NOTE 17 - INCOME TAXES

The following table details the components of the Company's benefit for income taxes from continuing operations (in thousands):

	Years Ended September 30,
	2011			2010			2009
Current tax provision:
Federal	$	51		$	1,379		$	2,238
State		574			535			475
Foreign		425			−			32
Total current tax provision		1,050			1,914			2,745

Deferred tax (benefit) provision:
Federal		(4,668	)		(5,795	)		(10,777	)
State		(2,056	)		(223	)		(2,472	)
Foreign		1,067			1,454			−
Total deferred tax benefit		(5,657	)		(4,564	)		(13,249	)

Total income tax benefit	$	(4,607	)	$	(2,650	)	$	(10,504	)

A reconciliation between the federal statutory income tax rate and the Company's effective income tax rate is as follows:

	Years Ended September 30,
	2011			2010			2009
Statutory tax rate		35	%		35	%		35	%
State and local taxes, net of federal benefit		13			12			5
Deferred tax adjustments		12			(7	)		−
Taxable foreign distributions		(6	)		−			−
Valuation allowance for deferred tax assets		(4	)		(18	)		4
Equity-based compensation expense		(3	)		(8	)		(1	)
Other items		−			(1	)		(3	)
		47	%		13	%		40	%

Deferred tax assets/liabilities are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences will result in taxable or deductible amounts in future years. The components of deferred tax assets, net, are as follows (in thousands):

	September 30,
	2011			2010
Deferred tax assets related to:
Federal, foreign, state and local operating loss carryforwards	$	23,594		$	17,540
Capital loss carryforwards		24,752			14,319
Unrealized loss on investments		9,830			10,079
Provision for credit losses		4,627			−
Accrued expenses		3,685			277
Employee stock option and restricted stock awards		1,242			3,456
Investments in partnership interests		41			1,756
Property and equipment basis differences		681			774
Gross deferred tax assets		68,452			48,201
Less: valuation allowance		(4,858	)		(4,498	)
		63,594			43,703

Deferred tax liabilities related to:
Investments in partnership interests		(12,013	)		(70	)
Provision for credit losses		−			(341	)
		(12,013	)		(411	)

Deferred tax assets, net	$	51,581		$	43,292

At September 30, 2011, the Company had gross federal, state and local net operating tax loss carryforwards ("NOLs") of $222.5 million (a deferred tax asset of $23.6 million) that will expire between fiscal 2012 and 2032. The Company believes it will be able to utilize up to $142.4 million of these NOLs (tax effected benefit of $19.4 million) prior to their expiration and has changed its gross valuation allowance from $84.8 million to $80.1 million (tax effected expense of $4.2 million). In addition, a valuation allowance was established against gross state timing differences of $1.0 million (tax effected expense of $650,000) that the Company believes it will not be able to use. Management will continue to assess its estimate of the amount of NOLs that the Company will be able to utilize. Furthermore, its estimate of the required valuation allowance could be adjusted in the future if projections of taxable income are revised. Management believes it is more likely than not that the other net deferred tax assets will be realized based on tax planning strategies that will generate future taxable income during the periods in which these temporary differences become deductible.

The Company is subject to examination by the U.S. Internal Revenue Service (“IRS”) and by the taxing authorities in states in which the Company has significant business operations, such as Pennsylvania and New York. The Company is currently undergoing a New York State examination for fiscal 2007 through 2009. The Company is not subject to IRS examination for fiscal years before 2008 and is not subject to state and local income tax examinations for fiscal years before 2005.

A tax position should only be recognized if it is more likely than not that the position will be sustained upon examination by the appropriate taxing authority. A tax position that meets this threshold is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company classifies any tax penalties as general and administrative expenses and any interest as interest expense. The Company does not have any unrecognized tax benefits that would affect the effective tax rate.