10. Income Taxes

Provision for Income Taxes

The provision for income taxes relating to continuing operations consists of the following (in thousands):

	December 31,

	2012		2011			2010
Current—
Federal	$	5,679	$	2,207		$	9,474
State and Puerto Rico		1,151		1,673			1,954

		6,830		3,880			11,428

Deferred—
Federal		2,897		(10,121	)		1,501
State and Puerto Rico		318		778			(1,736	)

		3,215		(9,343	)		(235	)

	$	10,045	$	(5,463	)	$	11,193

The difference in income taxes provided for and the amounts determined by applying the federal statutory tax rate to income before income taxes results from the following (in thousands):

	December 31,

	2012			2011			2010
Income tax expense (benefit) at the statutory rate	$	7,539		$	(13,278	)	$	11,115
Changes resulting from—
State income taxes, net of federal tax effect		1,011			(1,972	)		924
Increase (decrease) in valuation allowance		455			3,431			(846	)
Increase in contingency reserves		198			28			95
Increase (decrease) from noncontrolling interests		565			(118	)		—
Non-deductible expenses		481			386			452
Production activity deduction		(378	)		—			(391	)
Goodwill impairment		—			9,223			—
Purchase accounting adjustments		(210	)		(2,992	)		—
Other		384			(171	)		(156	)

	$	10,045		$	(5,463	)	$	11,193

Deferred Tax Assets (Liabilities)

Significant components of the net deferred tax assets and net deferred tax liabilities as reflected on the balance sheet are as follows (in thousands):

	Year Ended December 31,

	2012			2011
Deferred income tax assets—
Accounts receivable and allowance for doubtful accounts	$	2,293		$	1,692
Goodwill		—			4,519
Stock compensation		2,444			2,583
Accrued liabilities and expenses		19,661			20,809
State net operating loss carryforwards		4,668			4,604
Other		1,224			1,186

Total deferred income tax assets		30,290			35,393

Deferred income tax liabilities—
Property and equipment		(5,357	)		(5,828	)
Long-term contracts		(306	)		(237	)
Goodwill		(1,124	)		—
Intangible assets		(3,932	)		(4,762	)
Tax accounting method change (Section 481 adjustments)		—			(2,978	)
Other		(1,131	)		(671	)

Total deferred income tax liabilities		(11,850	)		(14,476	)

Less—Valuation allowance		(4,453	)		(3,999	)

Net deferred income tax assets	$	13,987		$	16,918

The deferred income tax assets and liabilities reflected above are included in the consolidated balance sheets as follows (in thousands):

	December 31,

	2012		2011
Deferred income tax assets—
Prepaid expenses and other	$	19,952	$	19,294
Other noncurrent assets		2,324		2,594

Total deferred income tax assets	$	22,276	$	21,888

Deferred income tax liabilities—
Other current liabilities	$	335	$	328
Deferred income tax liabilities		7,954		4,642

Total deferred income tax liabilities	$	8,289	$	4,970

As of December 31, 2012, we had $4.9 million of future tax benefits related to $99.9 million of available state and Puerto Rican net operating loss carryforwards ("NOLs") which expire between 2013 and 2032. A valuation allowance of $4.5 million has been recorded against net deferred tax assets of state and Puerto Rican NOLs and other state and Puerto Rican deferred tax assets. We recorded an increase in valuation allowances of $0.5 million for the year ended December 31, 2012. A deferred tax asset for state NOLs, net of related valuation allowance, of $1.9 million reflects our conclusion that it is likely that this asset will be realized based upon expected future earnings in certain subsidiaries. We update this assessment of the realizability of deferred tax assets relating to state net NOLs annually. A return to profitability in our entities with valuation allowances on their NOL's and deferred tax assets would result in a reversal of a portion of the valuation allowance relating to realized deferred tax assets. A sustained period of profitability could cause a change in our judgment of the remaining deferred tax assets. If that were to occur then it is likely that we would reverse some or all of the remaining deferred tax asset valuation allowance.

As of December 31, 2012 and 2011, approximately $0.3 million and $0.5 million, respectively, of unrecognized tax benefits, if recognized in future periods, would impact our effective tax rate. This liability is included in "Other Long-Term Liabilities" in the consolidated balance sheets. We do not expect that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months.

We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. We recognized $0.4 million in interest during the year ended December 31, 2012. We did not recognize any interest or penalties during the year ended December 31, 2011. We had accrued approximately $0.7 million and $0.3 million for the payment of interest and penalties at December 31, 2012 and 2011, respectively. Our tax records are subject to review by the Internal Revenue Service for the 2009 tax year forward and by various state authorities for the 2004 tax year forward. We are currently under examination for our U.S. federal income taxes for the 2009 tax year.

Liabilities for Uncertain Tax Positions

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Year Ended December 31,

	2012			2011		2010
Balance at beginning of year	$	696		$	696	$	634
Additions based on tax positions related to the current year		—			—		189
Additions for tax positions of prior years		—			—		—
Reductions for tax positions of prior years		(197	)		—		(127	)
Settlements		—			—		—

Balance at end of year	$	499		$	696	$	696