Income taxes

12 Months Ended

Dec. 31, 2011

Income taxes

Income taxes

10. Income taxes

        On January 1, 2007, we adopted ASC 740. There was no cumulative effect recorded as a charge to retained earnings from the adoption of FIN 48.

        The income taxes by jurisdiction consist of the following for the years ended December 31:

	2011			2010			2009
U.S. Federal:
Current	$	1,971		$	214		$	70
Deferred		2,261			(10,360	)		242
Total U.S. Federal		4,232			(10,146	)		312
U.S. state and local:
Current		1,092			1,193			623
Deferred		(1,260	)		50			50
Total U.S. state and local	$	(168	)	$	1,243		$	673

        Income taxes differ from the amounts computed by applying the U.S. federal income tax rate to pretax income (loss) before income taxes as a result of the following for the years ended December 31:

	2011			2010			2009
Federal statutory rate		34.0	%		34.0	%		34.0	%
State and local		(0.7	)		16.7			30.7
Stock options		1.9			4.0			12.5
Non-controlling interests		(2.0	)		(2.6	)		(6.3	)
Valuation allowance		0.0			(172.9	)		(29.5	)
Other		3.8			(2.6	)		4.9
Income tax expense (benefit).		37.0	%		(123.4)	%		46.3	%

        In 2010, we established a foreign subsidiary in the United Kingdom, which has generated losses resulting in a $400 deferred tax asset with a corresponding valuation allowance.

        Deferred income tax reflects the tax effects of temporary differences that gave rise to significant portions of our deferred tax assets and liabilities and consisted of the following at December 31:

	2011			2010
Deferred tax assets:
Net operating loss carryforwards	$	3,735		$	7,597
Outside basis differences for U.S. partnerships		3,524			3,234
Stock options		1,397			115
Deferred revenue		1,014			787
Deferred compensation		407			354
Property and equipment		—			382
State taxes		—			406
Other		455			404
Valuation allowance		(1,822	)		(3,109	)
Net deferred tax assets		8,710			10,170
Deferred tax liabilities:
Intangible assets		(1,202	)		(893	)
State taxes		(926	)		—
Property and equipment		(133	)		—
Net deferred tax liabilities		(2,261	)		(893	)
Net deferred taxes	$	6,449		$	9,277

        In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2011 and 2010, we had federal net operating loss carryforwards of approximately $7,979 and $15,618, respectively, state net operating loss carryforwards of approximately $27,900 and $32,079, respectively, and foreign net operating loss carryforwards of $1,334. The federal net operating loss carryforwards will begin to expire in 2021, and our foreign net operating loss carryforwards have an indefinite life. Our state net operating loss carryforwards are principally related to California net operating losses for which the ability to utilize has been suspended for several years and will begin to expire in 2012. Our ability to utilize certain of our net operating loss carryforwards may be limited in the event that a change in ownership, as defined in the Internal Revenue Code, occurs in the future.

        At December 31, 2010, we recorded a $12,280 release to the valuation allowance on our U.S. federal net deferred tax assets due to changes in our expectations regarding our ability to realize these deferred tax assets. This resulted from a determination that it was more likely than not that the U.S. federal net deferred tax assets would be realized. At December 31, 2011, we recorded a $1,287 release to the valuation allowance on our state net deferred tax assets, due to changes in our expectations regarding our ability to realize these deferred tax assets. This resulted from a determination that it was more likely than not that the state net deferred tax assets would be realized. In reaching the determination of releasing a valuation allowance, we have evaluated all significant available positive and negative evidence including, but not limited to, our three year cumulative results, trends in our business, expected future results and the character, amount and expiration periods of our net deferred tax assets. The underlying assumptions we used in forecasting future income required significant judgment and took into account our recent performance.

        During 2011, we realized excess windfall tax benefits of $0.2 million from stock option exercises. These benefits reduced income taxes payable and were recorded as an increase to additional paid-in capital in the accompanying consolidated balance sheets as of December 31, 2011. In accordance with the reporting requirements under ASC 718, we did not include $1.8 million of excess windfall tax benefits resulting from stock option exercises as components of our gross deferred tax assets and corresponding valuation allowance disclosures, as tax attributes related to those windfall tax benefits should not be recognized until they result in a reduction of taxes payable. The tax effected amount of gross unrealized net operating loss carryforwards excluded under ASC 718 was $1.8 million at December 31, 2011. When realized, those excess windfall tax benefits are credited to additional paid-in capital.

        We recognized interest and penalties related to income tax matters in income tax expense (benefit) which were not material during the years ended December 31, 2011, 2010, and 2009.

        The adoption of ASC 740 guidance required us to identify, evaluate and measure all uncertain tax positions taken or to be taken on tax returns and to record liabilities for the amount of these positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities. Although we believe that our estimates and judgments were reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review by the taxing authorities. We have no significant uncertain tax positions for the years ended December 31, 2011, 2010 and 2009.

        Our annual income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of judgment. Our judgments, assumptions and estimates relative to current income taxes take into account current tax laws, their interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We operate within federal, state and international taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve. We are subject to taxation in the United States and in various states. Our tax years 2008 and forward are subject to examination by the IRS and our tax years 2007 and forward are subject to examination by material state jurisdictions. However, due to prior year loss carryovers, the IRS and state tax authorities may examine any tax years for which the carryovers are used to offset future taxable income.

        We accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2011, 2010 and 2009, there was no accrued interest or penalties.

        The following table sets forth the changes in the valuation allowance, for all periods presented:

	Valuation Allowance
Balance, December 31, 2008	$	14,258
Additions charged to operations		731
Balance, December 31, 2009		14,989
Additions charged to operations		400
Decrease credited to operations		(12,280	)
Balance, December 31, 2010		3,109
Decrease credited to operations		(1,287	)
Balance, December 31, 2011	$	1,822