Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 12 - Income Taxes

The provision for income taxes is comprised of the following components:

	Year Ended December 31,
	2014			2013			2012
	(in thousands)
Current Tax Provision
Federal	$	30,235		$	34,680		$	29,147
State		3,095			5,588			4,010
		33,330			40,268			33,157
Deferred Tax Provision
Federal		(1,172	)		(2,226	)		892
State		(334	)		(479	)		132
		(1,506	)		(2,705	)		1,024
Income Tax Provision	$	31,824		$	37,563		$	34,181

The deferred tax assets and liabilities, consisting of temporary differences tax effected at the respective income tax rates, are as follows:

	December 31,
	2014			2013
	(in thousands)
Current deferred tax asset:
Allowance for doubtful accounts receivable	$	2,138		$	1,802
Accrued risk reserves		964			857
Accrued expenses		3,635			3,593
		6,737			6,252
Current deferred tax liability:
Unrealized gains on marketable securities		(39,958	)		(29,120	)
Other		(2,284	)		(1,922	)
		(42,242	)		(31,042	)
Net current deferred tax liability	$	(35,505	)	$	(24,790	)
Noncurrent deferred tax asset:
Unrealized gains on marketable securities	$	(183	)	$	593
Financial reporting depreciation in excess of tax depreciation		7,191			5,872
Deferred gain on sale of assets (net)		(3,135	)		(3,135	)
Tax basis intangible asset in excess of financial reporting basis		(409	)		127
Stock-based compensation		2,879			2,214
Long-term investments		(2,445	)		(2,276	)
Nonrefundable entrance fees		129			45
Refundable entrance fees		1,739			1,647
Obligation to provide future services		1,532			1,439
Accrued risk reserves, less current portion		2,295			3,040
Accrued expenses		2,910			2,502
Deferred revenue		6,197			6,096
Net noncurrent deferred tax asset	$	18,700		$	18,164

A reconciliation of income tax expense and the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows:

	Year Ended December 31,
	2014			2013			2012
	(in thousands)
Tax provision at federal statutory rate	$	29,818		$	35,762		$	32,718
Increase (decrease) in income taxes resulting from:
State, net of federal benefit		2,207			2,325			3,261
Nondeductible expenses		363			197			118
Insurance expense		27			35			39
Other, net		439			(258	)		823
Unrecognized tax benefits		512			1,107			409
Expiration of statute of limitations		(1,542	)		(1,605	)		(3,187	)
		2,006			1,801			1,463
Effective income tax expense	$	31,824		$	37,563		$	34,181

The exercise of non-qualified stock options results in state and federal income tax benefits to the Company related to the difference between the market price at the date of exercise and the option exercise price. During 2014, 2013 and 2012, $201,000, $(225,000), and $(267,000), respectively, attributable to the tax benefit of stock options exercised and restricted stock, was credited to additional paid-in capital.

Our deferred tax assets have been evaluated for realization based on historical taxable income, tax planning strategies, the expected timing of reversals of existing temporary differences and future taxable income anticipated. Our deferred tax assets are more likely than not to be realized in full due to the existence of sufficient taxable income of the appropriate character under the tax law. As such, there is no need for a valuation allowance.

Uncertain tax positions may arise where tax laws may allow for alternative interpretations or where the timing of recognition of income is subject to judgment. We believe we have adequate provisions for unrecognized tax benefits related to uncertain tax positions. However, because of uncertainty of interpretation by various tax authorities and the possibility that there are issues that have not been recognized by management, we cannot guarantee we have accurately estimated our tax liabilities. We believe that our liabilities reflect the anticipated outcome of known uncertain tax positions in conformity with ASC Topic 740 Income Taxes. Our liabilities for unrecognized tax benefits are presented in the consolidated balance sheets within other noncurrent liabilities.

Also under ASC Topic 740, tax positions are evaluated for recognition using a more-likely-than-not threshold, and those tax positions requiring recognition are measured at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.

In accordance with current guidance, the Company has established a liability for unrecognized tax benefits, which are differences between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured. Generally a liability is created for an unrecognized tax benefit because it represents a company’s potential future obligation to a taxing authority for a tax position that was not recognized per above.

