NOTE 5. INCOME TAXES

The Company recorded income tax benefits of $11.7 million and $14.0 million for the three and nine months ended September 30, 2012, respectively, and recorded income tax provisions of $2.4 million and $5.3 million in the three and nine months ended September 30, 2011. During the three months ended September 30, 2012, the Company recognized a tax benefit of $0.2 million primarily related to a reversal of a previously recorded unrecognized tax benefit. The reduction in unrecognized tax benefit was due to a change in judgment during the quarter. Additionally, the tax benefit associated with the goodwill impairment charge of $36.6 million was applied at a rate of 36%. Absent these items, the effective tax rate on operating results was 40.9% for the nine months ended September 30, 2012 compared to 41.9% for comparable prior year period.

At September 30, 2012, the Company had no unrecognized tax benefits, which if recognized in future periods, could favorably impact the effective tax rate.

The Company is permitted to deduct certain intangible assets and goodwill balances over a period of 15 years from the date of the historic acquisitions, thereby reducing the Company's taxable income as reported on the income tax return. The Company estimates the annual cash savings from these deductions, as compared with tax expense to be provided for in the Company's financial statements, from these deductions as follows:

Year	Income Tax Benefit
2012	$	4,500
2013	$	4,700
2014	$	4,700
2015	$	5,000
2016	$	5,300
2017 and thereafter	$	43,400
	$	67,600

In the year in which these benefits are realized, the Company would recognize a reduction in a long term deferred tax asset.

The Internal Revenue Service ("IRS") had challenged the deferral of income for tax reporting purposes related to unbilled receivables, including the applicability of a Letter Ruling issued by the IRS to the Company in January 1976 which granted to the Company deferred tax treatment of the unbilled receivables. This issue was elevated to the IRS National Office for determination. On October 23, 2008, the Company received a notification of ruling from the IRS National Office. This ruling provided clarification regarding the IRS position relating to revenue recognition for tax purposes regarding its unbilled receivables. During September 2009, the IRS completed its examination of the Company's tax returns for 2004 through 2007 and issued a Revenue Agent Report ("RAR"), which reduced the deferral of income for tax reporting purposes. As a result, the Company reclassified approximately $1.0 million from deferred to current taxes payable. The RAR also included an assessment of interest of $0.5 million. The Company filed a protest letter with the IRS to appeal the assessment. During the three months ended September 30, 2012, we executed closing agreements with the IRS on our tax audits through the year 2009. The closing agreements are subject to Joint Congressional Committee approval, primarily due to a large tax deduction in 2009 related to a legal settlement reached in 2008. The Company does not have reason to believe approval by the Joint Congressional Committee will be withheld.