INCOME TAXES

The Company’s federal and state income tax expense (benefit) is summarized in the following table (in thousands):



	Year Ended December 31,
	2013			2012			2011
Current
Federal	$	(866	)	$	(3,759	)	$	(167	)
State	(1,412		)	(676		)	(122		)
Total current	(2,278		)	(4,435		)	(289		)
Deferred
Federal	4,437			121			632
State	379			(125		)	92
Total deferred	4,816			(4		)	724
Total tax (benefit) provision	$	2,538		$	(4,439	)	$	435

The effect of temporary differences that give rise to a significant portion of deferred taxes is as follows (in thousands):



	December 31,
	2013			2012
Deferred tax assets:
Reserves not currently deductible	$	10,315		$	11,771
Net operating loss carryforwards	39,556			16,287
Goodwill and intangibles (tax deductible)	8,089			7,278
Accrued expenses	148			3,055
Stock based compensation	6,277			3,717
Other	417			1,778
Total deferred tax assets	64,802			43,886
Deferred tax liabilities:
Property basis differences	(506		)	(3,144		)
Indefinite-lived goodwill and intangibles	(16,122		)	(11,306		)
Less: valuation allowance	(63,281		)	(39,727		)
Net deferred tax liability	$	(15,107	)	$	(10,291	)

During the fourth quarter of 2010, the Company concluded that it was more likely than not that its deferred tax assets would not be realized. The Company continually assesses the necessity of a valuation allowance. Based on this assessment, the Company concluded that a valuation allowance, in the amount of $63.3 million and $39.7 million, was required as of December 31, 2013 and 2012, respectively. If the Company determines in a future period that it is more likely than not that part or all of the deferred tax assets will be realized, the Company will reverse part or all of the valuation allowance.

At December 31, 2013, the Company had federal net operating loss (“NOL”) carryforwards of approximately $112.0 million, of which $23.9 million is subject to an annual limitation, which will begin expiring in 2026 and later. Of the Company’s $112.0 million of federal NOLs, $17.9 million will be recorded in additional paid-in capital when realized as these NOLs are related to the exercise of non-qualified stock options and restricted stock grants. The Company has post-apportioned state NOL carryforwards of approximately $138.4 million, the majority of which will begin expiring in 2017 and later.

The Company’s reconciliation of the statutory rate to the effective income tax rate is as follows (in thousands):



	Year Ended December 31,
	2013			2012			2011
Tax (benefit) provision at statutory rate	$	(17,874	)	$	(4,473	)	$	4
State tax (benefit) provision, net of federal taxes	(2,419		)	(587		)	36
Non-deductible transaction costs	317			—			—
Penalties	—			—			78
Change in tax contingencies	(1,157		)	(633		)	(675		)
Valuation allowance changes affecting income tax expense	23,493			1,104			778
Other	178			150			214
Tax (benefit) provision	$	2,538		$	(4,439	)	$	435

As of December 31, 2013, the Company had $1.2 million of gross unrecognized tax benefits, of which $0.2 million, if recognized, would favorably affect the effective income tax rate in future periods. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):



	Year Ended December 31,
	2013			2012			2011
Unrecognized tax benefits balance at January 1,	$	2,754		$	2,605		$	2,869
Gross increases for tax positions of prior years	—			—			—
Gross increases for tax positions taken in current year	—			636			378
Settlements with taxing authorities	—			—			(212		)
Lapse of statute of limitations	(1,582		)	(487		)	(430		)
Unrecognized tax benefits balance at December 31,	$	1,172		$	2,754		$	2,605

The Company's policy for recording interest and penalties associated with uncertain tax positions is to record such items as a component of income tax expense in the Consolidated Statements of Operations. As of December 31, 2013 and 2012, the Company had approximately $0.1 million and $0.3 million of accrued interest related to uncertain tax positions, respectively.

The Company files income tax returns, including returns for its subsidiaries, with federal, state and local jurisdictions. The Company's uncertain tax positions are related to tax years that remain subject to examination. As of December 31, 2013, U.S. tax returns for the years 2011 through 2013 remain subject to examination by federal tax authorities. Tax returns for the years 2009 through 2013 remain subject to examination by state and local tax authorities for a majority of the Company's state and local filings.