Federal and state income taxes

The components of the income tax provision (benefit) are as follows:



	Years Ended December 31,
	2011			2010			2009
	(Amounts in thousands)
Current:
Federal	$	(14,093	)	$	2,340		$	(4,908	)
State	9,825			7,795			10,322
Total current	(4,268		)	10,135			5,414
Deferred:
Federal	23,428			1,640			(4,193		)
State	7,388			(849		)	(3,927		)
Total deferred	30,816			791			(8,120		)
Tax benefit applied to reduce goodwill	1,204			1,204			1,204
Total	$	27,752		$	12,130		$	(1,502	)

The reconciliation of income tax at the federal statutory rate to the actual effective income tax rate is as follows:



	Years Ended December 31,
	2011		2010		2009
Federal statutory rate	35.0	%	35.0	%	35.0	%
State income tax expense, net of federal benefit	40.1		19.7		(45.1	)
Change in uncertain tax provisions	0.4		0.2		32.2
Nondeductible expenses for tax purposes	6.8		6.8		(17.8	)
Tax credits	(2.0	)	(3.8	)	15.7
Other	—		0.5		4.3
	80.3	%	58.4	%	24.3	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred income taxes consisted of the following:



	December 31,
	2011			2010
	(Amounts in thousands)
Deferred income tax assets:
Goodwill amortization	$	116,902		$	135,572
Net operating loss carryforwards	11,099			10,893
Deferred compensation	7,871			9,009
Accrued expenses	6,424			9,481
Stock-based compensation	16,444			13,961
Accrued vacation	2,109			2,242
Other	226			1,961
Total deferred income tax assets	161,075			183,119
Deferred income tax liabilities:
Property and equipment	(157,185		)	(148,335		)
Prepaid insurance	(1,489		)	(1,662		)
Other	(2,170		)	—
Total deferred income tax liabilities	(160,844		)	(149,997		)
Net deferred income tax assets	$	231		$	33,122

At December 31, 2011, the Company had available $250.8 million of state net operating loss carryforwards that relate to the Company’s Missouri properties and may be applied against future taxable income. The Company also had available $12.0 million of additional Colorado net operating losses that relate to the post-acquisition period for the Ameristar Black Hawk property. In general, the remaining unused federal and state net operating loss carryforwards will expire in 2020 through 2029. No valuation allowance has been provided against deferred income tax assets as the Company believes it is more likely than not that the deferred income tax assets are fully realizable because of the future reversal of existing taxable temporary differences, availability of tax strategies and future projected taxable income.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



	Years Ended December 31,
	2011			2010
	(Amounts in thousands)
Balance at beginning of year	$	4,914		$	5,067
Increases for tax positions of the current year	551			564
Increases for tax positions of prior years	143			—
Decreases for tax positions of prior years	(34		)	(34		)
Lapses of applicable statutes of limitations	(557		)	(683		)
Balance at end of year	$	5,017		$	4,914

As of December 31, 2011 and 2010, the total amount of unrecognized benefits that would affect the effective tax rate if recognized was $1.7 million and $1.1 million, respectively.

Interest and penalties related to income taxes are classified as income tax expense in the financial statements. As of December 31, 2011, accrued interest and penalties totaled $0.8 million, of which $0.5 million would affect the effective tax rate if recognized. As of December 31, 2010, accrued interest and penalties totaled $0.7 million, of which $0.5 million would affect the effective tax rate if recognized.

The Company files income tax returns in numerous tax jurisdictions. The statutes of limitations vary by jurisdiction, with certain of these statutes expiring without examination each year. With the normal expiration of statutes of limitations, the Company anticipates that the amount of unrecognized tax benefits will decrease by $0.6 million within the next 12 months. With few exceptions, the Company is no longer subject to federal or state examinations by taxing authorities for years ended on or before December 31, 2006.

The Company’s federal income tax returns for the years ended December 31, 2006 through December 31, 2009 are under examination by the Internal Revenue Service (the “IRS”). In May 2011, the IRS issued a letter challenging the Company’s method of accounting for certain repair and maintenance expenses. The Company disagrees with the IRS determination and has submitted a protest and a request for an appeals conference to the IRS. In January 2012, an informal ruling was released by the IRS that agreed to the Company’s current method of accounting for a portion of expenses incurred for repairs of its gaming equipment. The remaining portion of repair expenses continues to be challenged by the IRS.

The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that the taxing authorities will not propose adjustments that are different from the Company’s expected outcome and impact the provision for income taxes.