Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
INCOME TAXES [Abstract]  
Income Tax Disclosure [Text Block]
15.
Income Taxes
 
The provision for or benefit from income taxes on continuing operations for the years ended December 31, 2011 and 2010 is comprised of the following:

 
2011
 
2010
Current:
 
 
 
Federal
$
(879
)
 
$
34

State
(39
)
 
274

Total current
(918
)
 
308

Deferred:
 
 
 

Federal
(17
)
 
71

State
(4
)
 
13

Total deferred
(21
)
 
84

Provision for income taxes
$
(939
)
 
$
392


The Company performs an analysis each year to determine whether the expected future income will more likely than not be sufficient to realize the deferred tax assets.  The Company's recent operating results and projections of future income weighed heavily in the Company's overall assessment.  As a result of this analysis, the Company continues to maintain a full valuation allowance against its federal and state net deferred tax assets at December 31, 2011 as the Company believes that it is more likely than not that these assets will not be realized. The tax effects of significant items comprising the Company’s deferred tax assets and (liabilities) as of December 31, 2011 and 2010 are as follows:

 
2011
 
2010
Current deferred tax assets (liabilities)
 
 
 
included in other current assets:
 
 
 
Allowances and reserves
$
2,953

 
$
1,992

Compensation
3,564

 
3,148

Valuation allowance on deferred tax assets
(6,517
)
 
(5,140
)
 
—

 
—

Noncurrent deferred tax assets (liabilities)
 
 

included in other long-term assets:
 

 
 

State net operating loss carryforwards
4,366

 
3,888

Federal net operating loss carryforwards
24,743

 
15,067

State taxes
1,134

 
1,134

Self insurance and other reserves
267

 
1,321

Property, plant and equipment
2,431

 
2,406

Intangible assets
930

 
5,279

Other reserves - restructuring
667

 
1,292

Compensation
9

 
—

Deferred Revenue
1,660

 
—

Valuation allowance on deferred tax assets
(36,269
)
 
(30,471
)
 
(62
)
 
(84
)
Net deferred tax liability
$
(62
)
 
$
(84
)

The noncurrent net deferred tax liability as of December 31, 2011 relates to tax amortization of the tax basis in trade names associated with the Group DCA acquisition.  The Company determined that this deferred tax liability would not be realizable for an indeterminate time in the future and consequently should not be included in net deferred tax assets for purposes of calculating the valuation allowance in any period.
 
Federal tax attribute carryforwards at December 31, 2011, consist primarily of approximately $24.7 million of federal net operating losses.  In addition, the Company has approximately $4.4 million of state net operating losses carryforwards.  The utilization of the federal carryforwards as an available offset to future taxable income is subject to limitations under federal income tax laws.  If the federal net operating losses are not utilized, they begin to expire in 2027, and current state net operating losses not utilized began to expire in 2011.
 
A reconciliation of the difference between the federal statutory tax rates and the Company's effective tax rate from continuing operations is as follows:
 
 
2011
 
2010
Federal statutory rate
35.0
 %
 
35.0
 %
State income tax rate, net
 

 
 

of Federal tax benefit
1.3
 %
 
(1.7
)%
Meals and entertainment
(3.3
)%
 
(1.5
)%
Valuation allowance
(35.0
)%
 
(35.3
)%
Other non-deductible
—
 %
 
(0.1
)%
Other taxes
0.4
 %
 
—
 %
Net change in Federal and state reserves
21.5
 %
 
(2.2
)%
Effective tax rate
19.9
 %
 
(5.8
)%
 
The following table summarizes the change in uncertain tax benefit reserves for the two years ended December 31, 2011:

 
Unrecognized
 
Tax Benefits
 
 
Balance of unrecognized benefits as of January 1, 2010
$
3,936

Additions for tax positions related to the current year
—

Additions for tax positions of prior years
—

Reductions for tax positions of prior years
—

Balance as of December 31, 2010
$
3,936

Additions for tax positions related to the current year
—

Additions for tax positions of prior years
—

Reductions for tax positions of prior years
(2,819
)
Balance as of December 31, 2011
$
1,117


As of December 31, 2011 and 2010, the total amount of gross unrecognized tax benefits was $1.1 million and $3.9 million, respectively.  The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2011 and 2010 were $1.1 million and $1.7 million, respectively. Also included in the balance of unrecognized tax benefits at December 31, 2011 and 2010 were $0.0 million and $2.2 million of tax benefits that, if recognized, would result in an increase to deferred tax assets and a corresponding decrease to the valuation allowance against deferred tax assets.
 
The Company recognized interest and penalties of $0.1 million and $0.2 million related to uncertain tax positions in income tax expense during the years ended December 31, 2011 and 2010, respectively.  At December 31, 2011 and 2010, accrued interest and penalties, net were $1.7 million and $2.4 million, respectively.
 
The Company and its subsidiaries file a U.S. Federal consolidated income tax return and consolidated and separate income tax returns in numerous states and local tax jurisdictions.  The following tax years remain subject to examination as of December 31, 2011:
 
Jurisdiction
Tax Years
Federal
2009-2011
State and Local
2007-2011

To the extent there was a failure to file a tax return in a previous year, the statute of limitation will not begin until the return is filed. In March of 2011, the examination by the Internal Revenue Service of the 2008 net operating loss carry back to the 2003 to 2005 tax years was closed, therefore these years are considered effectively settled in accordance with Accounting Standards Codification 740.  There were no examinations in process by the Internal Revenue Service as of December 31, 2011.