Income Taxes

The components of the Company's income tax provision are summarized as follows (in thousands):



	December 31,
	2012		2011		2010
Current provision:
Federal	—		$	—	$	—
State	4,059		3,595		3,250
Foreign	—		466		—
	4,059		4,061		3,250
Deferred provision:
Federal	50,544		32,229		35,337
State	3,301		3,087		3,926
Foreign	—		—		—
	53,845		35,316		39,263
	$	57,904	$	39,377	$	42,513

A reconciliation of the amounts computed by applying the statutory federal income tax rate to income before income taxes to the amounts recorded in the consolidated statements of comprehensive income is summarized as follows (in thousands):



	December 31,
	2012			2011			2010
Amounts computed at statutory federal rate	(45,280		)	$	(97,405	)	$	(259,890	)
Non-deductible expenses	477			376			505
State income tax expense, net of federal income tax impact	5,944			5,708			6,019
Net tax expense (benefit) related to ventures	(6,737		)	(2,856		)	18,352
Non-deductible share-based compensation	5,776			6,623			4,505
Non-deductible goodwill impairment	—			—			125,164
Other	—			(2,936		)	—
Change in valuation allowance	97,724			129,867			147,858
	$	57,904		$	39,377		$	42,513

The components of the Company's deferred tax assets (liabilities) are summarized as follows (in thousands):



	As of December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	1,008,492		$	973,560
Wireless licenses	13,291			21,046
Capital loss carryforwards	—			3,031
Reserves and allowances	13,990			8,818
Share-based compensation	29,698			34,631
Deferred charges	49,898			53,835
Investments and deferred tax on unrealized losses	395			5,478
Intangible assets	15,502			18,545
Goodwill	28,546			30,869
Other	2,156			2,328
Gross deferred tax assets	1,161,968			1,152,141
Deferred tax liabilities:
Property and equipment	(222,260		)	(302,373		)
Other	(242		)	(439		)
Net deferred tax assets	939,466			849,329
Valuation allowance	(937,568		)	(847,399		)
Other deferred tax liabilities:
Wireless licenses	(378,876		)	(317,682		)
Investment in joint ventures	(1,653		)	(10,236		)
Net deferred tax liabilities	$	(378,631	)	$	(325,988	)

Deferred tax assets (liabilities) are reflected in the accompanying consolidated balance sheets as follows (in thousands):



	As of December 31,
	2012			2011
Current deferred tax assets (included in other current assets)	6,480			$	7,816
Long-term deferred tax liabilities	(385,111		)	(333,804		)
	$	(378,631	)	$	(325,988	)

Except with respect to the $1.9 million TMT credit outstanding as of December 31, 2012 and 2011, the Company established a full valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The valuation allowance is based on available evidence, including the Company's historical operating losses. Deferred tax liabilities associated with wireless licenses and investments in certain joint ventures cannot be considered a source of taxable income to support the realization of deferred tax assets because these deferred tax liabilities will not reverse until some indefinite future period. Since it has recorded a valuation allowance against substantially all of its deferred tax assets, the Company carries a net deferred tax liability on its balance sheet. During the year ended December 31, 2012, the Company recorded a $90.2 million increase to its valuation allowance, which primarily consisted of $84.3 million and $5.9 million related to changes in the federal and state net operating loss carryforwards, respectively. During the year ended December 31, 2011, the Company recorded a $138.9 million increase to its valuation allowance, which primarily consisted of $124.6 million and $11.1 million related to changes in the federal and state net operating loss carryforwards, respectively.

At December 31, 2012, the Company estimated it had federal and state NOL carryforwards of approximately $2.6 billion and $2.0 billion, respectively (which begin to expire in 2022 for federal income tax purposes and of which $69.8 million will expire at the end of 2013 for state income tax purposes). During the year ended December 31, 2012, $37.2 million of the Company's state NOLs expired. Included in the Company's federal and state net operating loss carryforwards are $24.6 million of losses which, when utilized, will increase additional paid-in capital by approximately $9.4 million.

The Company's ability to utilize NOLs could be limited if it were to experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code and similar state provisions. In general terms, an ownership change can occur whenever there is a cumulative shift in the ownership of a company by more than 50 percentage points by one or more “5% stockholders” within a three-year period. The occurrence of such a change in the Company's ownership would limit the amount of NOL carryforwards it could utilize in a given year. This limitation would accelerate cash tax payments the Company would be required to make and likely result in a substantial portion of its NOLs expiring before the Company could fully utilize them.

In 2011, trading in Leap common stock increased the risk of an ownership change under Section 382 of the Internal Revenue Code. Accordingly, on August 30, 2011, the Company’s board of directors adopted a Tax Benefit Preservation Plan to help deter acquisitions of Leap common stock that could result in an ownership change under Section 382 and thus help preserve the Company’s ability to use its NOL carryforwards. The Tax Benefit Preservation Plan is designed to deter acquisitions of Leap common stock that would result in a stockholder owning 4.99% or more of Leap common stock (as calculated under Section 382), or any existing holder of 4.99% or more of Leap common stock acquiring additional shares, by substantially diluting the ownership interest of any such stockholder unless the stockholder obtains an exemption from the Company’s board of directors.

None of the Company's NOL carryforwards are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Any carryforwards that expire prior to utilization as a result of a Section 382 limitation will be removed from deferred tax assets with a corresponding reduction to valuation allowance. Since the Company currently maintains a full valuation allowance against its federal and state NOL carryforwards, it does not expect that any possible limitation would have a current impact on its results of operations.

In accordance with the authoritative guidance for business combinations, which became effective for the Company on January 1, 2009, any reduction in the valuation allowance, including the valuation allowance established in fresh-start reporting, will be accounted for as a reduction of income tax expense.

The Company's unrecognized income tax benefits and uncertain tax positions, as well as any associated interest and penalties, are recorded through income tax expense; however, such amounts have not been significant in any period. All of the Company's tax years from 1998 to 2011 remain open to examination by federal and state taxing authorities. In July 2009, the federal examination of the Company's 2005 tax year, which was limited in scope, was concluded and the results did not have a material impact on the consolidated financial statements.