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

	Deferred Tax Asset			Liability For Unrecognized Tax Benefits			Liability For Interest and Penalties			Liability Total
Balance, January 1, 2012	$	9,926		$	13,765		$	2,479		$	16,244
Additions based on tax positions related to the current year		−			1,695			185			1,880
Additions for tax positions of prior years		728			845			170			1,015
Reductions for statute of limitation expirations		(1,999	)		(4,309	)		(940	)		(5,249	)
Balance, December 31, 2012		8,655			11,996			1,894			13,890
Additions based on tax positions related to the current year		−			1,832			198			2,030
Additions for tax positions of prior years		2,120			1,427			641			2,068
Reductions for statute of limitation expirations		(2,177	)		(2,802	)		(661	)		(3,463	)
Balance, December 31, 2013		8,598			12,453			2,072			14,525
Additions based on tax positions related to the current year		−			2,008			216			2,224
Additions for tax positions of prior years		2,032			1,218			706			1,924
Reductions for statute of limitation expirations		(1,523	)		(2,059	)		(603	)		(2,662	)
Balance, December 31, 2014	$	9,107		$	13,620		$	2,391		$	16,011

During the year ended December 31, 2014, we have recognized a $2,059,000 decrease in unrecognized tax benefits (including $1,120,000 of temporary differences and $939,000 of permanent differences) and an accompanying $603,000 decrease of related interest and penalties due to the effect of statute of limitations lapse. The favorable impact on our tax provision was $1,542,000 composed of $939,000 tax and $492,000 interest and penalties on permanent differences and $111,000 interest and penalties on temporary differences.

At December 31, 2014, we had $13,620,000 of unrecognized tax benefits, composed of $8,725,000 of deferred tax assets and $4,895,000 of permanent differences. Accrued interest and penalties of $2,391,000 related to unrecognized tax benefits at December 31, 2014. Unrecognized tax benefits of $4,895,000, net of federal benefit, at December 31, 2014, attributable to permanent differences, would favorably impact our effective tax rate if recognized. Accrued interest and penalties of $2,118,000 relate to these permanent differences at December 31, 2014. We do not expect to recognize significant increases or decreases in unrecognized tax benefits within the twelve months beginning December 31, 2014, except for the effect of decreases related to the lapse of statute of limitations estimated at $2,585,000, composed of temporary differences of $1,520,000, and permanent differences of $1,065,000. Interest and penalties of $615,000 relate to these temporary and permanent difference changes within 12 months beginning December 31, 2014.

During the year ended December 31, 2013, we have recognized a $2,802,000 decrease in unrecognized tax benefits (including $1,817,000 of temporary differences and $985,000 of permanent differences) and an accompanying $661,000 decrease of related interest and penalties due to the effect of statute of limitations lapse. The favorable impact on our tax provision was $1,605,000 composed of $976,000 tax and $451,000 interest and penalties on permanent differences and $178,000 interest and penalties on temporary differences.

At December 31, 2013, we had $12,453,000 of unrecognized tax benefits, composed of $8,253,000 of deferred tax assets and $4,200,000 of permanent differences. Accrued interest and penalties of $2,072,000 related to unrecognized tax benefits at December 31, 2013. Unrecognized tax benefits of $4,200,000, net of federal benefit, at December 31, 2013, attributable to permanent differences, would favorably impact our effective tax rate if recognized. Accrued interest and penalties of $1,835,000 relate to these permanent differences at December 31, 2013. We do not expect to recognize significant increases or decreases in unrecognized tax benefits within the twelve months beginning December 31, 2013, except for the effect of decreases related to the lapse of statute of limitations estimated at $2,330,000, composed of temporary differences of $1,390,000, and permanent differences of $940,000. Interest and penalties of $566,000 relate to these temporary and permanent difference changes within 12 months beginning December 31, 2013.

During the year ended December 31, 2012, we have recognized a $4,309,000 decrease in unrecognized tax benefits (including $1,999,000 of temporary differences and $2,310,000 of permanent differences) and an accompanying $940,000 decrease of related interest and penalties due to the effect of statute of limitations lapse. The favorable impact on our tax provision was $3,187,000 composed of $2,310,000 tax and $707,000 interest and penalties on permanent differences and $170,000 interest and penalties on temporary differences.

At December 31, 2012, we had $11,996,000 of unrecognized tax benefits, composed of $8,292,000 of deferred tax assets and $3,704,000 of permanent differences. Accrued interest and penalties of $1,894,000 related to unrecognized tax benefits at December 31, 2012. Unrecognized tax benefits of $3,704,000, net of federal benefit, at December 31, 2012, attributable to permanent differences, would favorably impact our effective tax rate if recognized. Accrued interest and penalties of $1,531,000 relate to these permanent differences at December 31, 2012.

Interest and penalties expense related to U.S. federal and state income tax returns are included within income tax expense. Interest and penalties expense (benefit) was $319,000, $178,000 and ($585,000) for the years ended December 31, 2014, 2013, and 2012, respectively.

The Company is no longer subject to U.S. federal and state examinations by tax authorities for years before 2011 (with few state exceptions). Currently, there are no U.S. federal and state returns under examination.