Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 8—Income Taxes

Following is a schedule of the income tax expense (benefit) (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Federal
Current	$	(40	)	$	208		$	(48	)	$	398
Deferred		(500	)		(13	)		(6,066	)		(2,638	)
Sub-total		(540	)		195			(6,114	)		(2,240	)
State
Current		(1	)		87			(12	)		207
Deferred		—			—			—			—
Sub-total		(1	)		87			(12	)		207
Total	$	(541	)	$	282		$	(6,126	)	$	(2,033	)

The net deferred tax asset was $9,636,000 and $3,571,000 at September 30, 2012 and December 31, 2011, respectively. The net deferred tax asset at September 30, 2012 was comprised of temporary differences, including $707,000 related to loss reserves on litigation matters and $9,648,000 related to the carryforward of 2012 taxable losses to future periods, including an estimated $4,569,000 that the Company expects to carryback to 2010 for a refund to be received in the 2013 second quarter. The net deferred tax asset at December 31, 2011 was comprised of temporary differences, including $3,162,000 related to loss reserves on litigation matters and $1,088,000 associated with the Company’s investment in Hallwood Energy. The federal tax rate was 34%, while state taxes were determined based upon taxable income apportioned to those states in which Hallwood Group does business at their respective tax rates.

Hallwood Group had a federal income tax receivable of $-0- and $821,000 at September 30, 2012 and December 31, 2011, respectively, and a net state tax receivable of $372,000 and $195,000, at September 30, 2012 and December 31, 2011, respectively. During the 2012 third quarter, the Company received federal tax refunds of $869,000, including $689,000 from the carryback of the 2011 federal net operating loss to 2009. The Company anticipates that $4,569,000 of the deferred tax asset at September 30, 2012 will be reclassified to federal income tax receivable at December 31, 2012 due to the carryback of the 2012 federal net operating loss to 2010.