Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Income Taxes

Note 13. Income Taxes

The Company recognized income tax expense of $20.7 million and $38.5 million for the three and six months ended June 30, 2011, respectively.  The Company recognized an income tax benefit of $2.9 million and an income tax expense of $1.6 million for the same periods in 2010. The income tax benefit for the second quarter of 2010 includes a $19 million tax litigation settlement with the California Franchise Tax Board, which was partially offset by expense of $4.3 million relating to revisions to correct certain deferred tax accounts.

The Company recognizes accrued interest and penalties relating to uncertain tax positions as an income tax provision expense. The Company recognized interest and penalties expense of approximately $0.3 million for the six-month period ended June 30, 2011 and $0.6 million of benefit on accrued interest and penalties for the same period in 2010. The Company had approximately $3.2 million, $2.9 million and $2.7 million of accrued interest and penalties as of June 30, 2011, December 31, 2010 and June 30, 2010, respectively.

The Company and its subsidiaries file a consolidated federal income tax return and also file income tax returns in various state jurisdictions. The Company is currently being audited by the Internal Revenue Service for the tax years 2010 and 2011. The Company is also under audit with the California Franchise Tax Board for the tax years 2005 to 2007. The potential financial statement impact, if any, resulting from completion of these audits is expected to be minimal.

From time to time, there may be differences in opinion with respect to the tax treatment accorded transactions. If a tax position which was previously recognized on the consolidated financial statements is no longer “more likely than not” to be sustained upon a challenge from the taxing authorities, the tax benefit from the tax position will be derecognized. As of June 30, 2011, the Company does not have any tax positions which dropped below a “more likely than not” threshold.