17. Income Taxes

The provision for income taxes is comprised of the following (dollars in thousands):

	For the Years Ended December 31,
	2013			2012			2011
Federal:
Current	$	(312	)	$	193		$	631
Deferred		183			347			(383	)
Total Federal		(129	)		540			248
State:
Current		(1,627	)		(2,059	)		(2,028	)
Deferred (included in Federal above)		—			—			—
Total State		(1,627	)		(2,059	)		(2,028	)
Total	$	(1,756	)	$	(1,519	)	$	(1,780	)

A reconciliation of the provision for income taxes to the amount computed at the U.S. Federal statutory rate of 35% is as follows (dollars in thousands):

	For the Years Ended December 31,
	2013			2012			2011
Tax benefit at U.S. statutory rate	$	640		$	22,945		$	23,545
Credits		9,757			—			4,803
Valuation allowance		(7,097	)		(24,138	)		(30,489	)
Return to provision		(2,568	)		(225	)		(1,302	)
State taxes, net of federal income tax		(985	)		1,258			1,373
Officer's compensation		(724	)		(922	)		(760	)
Meals and entertainment		(496	)		(486	)		(430	)
Expired charitable		(126	)		—			—
Lobbying and political		(89	)		—			—
Other, net		(65	)		122			59
Unrecognized tax benefits		(3	)		193			630
(Loss) gain on acquisition		—			(266	)		791
Total	$	(1,756	)	$	(1,519	)	$	(1,780	)

Significant components of the Company's deferred tax assets and liabilities at December 31 are as follows (dollars in thousands):

	2013			2012
Deferred income tax assets:
Operating loss carryforwards	$	150,755		$	169,792
Accrued expenses		54,400			51,124
Prepaid revenue		53,228			55,386
Deferred lease liability		49,864			46,541
Capital lease obligations		39,748			52,720
Tax credits		32,673			20,551
Deferred gain on sale leaseback		8,673			10,127
Total gross deferred income tax asset		389,341			406,241
Valuation allowance		(72,366	)		(65,269	)
Net deferred income tax assets		316,975			340,972
Deferred income tax liabilities:
Property, plant and equipment		(374,431	)		(415,354	)
Other		(6,200	)		(8,428	)
Total gross deferred income tax liability		(380,631	)		(423,782	)
Net deferred tax liability	$	(63,656	)	$	(82,810	)

A reconciliation of the net deferred tax liability to the consolidated balance sheets at December 31 is as follows (dollars in thousands):

	2013			2012
Deferred tax asset – current	$	17,643		$	13,377
Deferred tax liability – noncurrent		(81,299	)		(96,187	)
Net deferred tax liability	$	(63,656	)	$	(82,810	)

As of December 31, 2013 and 2012, the Company had net federal operating loss carryforwards of approximately $427.4 million and $454.6 million, respectively, which are available to offset future taxable income through 2031. The Company concluded that the additional benefits generated during 2013 and 2012 did not meet the more likely than not criteria for realization. The conclusion was determined solely based on the reversal of current timing differences and did not consider future taxable income to be generated by the Company. Therefore, the Company has recorded a valuation allowance of $44.7 million against federal net operating losses at December 31, 2013. The Company continues to maintain that the deferred tax assets recorded as of December 31, 2013, primarily related to net operating losses generated prior to December 31, 2010, are more likely than not to be realized based on the reversal of deferred tax liabilities recorded. However, if the Company continues its current trend of improved GAAP earnings before taxes, this valuation allowance may be reduced in future years.

The Company has recorded valuation allowances of $7.0 million and $7.2 million at December 31, 2013 and 2012, respectively, against its state net operating losses, as the Company anticipates these losses will not be utilized prior to expiration. The carryforward period for some states is considerably shorter than the period which is allowed for federal purposes. The Company also recorded a valuation allowance against federal and state credits of $20.6 million and $8.5 million as of December 31, 2013 and 2012, respectively. As of December 31, 2013 and 2012, the Company had $53.5 million and $31.9 million, respectively, included in its net operating loss carryforward relating to restricted stock grants. Under ASC 718-10, this loss will be recorded in additional paid-in capital in the period in which the loss is effectively used to reduce taxes payable.

The formation of the Company, the reorganization of a predecessor company and the acquisitions of several wholly-owned subsidiaries constituted ownership changes under Section 382 of the Internal Revenue Code, as amended. As a result, the Company's ability to utilize the net operating loss carryforward to offset future taxable income is subject to certain limitations and restrictions. Furthermore, the Company had an ownership change under Section 382 in May 2010 which resulted in an additional annual limitation to the utilization of the net operating loss in an

amount of $92 million. The Company expects the net operating loss to be fully released before expiration and therefore does not anticipate a financial statement impact as a result of the limitation.

At December 31, 2013, the Company had gross tax affected unrecognized tax benefits of $1.6 million, which, if recognized, would result in an income tax benefit in accordance with ASC 805. Interest and penalties related to these tax positions are classified as tax expense in the Company's financial statements. Total interest and penalties reserved is $0.6 million at December 31, 2013. Tax returns for years 2010 through 2012 are subject to future examination by tax authorities. In addition, the net operating losses from prior years are subject to adjustment under examination. The Company does not expect that unrecognized tax benefits for tax positions taken with respect to 2013 and prior years will significantly change in 2014.

A reconciliation of the unrecognized tax benefits for the year 2013 is as follows (dollars in thousands):

Balance at January 1, 2013	$	1,245
Additions for tax positions related to the current year		53
Additions for tax positions related to prior years		414
Reductions for tax positions related to prior years		(156	)
Balance at December 31, 2013	$	1,556

On September 13, 2013, Treasury and the Internal Revenue Service issued final regulations regarding the deduction and capitalization of expenditures related to tangible property. The final regulations under Internal Revenue Code Sections 162, 167 and 263(a) apply to amounts paid to acquire, produce, or improve tangible property as well as dispositions of such property and are generally effective for tax years beginning on or after January 1, 2014. The Company has evaluated these regulations and determined they will not have a material impact on our consolidated results of operations, cash flows or financial position.