Income Taxes

The composition of our income tax expense (benefit) from continuing operations for the years ended December 31, 2011, 2010 and 2009 was as follows:



	Current			Deferred			Total
	(in millions)
Year ended December 31, 2011:
U.S. Federal	$	—		$	(1.5	)	$	(1.5	)
State	3.5			0.3			3.8
	$	3.5		$	(1.2	)	$	2.3
Year ended December 31, 2010:
U.S. Federal	$	(21.2	)	$	14.9		$	(6.3	)
State	(2.3		)	(3.1		)	(5.4		)
	$	(23.5	)	$	11.8		$	(11.7	)
Year ended December 31, 2009:
U.S. Federal	$	3.2		$	(9.4	)	$	(6.2	)
State	6.9			(1.0		)	5.9
	$	10.1		$	(10.4	)	$	(0.3	)

The following table reconciles our effective income tax rate from continuing operations to the federal statutory tax rate of 35%:



	2011					2010					2009
	Percent		Amount			Percent		Amount			Percent		Amount
	(dollars in millions)
Federal income tax benefit at the statutory rate	35.0	%	$	11.4		(35.0	)%	$	(18.4	)	(35.0	)%	$	(22.1	)
State income taxes, net of federal tax benefits	14.9	%	4.8			(5.8	)%	(3.0		)	4.6	%	2.9
Non-deductible expenses and other	2.7	%	0.8			1.4	%	0.7			2.6	%	1.6
Forfeiture of equity compensation	3.7	%	1.2			—	%	—			—	%	—
Non-deductible donation of land	3.5	%	1.2			—	%	—			—	%	—
Dividend income from foreign subsidiary	—	%	—			3.5	%	1.8			—	%	—
Reversal of reserves for unrecognized tax benefits	(1.7	)%	(0.5		)	(4.1	)%	(2.1		)	1.9	%	1.2
Credits	(3.7	)%	(1.2		)	(13.7	)%	(7.2		)	(3.1	)%	(2.0		)
Change in valuation allowance/reserve of deferred tax assets	(47.2	)%	(15.4		)	31.4	%	16.5			28.6	%	18.1
Income tax (benefit) expense from continuing operations	7.2	%	$	2.3		(22.3	)%	$	(11.7	)	(0.4	)%	$	(0.3	)

The following table shows the allocation of income tax (expense) benefit between continuing operations, discontinued operations and equity:



	For the year ended December 31,
	2011			2010			2009
	(in millions)
Income (loss) from continuing operations before income taxes	$	32.5		$	(52.5	)	$	(63.4	)
Income tax benefit (expense) allocated to continuing operations	(2.3		)	11.7			0.3
Income (loss) from continuing operations	30.2			(40.8		)	(63.1		)
Income (loss) from discontinued operations before income taxes	(32.9		)	27.1			(192.3		)
Income tax benefit (expense) allocated to discontinued operations	0.2			(9.7		)	(3.0		)
Income (loss) from discontinued operations	(32.7		)	17.4			(195.3		)
Net loss	$	(2.5	)	$	(23.4	)	$	(258.3	)
Income tax benefit allocated to additional paid in capital	$	—		$	—		$	—
Income tax benefit (expense) allocated to other comprehensive income	$	0.2		$	—		$	—

At December 31, 2011 and 2010, the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were:



	December 31,
	2011			2010
	(in millions)
Deferred tax assets—current:
Workers’ compensation insurance reserve	$	2.6		$	3.8
Allowance for doubtful accounts	3.0			2.2
Legal and merger costs	2.7			4.5
Other	7.5			6.9
Less valuation allowance	(15.1		)	(17.2		)
Total deferred tax assets—current	0.7			0.2
Deferred tax liabilities—current:
Prepaid expenses	(3.2		)	(3.2		)
Other	—			(0.2		)
Total deferred tax liabilities—current	(3.2		)	(3.4		)
Net current deferred tax liabilities	$	(2.5	)	$	(3.2	)
Deferred tax assets—non-current:
Federal tax credit carry-forwards	$	28.3		$	21.2
Federal net operating loss carry-forwards	77.3			71.7
State net operating loss carry-forwards	11.7			9.9
Capital loss carry-forward	6.4			6.5
Los Angeles Revitalization Zone tax credits	—			4.3
Deferred compensation	2.9			4.6
Pre-opening expenses capitalized for tax purposes	10.9			10.1
Unrealized loss on equity securities	(0.4		)	(0.3		)
Share-based compensation expense—book cost	12.1			16.5
Land, building, riverboats and equipment, net	31.6			45.8
Other	11.2			6.5
Less valuation allowance	(190.3		)	(196.3		)
Total deferred tax assets—non-current	1.7			0.5
Deferred tax liabilities—non-current:
Intangible assets	(5.1		)	(4.1		)
Total deferred tax liabilities—non-current:	(5.1		)	(4.1		)
Net non-current deferred tax liabilities	$	(3.4	)	$	(3.6	)

