Provision (Benefit) for Income Taxes

Income (Loss) from continuing operations before taxes is as follows (in thousands):



	Year Ended December 31,
	2012		2011		2010
Income (Loss) from Continuing Operations Before Income Taxes	$	36,578	$	135,104	$	74,308

The following is an analysis of the consolidated income tax provision (benefit) (in thousands):



	Year Ended December 31,
	2012			2011		2010
Current	$	(1,144	)	$	1,616	$	(2,957	)
Deferred	16,783			48,878		30,790
Total	$	15,639		$	50,494	$	27,833

Current taxes consist of a U.S. Federal income tax benefit of $1.4 million primarily related to an IRS refund and state tax expenses of $0.3 million. For 2010, current income tax expense is a net credit due to realization of U.S. Federal income tax refunds that were not anticipated at the end of 2009. These refunds were realized as a result of provisions within the Work, Homeownership, and Business Assistance Act of 2009. Under the provisions of this act, the Company carried back its 2008 Federal net operating loss. However, upon IRS audit of these refunds, the IRS disallowed a portion of the carry back resulting in a charge in current expense during 2011. During 2012, the Joint Committee on Taxation reversed the IRS's decision and the IRS re-issued the refunds. The 2010 and 2012 refunds and 2011 payments were primarily attributable to alternative minimum tax. The Company has no continuing operations in foreign jurisdictions.

Reconciliations of income taxes computed using the U.S. Federal statutory rate to the effective income tax rates are as follows (in thousands):



	Year Ended December 31,
	2012			2011			2010
Income taxes computed at U.S. statutory rate (35%)	$	12,803		$	47,282		$	26,008
State tax provisions (benefits), net of federal benefits	(110		)	1,505			641
Cumulative impact of adjustments to net state income tax rate	(854		)	(2,663		)	(1,718		)
Valuation allowance of state carryover tax assets	2,070			2,273			1,681
Non-deductible equity compensation	1,911			1,537			867
Uncertain Tax Positions	(977		)	—			—
Other, net	796			560			354
Provision (benefit) for income taxes	$	15,639		$	50,494		$	27,833

Effective rate	42.8		%	37.4		%	37.5		%

One of the primary upward adjustments in the effective tax rate above the U.S. statutory rate is the non-deductible equity compensation. Non-deductible equity compensation increased tax expense by $1.9 million for 2012, $1.5 million for 2011, and $0.9 million for 2010. The provision for state income tax was a credit of $0.1 million for 2012, $1.5 million for 2011 and $0.6 million for 2010. The state income tax provision for 2012 was $1.3 million before a Louisiana percentage depletion benefit of $1.4 million. Revisions in the Company's long-term state apportionment rates resulted in a net decrease to state income tax deferred liabilities of $0.9 million and $2.7 million at December 31, 2012 and 2011, respectively. The 2012 revisions in the Company's long-term state apportionment rates included a reduction to Louisiana income tax deferred liabilities of $1.3 million which was partially offset by an increase of $0.4 million in the deferred income tax liabilities for other states. However, these adjustments also reduced our future expectation to realize benefits for Louisiana state tax loss carryovers. The Company took a charge of $2.1 million and $2.3 million at December 31, 2012 and 2011, respectively, for a valuation allowance against our Louisiana loss carryovers. In 2012, the Company was able to reverse a previously recorded $1.0 million uncertain tax liability as a result of expiring statutes.

The tax effects of temporary differences representing the net deferred tax asset (liability) at December 31, 2012 and 2011 were as follows (in thousands):



	Year Ended December 31,
	2012			2011
Deferred tax assets:
Federal net operating loss (“NOL”) carryovers	$	93,600		$	54,954
NOLs for excess stock-based compensation	(9,676		)	(9,450		)
State NOL carryovers	13,686			11,377
Alternative minimum tax credits	2,092			3,451
Other Carryover Items	1,378			1,141
Unrealized share-based compensation	9,096			7,151
Valuation allowance	(6,318		)	(3,901		)
Other	5,909			7,580
Total deferred tax assets	$	109,767		$	72,303

Deferred tax liabilities:
Oil and gas exploration and development costs	$	(324,031	)	$	(270,158	)
Other	(3,300		)	(2,109		)
Total deferred tax liabilities	$	(327,331	)	$	(272,267	)

Net deferred tax liabilities	$	(217,564	)	$	(199,964	)

Net current deferred tax assets	5,679			6,603

Net non-current deferred tax liabilities	$	(223,243	)	$	(206,567	)

Deferred tax assets increased by $37.5 million. The federal NOL carryover tax assets, net of NOLs for excess stock-based compensation, increased by $38.4 million due to an estimated current year tax operating loss. Alternative Minimum Tax ("AMT") credits available for future years decreased by $1.4 million as a result of refunds.

The total change in the deferred tax liability from 2011 to 2012 was an increase of $55.1 million. This increase is primarily attributable to a $53.9 million increase in the deferred liability for oil and gas exploration and development costs which is attributable to tax deductions in excess of book deductions for these costs.

The federal NOL carryovers will expire between 2027 and 2032 if not utilized in earlier periods. The Company's federal NOL carryover net deferred tax assets for the years ended December 31, 2012, 2011 and 2010, were $93.6 million, $55.0 million and $30.7 million, respectively, including deferred tax benefits for excess stock-based compensation deductions. Deferred tax benefits for excess stock-based compensation deductions in the amount of $9.7 million for 2012, $9.5 million for 2011 and $7.6 million for 2010 represent stock-based compensation that have generated tax deductions that have not yet resulted in a cash tax benefit because the Company has NOL carryovers. The Company plans to recognize the federal NOL net deferred tax assets associated with excess stock-based compensation tax deductions only when all other components of the federal NOL carryover tax assets have been fully utilized. If and when the excess stock-based compensation related NOL carryover tax assets are realized, the benefit will be credited directly to equity. The other primary carryover item is a $13.7 million net deferred tax asset, offset by a $6.0 million valuation allowance for State of Louisiana NOLs. These loss carryovers are scheduled to expire between 2013 and 2027.

Unrealized share-based compensation accounts for $9.1 million in deferred tax assets. These amounts are attributable to share-based compensation expenses accrued for employee stock options and restricted stock that are not realized for income tax purposes until exercised (for stock options) or vested (for restricted stock). The actual tax deductions realized may be significantly different than the accrued amounts depending on the market value of the stock on the date of exercise or vesting.

The total change in the valuation allowance from 2011 to 2012 was an increase of $2.4 million. This increase is related to a charge of $2.1 million for a valuation allowance against our Louisiana net operating losses and $0.3 million for a valuation allowance against charitable contribution carryforwards.

The Internal Revenue Service (IRS) has completed their examination of the Company's 2008 U.S. income tax returns which commenced in October 2010. There are no items under dispute related to this audit.