Income Taxes

Successor

The Company is a limited liability company and on the Effective Date, elected to be treated as a partnership for income tax purposes under the provisions of the Internal Revenue Code. Under those provisions, the members are liable for income tax on the taxable income of the Company as it affects the members' individual income tax returns. As a result of its election, the Company is a pass-through entity and is not liable for income tax in the jurisdictions in which it operates. Accordingly, no provision for income taxes has been included in the financial statements as of December 31, 2011, and the Company has recorded no liability associated with uncertain tax positions.

STN Predecessor

STN Predecessor's operating results have been included in a consolidated federal income tax return. For financial reporting purposes, STN Predecessor recorded income tax benefit of $107.9 million, $22.0 million, and $289.9 million for the Predecessor period January 1, 2011 through June 16, 2011, and the years ended December 31, 2010 and 2009, respectively.

The benefit for income taxes attributable to net loss consists of the following (amounts in thousands):



	STN Predecessor
	Station Casinos, Inc.
	Period January 1, 2011 Through June 16, 2011			Year Ended December 31, 2010			Year Ended December 31, 2009
Current	$	(107,924	)	$	(5,469	)	$	(1,217	)
Deferred	—			(16,527		)	(288,655		)
Total income tax benefit	$	(107,924	)	$	(21,996	)	$	(289,872	)

The income tax provision differs from that computed at the federal statutory corporate tax rate as follows:



	STN Predecessor
	Station Casinos, Inc.
	Period January 1, 2011 Through June 16, 2011		Year Ended December 31, 2010		Year Ended December 31, 2009
Federal statutory rate	35.0	%	35.0	%	35.0	%
Change in valuation allowance	(14.5	)	(21.3	)	(15.8	)
Goodwill impairment	—		(3.6	)	(3.0	)
Vesting of Class B and Class C Units	0.1		(0.8	)	(0.2	)
Restructuring costs	(1.7	)	(5.3	)	(1.2	)
Discharge of Liabilities Subject to Compromise	(22.2	)	—		—
Other, net	—		(0.3	)	(0.1	)
Effective tax rate	(3.3	)%	3.7	%	14.7	%

The tax effects of significant temporary differences representing net deferred tax assets and liabilities are as follows (amounts in thousands):



	STN Predecessor
	Station Casinos, Inc.
	December 31, 2010
Deferred tax assets:
Accrued vacation, bonuses and group insurance	$	7,429
Preopening and other costs, net of amortization	9,756
Accrued benefits	9,653
Capital loss carryover	64,917
Net operating loss carryover	380,286
Financing arrangements	38,688
FICA credits	10,194
Minimum tax credit carryover	20,850
Other deferred tax assets	96,988
Valuation allowance	(468,904		)
Total deferred tax assets	169,857
Deferred tax liabilities:
Prepaid expenses and other	(16,287		)
Temporary differences related to property and equipment	(184,247		)
Intangibles	(70,713		)
Other deferred tax liabilities	(1,046		)
Total deferred tax liabilities	(272,293		)
Net	$	(102,436	)

At December 31, 2010, STN Predecessor had an Alternative Minimum Tax (“AMT”) credit carryover of approximately $20.9 million. AMT credits are available to be carried forward indefinitely and may be utilized against regular U.S. corporate tax to the extent that they do not exceed computed AMT calculations. STN expected to utilize all of its AMT credits at December 31, 2010.

At December 31, 2010, STN Predecessor had a general business credit (“GBC”) carryover for U.S. federal income tax purposes of approximately $10.2 million, which would begin expiring in 2022. The accounting guidance for income taxes requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise a valuation allowance is applied. Based on the future reversal of existing temporary differences, STN believed it would be unable to utilize the GBC carryover on a more likely than not basis and recorded a full valuation allowance for this credit.

As of December 31, 2010, STN Predecessor had a tax net operating loss carryover of approximately $1.11 billion that expired between 2027 and 2030. Management believed that the realization of a portion of this deferred tax asset was more likely than not based on the future reversal of existing temporary differences. At December 31, 2010 a valuation allowance was established against the portion of net operating loss that was more likely than not unrealizable.

STN or its subsidiaries is no longer subject to U.S. federal tax examination for years before 2007 except for earlier years that can be examined as a result of any net operating losses that were carried back.

As of December 31, 2010, unrecognized tax benefits of $3.5 million were recorded as reductions to the U.S. net operating loss deferred tax asset. As of December 31, 2010, unrecognized tax benefits of $5.3 million were recorded in other long term liabilities. Included in the balance as of December 31, 2010 were $4.1 million of uncertain tax benefits that would affect the effective income tax rate if recognized.

If applicable, STN Predecessor recognized accrued interest and penalties related to its unrecognized tax benefits in income tax expense. STN Predecessor's liability for the payment of interest on unrecognized tax benefits was reduced to zero as of December 31, 2010 because the net operating losses exceeded taxable income, including the unrecognized tax benefits. STN Predecessor did not anticipate any penalty assessments associated with its liability for unrecognized tax benefits.

A summary of the changes in the gross amount of unrecognized tax benefit is shown below (amounts in millions):



	STN Predecessor
	Station Casinos, Inc.
	December 31, 2010
Balance at the beginning of the year	$	10.3
Additions based on tax positions related to prior years	0.4
Reductions based on tax positions related to prior years	(1.9		)
Statute expirations	—
Balance at the end of the year	$	8.8