The following table summarizes the total deferred tax assets and total deferred tax liabilities provided in the previous table:



	December 31,
	2011			2010
	(in millions)
Total deferred tax assets	$	207.7		$	214.2
Less valuation allowances	(205.4		)	(213.4		)
Less total deferred tax liabilities	(8.2		)	(7.6		)
Net deferred tax liabilities	$	(5.9	)	$	(6.8	)

As of December 31, 2011, we provided a full valuation allowance against deferred tax assets for all jurisdictions except for certain states that are more likely than not to be realized. In evaluating the need for a valuation allowance, we consider all sources of taxable income available to realize the deferred tax asset, including the future reversal of existing temporary differences, forecasts of future taxable income, and tax planning strategies. Authoritative guidance provides that “forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years,” and places considerably more weight on historical results and less weight on future projections. We have a cumulative U.S. pretax accounting loss for the years 2009 through 2011. Considering all available evidence both positive and negative, and in light of the cumulative losses in recent years, we determined that a full valuation allowance was appropriate.

As of December 31, 2011, our tax filings reflected available Alternative Minimum Tax (“AMT”) credit carry-forwards of $3.1 million, General Business Credit (“GBC”) carry-forwards of $14.7 million and Foreign Tax Credit (“FTC”) carry-forwards of $10.4 million. The FTC and GBC carry-forwards will begin to expire in 2020 through 2030, while the AMT credits can be carried forward indefinitely to reduce future regular tax liabilities. As of December 31, 2011, we had $230 million of federal net operating losses, which can be carried forward 20 years and will expire in 2028. We also have $241.2 million of state net operating loss carry-forwards, predominantly in Louisiana and New Jersey, which expire on various dates beginning in 2012. Our net operating loss carry-forwards include an $8.9 million excess tax benefit from stock option deductions, which have not been recognized for financial statement purposes. The excess tax benefit will be credited to additional paid-in capital when the net operating loss is utilized and reduces current-year income tax payable.

We file income tax returns in federal and state jurisdictions and are no longer subject to federal income tax examinations for tax years prior to 2009 and state income tax examinations for tax years prior to 2000. In 2010, our federal tax return was examined by the Internal Revenue Service for the years 2006 through 2008, and the audit was concluded with no adjustment. In 2008, the Indiana Department of Revenue commenced an income tax examination of our Indiana income tax filings for the 2005 to 2007 period. See Note 11, Commitments and Contingencies.

As of December 31, 2011, we had $3.0 million of uncertain tax benefits that, if recognized, would impact the effective tax rate. Authoritative guidance requires companies to accrue interest and related penalties, if applicable, on all tax positions for which reserves have been established consistent with jurisdictional tax laws. We recognize accrued interest and penalties related to uncertain tax benefits as a component of income tax expense. During 2011, we accrued approximately $0.1 million of interest related to unrecognized tax benefits which consists of current year accrual for uncertain tax benefits offset by the write-offs of previously accrued interest for uncertain tax benefits that were recognized in 2011. We had $0.7 million of cumulative interest accrued as of the end of the year. No penalties were accrued for in any years. It is reasonably possible that the total amounts of unrecognized tax benefits may increase from zero to approximately $4.0 million during the next twelve months.

The following table summarizes the activity related to uncertain tax benefits for 2011 and 2010, excluding any interest or penalties:



	2011			2010
	(in millions)
Balance at January 1	$	8.2		$	19.5
Gross increases - tax positions in prior periods	1.0			—
Gross decreases - tax positions in prior periods	(0.1		)	(8.3		)
Gross increases (decreases) - tax positions in current period	0.2			(0.6		)
Statute of limitation expirations	(1.6		)	(2.4		)
Balance as of December 31	$	7.7		$	8.2