Income Taxes

A comparative analysis of the provision for income taxes follows (in thousands):



	For the Year Ended
	December 31, 2012			December 31, 2011			December 31, 2010
Current:
Federal	$	(7,784	)	$	7,784		$	31,707
State and local	1,522			2,460			3,515
Current income tax (benefit) expense	(6,262		)	10,244			35,222
Deferred:
Federal	20,211			(70,978		)	(852		)
State and local	3,302			(15,034		)	(294		)
Deferred income tax expense (benefit)	23,513			(86,012		)	(1,146		)
Income tax expense (benefit)	$	17,251		$	(75,768	)	$	34,076

A reconciliation of the differences between federal statutory tax rate and the Company’s effective tax rate for 2012, 2011 and 2010 is as follows:



	For the Year Ended
	December 31, 2012		December 31, 2011		December 31, 2010
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
Impairment	0.0		(23.6	)	—
State income taxes, net of Federal benefit	4.6		1.7		4.8
Change in tax reserve	(3.4	)	(0.5	)	(2.7	)
Increase (decrease) in capital loss valuation allowance	—		—		2.4
Net change in state valuation allowance	(0.6	)	(0.1	)	(1.1	)
Other	0.9		0.1		0.1
Effective tax rate	36.5	%	12.6	%	38.5	%

Deferred income tax assets and deferred tax liabilities are as follows (in thousands):



	December 31, 2012			December 31, 2011
Deferred tax assets
Current:
Reserves and allowances	$	8,833		$	28,998
Payroll and related accruals	5,953			1,374
Other	446			514
Less: valuation allowance	(511		)	(1,359		)
Total current deferred tax assets	14,721			29,527
Noncurrent:
Equity compensation	16,940			15,424
Financing fees	—			3,668
Deferred rent	2,935			3,284
State net operating loss carryforwards	4,809			6,413
Other	3,669			3,149
Less: valuation allowance	(2,367		)	(3,308		)
Total noncurrent deferred tax assets	25,986			28,630
Total deferred tax assets	40,707			58,157
Deferred tax liabilities:
Current:
Prepaid assets and other	(2,458		)	(3,076		)

Noncurrent:
Fixed assets	(1,409		)	(3,952		)
Intangible assets	(51,546		)	(52,286		)
Developed software	(4,559		)	(4,890		)
Financing fees	(10,637		)	—
Total non-current deferred tax liabilities	(68,151		)	(61,128		)
Total deferred tax liabilities	(70,609		)	(64,204		)
Net deferred tax liabilities	$	(29,902	)	$	(6,047	)

At December 31, 2012 and 2011, current net deferred tax assets were $12.3 million and $26.5 million, respectively and non-current net deferred tax liabilities were $42.2 million and $32.5 million, respectively.

As of December 31, 2012, the Company had state net operating loss carryforwards of approximately $102.7 million that will expire beginning in 2013. Deferred income tax assets, relating to the state net operating loss carryforwards approximate $4.8 million. A valuation allowance of $2.9 million has been recorded to reduce this deferred tax asset to its estimated realizable value since certain state net operating loss carryforwards may expire before realization.

Authoritative guidance requires that the realization of an uncertain income tax position must be more likely than not (i.e., greater than 50 percent likelihood of receiving a benefit) before it can be recognized in the financial statements. At December 31, 2012 and 2011, the Company had $8.4 million and $11.0 million, respectively, of unrecognized tax benefits, all of which would affect the Company’s effective tax rate if recognized.

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



Balance at January 3, 2010	$	2,165
Additions for tax positions of the current year	1,775
Additions for tax positions of prior year	286
Odyssey balance at date of acquisition	1,331
Changes in judgment	29
Reductions for tax positions of prior years for:
Settlements during the period	(4		)
Lapses of applicable statute of limitations	(1,931		)
Balance at December 31, 2010	3,651
Additions for tax positions of the current year	9,039
Additions for tax positions of prior year	2,316
Changes in judgment	(584		)
Reductions for tax positions of prior years for:
Settlements during the period	(3,184		)
Lapses of applicable statute of limitations	(211		)
Balance at December 31, 2011	11,027
Additions for tax positions of the current year	126
Additions for tax positions of prior year	245
Changes in judgment	(2,312		)
Reductions for tax positions of prior years for:
Settlements during the period	(274		)
Lapses of applicable statute of limitations	(456		)
Balance at December 31, 2012	$	8,356

The Company recognizes interest and penalties on uncertain tax positions in income tax expense. The Company had approximately $0.6 million and $0.3 million of accrued interest related to uncertain tax positions as of December 31, 2012 and 2011, respectively.

The Company continues to participate in the IRS’ Compliance Assurance Program (“CAP”). As a result of the Company’s participation in CAP, management has closed federal tax years prior to 2011 and anticipates closing 2011 in early 2013. The Company has a tax receivable of $21.5 million on its books as of December 31, 2012, primarily related to the settlement of positions late in 2012 with the IRS for both 2011 and 2012 tax years. The cash will be used to offset 2013 tax liabilities in lieu of making estimated tax payments. The Company is still open under statute of limitations for examination of income and non-income tax filings in various state and local jurisdictions from 2007 through current filings.