Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes [Abstract]

Income Taxes

(14) Income Taxes

Total income tax expense for the years ended December 31, 2012 and 2011 were allocated as follows (in thousands):

	2012		2011
Income from continuing operations	$	1,597		6,306

For the years ended December 31, 2012 and 2011, (loss) income before income tax expense consists of the following (in thousands):

	2012			2011
U.S. operations	$	1,602			33,561
Foreign operations		(1,286	)		(3,553	)
	$	316			30,008

The components of the provision for income tax expense included in the consolidated statements of operations are as follows for the years ended December 31, 2012 and 2011 (in thousands):

	2012			2011
Current:
Federal	$	—			—
State and local, net of federal income tax benefit		342			61
Foreign		(426	)		124
		(84	)		185
Deferred:
Federal		1,603			4,505
State and local, net of federal income tax benefit		73			1,639
Foreign		5			(23	)
		1,681			6,121
Total income tax expense	$	1,597			6,306

For the year ended December 31, 2012, approximately $0.2 million of Puerto Rico net operating loss carry-forwards were utilized and in 2011, approximately $1.8 million of federal net operating loss carry-forwards were utilized.

The tax effect of temporary differences and carry-forwards that give rise to deferred tax assets and deferred tax liabilities at December 31, 2012 and 2011 are as follows (in thousands):

	2012			2011
Deferred tax assets:
Federal and state net operating loss carryforwards	$	78,438			75,450
Foreign net operating loss carryforwards		12,207			11,225
FCC licenses		19,136			27,958
Allowance for doubtful accounts		1,850			810
Unearned revenue		204			339
AMT credit		824			829
Derivatives and hedging instruments		339			308
Property and equipment		413			1,883
Accrued foreign withholding		1,832			2,254
Straight-line expense adjustments		545			464
Accrued restructuring		396			370
Production costs		10,093			8,970
Other		4,542			4,074
Total gross deferred tax assets		130,819			134,934
Less valuation allowance		(129,995	)		(134,105	)
Net deferred tax assets		824			829
Deferred tax liabilities:
FCC licenses		86,873			85,197
Total gross deferred tax liabilities		86,873			85,197
Net deferred tax liability	$	86,049			84,368

The net change in the total valuation allowance for the years ended December 31, 2012 and 2011 was a decrease of $4.1 million and a decrease of $11.8 million, respectively. The valuation allowance at 2012 and 2011 was primarily related to domestic and foreign net operating loss carryforwards and future deductible amounts related to the excess tax basis over the book basis of certain FCC broadcasting licenses. As a result of adopting ASC 350 on December 31, 2001, amortization of the FCC broadcasting licenses stopped for financial statement purposes. However, the tax amortization of certain FCC broadcasting licenses recognized during the year as well as the expiration of certain net operating losses resulted in a decrease in gross deferred tax assets related to those intangibles and the net operating losses, which were accompanied by an offsetting decrease in the related valuation allowance for the year ending December 31, 2012.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. If the realization of deferred tax assets in the future is considered more likely than not, an adjustment to the deferred tax assets would increase net income in the period such determination is made.

Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, at this time, management believes it is more likely than not that we will not realize the benefits of the majority of these deductible differences. As a result, we have established and maintained a valuation allowance for that portion of the deferred tax assets we believe will not be realized. At December 31, 2012, we have federal and state net operating loss carry-forwards of approximately $191.9 million and $218.6 million, respectively. These net operating loss carry-forwards are available to offset future taxable income and expire from the years 2013 through 2032. In addition, at December 31, 2012, we have foreign net operating loss carry-forwards of approximately $40.7 million available to offset future taxable income expiring from the years 2015 through 2022.

Total income tax expense from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 35% for the years ended December 31, 2012 and 2011, as a result of the following:

	2012			2011
Computed “expected” tax expense/(benefit)		35.0	%		35.0	%
State income taxes, net of federal benefit		86.6	%		7.3	%
Foreign tax differential		20.4	%		0.6	%
Current year change in valuation allowance		(1314.7	%)		(39.2	%)
Nondeductible Expenses		50.0	%		0.4	%
Change in effective rate		(71.8	%)		2.6	%
Change in Puerto Rico statutory rate		—			15.6	%
Expiration of net operating losses		759.0	%		3.4	%
Other		940.9	%		(4.7	%)
		505.4	%		21.0	%

U.S. Federal jurisdiction and the jurisdictions of Florida, New York, California, Illinois, Texas and Puerto Rico are the major tax jurisdictions where we file income tax returns. The tax years that remain subject to assessment of additional liabilities by the federal, state and local tax authorities are 2009 through 2012. The tax years that remain subject to assessment of additional liabilities by the Puerto Rico tax authority are 2007 through 2012.

For the years ended December 31, 2012 and 2011, we did not have any unrecognized tax benefits as a result of tax positions taken during a prior period or during the current period. No interest or penalties have been recorded as a result of tax uncertainties. Our evaluation was performed for the tax years ended December 31, 2007 through December 31, 2012, which are the tax years that remain subject to examination by the tax jurisdictions as of December 31, 2012.