789,641	)
Total deferred tax liabilities		(823,487	)		(789,641	)
Net deferred tax liability		(533,301		$	(498,356	)

        The Company's deferred tax liabilities were primarily generated through an accelerated bonus depreciation on newly purchased aircraft and support equipment in accordance with IRS Section 168(k) in combination with shorter depreciable tax lives.

        The Company's valuation allowance is related to certain deferred tax assets with a limited carry-forward period. The Company does not anticipate utilizing these deferred tax assets prior to the lapse of the carry-forward period.

        At December 31, 2012, the Company had federal net operating losses of approximately $272.0 million and state net operating losses of approximately $736.5 million, which will start to expire in 2026 and 2016, respectively. As of December 31, 2012, the Company also had an alternative minimum tax credit of approximately $15.9 million which does not expire.

        In conjunction with the ExpressJet Merger, the Company acquired non-amortizable intangible tax assets and other tax assets that are not anticipated to provide a tax benefit until 2025 or later due to statutory limitations. Because of the uncertainty associated with the realization of those tax assets, the Company has a full valuation allowance of approximately $73.0 million on such tax assets as of December 31, 2012 and 2011. The Company also has a valuation allowance against deferred tax assets of approximately $1 million for net operating losses in states with short carry-forward periods. The deferred tax assets in the table above are shown net of these valuation allowance.