Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

8. Income Taxes

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between our financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. We recognize the effect on deferred tax assets and liabilities resulting from a change in tax rates in income in the period that includes the enactment date.

Under certain circumstances, we recognize liabilities in our financial statements for positions taken on uncertain tax issues. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, we believe it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits are classified as income tax expense in the statement of operations.

Federal and state income tax expense (benefit) is summarized as follows (in thousands):

		$(11,260)		$(11,260)		$(11,260)
	Year Ended December 31,
	2011		2010		2009
Current:
Federal	$	-	$	(504)	$	-
State and local		359		554		344
State and local - reserve for uncertain tax positions		(905)		(513)		(385)
Current income tax benefit		(546)		(463)		(41)
Deferred:
Federal		4,860		13,869		(11,640)
State and local		225		41		421
Deferred income tax expense (benefit)		5,085		13,910		(11,219)
Total income tax expense (benefit)	$	4,539	$	13,447	$	(11,260)

Significant components of our deferred tax liabilities and assets are as follows (in thousands):

	December 31,
	2011		2010
Deferred tax liabilities:
Net book value of property and equipment	$	11,303	$	13,366
Broadcast licenses, goodwill and other intangibles		269,818		258,715
Loan acquisition costs		295		393
Liability for accrued bonus 481(a) adjustment		101		203
Restricted stock		2		7
Total deferred tax liabilities		281,519		272,684
Deferred tax assets:
Liability under supplemental retirement plan		6		10
Liability for accrued vacation		825		811
Liability for accrued bonus		1,308		1,166
Allowance for doubtful accounts		406		410
Liability under health and welfare plan		425		526
Capital loss carryforwards		280		281
Liability for pension plan		13,417		7,254
Federal operating loss carryforwards		97,880		95,276
State and local operating loss carryforwards		13,662		13,285
Alternative minimum tax carryforwards		386		386
Unearned income		798		992
Network compensation		658		914
Stock options		566		589
Other		452		291
Total deferred tax assets		131,069		122,191
Valuation allowance for deferred tax assets		(4,620)		(4,871)
Net deferred tax assets		126,449		117,320
Deferred tax liabilities, net of deferred tax assets	$	155,070	$	155,364

We have approximately $279.7 million in federal operating loss carryforwards, which expire during the years 2021 through 2031. Additionally, we have an aggregate of approximately $316.8 million of various state operating loss carryforwards. We project to have taxable income in the carryforward periods. Therefore, we believe that it is more likely than not that the federal net operating loss carryforwards will be fully utilized.

A valuation allowance has been provided for a portion of the state net operating loss carryforwards. We believe that we will not meet the more likely than not threshold in certain states due to the uncertainty of generating sufficient income. Therefore, the state valuation allowance at December 31, 2011 and 2010 was $4.3 million and $4.6 million, respectively. As of December 31, 2011 and 2010, a full valuation allowance of $280,000 and $281,000, respectively, has been provided for the capital loss carryforwards, as we believe that we will not meet the more likely than not threshold due to the uncertainty of generating sufficient capital gains in the carryforward period. Our total valuation allowance provided for deferred tax assets decreased $252,000 for the year ended December 31, 2011 and decreased $1.6 million for the year ended December 31, 2010.

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands):

		$(11,260)		$(11,260)		$(11,260)
	Year Ended December 31,
	2011		2010		2009
Statutory federal rate applied to income (loss) before income tax expense or benefit	$	4,751	$	12,814	$	(12,007)
Current year permanent items		229		618		216
State and local taxes, net of federal tax benefit		710		1,993		(906)
Change in valuation allowance		(252)		(1,591)		1,553
Reserve for uncertain tax positions		(905)		(513)		(385)
Other items, net		6		126		269
Income tax expense (benefit) as recorded	$	4,539	$	13,447	$	(11,260)
Effective income tax rate		33.4%		36.7%		32.8%

As of each year end, we are required to adjust our pension liability to an amount equal to the funded status of our pension plans with a corresponding adjustment to other comprehensive income on a net of tax basis. During 2011, we increased our recorded non-current pension liability by $13.8 million and recognized other comprehensive loss of $8.4 million, net of a $5.4 million tax benefit. During 2010, we increased our recorded non-current pension liability by $4.2 million and recognized other comprehensive loss of $2.6 million, net of a $1.6 million tax benefit. During 2009, we decreased our recorded non-current pension liability by $6.6 million and recognized other comprehensive income of $4.0 million, net of a $2.6 million tax expense.

During 2010, our interest rate swap agreements expired, reducing our long-term liability from $6.3 million to zero. The resulting gain on derivatives of $3.8 million was recorded as other comprehensive income, net of a $2.5 million income tax expense. During 2009, we recognized a long term asset for the positive change in market value of our interest rate swap agreements of $18.3 million, and recorded a gain on derivatives as other comprehensive income of $11.2 million, net of a $7.1 million income tax expense.

We made income tax payments (net of refunds) of $465,000 in 2011. We received income tax refunds (net of payments) of $88,000 in 2010, which included a $504,000 federal refund for carrying back our alternative minimum tax net operating loss to 2004 and 2005. We made income tax payments (net of refunds) of $97,000 in 2009. At December 31, 2011 and 2010, we had current income taxes payable of approximately $2.8 million and $3.8 million, respectively.

We prescribe a recognition threshold and measurement attribution for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.

As of December 31, 2011 and 2010, we had approximately $2.6 million and $3.5 million, respectively, of unrecognized tax benefits. All of these unrecognized tax benefits would impact our effective tax rate if recognized. The liability for unrecognized tax benefits is recorded net of any federal tax benefit that would result from payment.

We have accrued estimates of interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2011 and 2010, we had recorded a liability for potential penalties and interest of approximately $1.0 million and $1.2 million, respectively, related to uncertain tax positions.

The following table summarizes the activity related to our unrecognized tax benefits, net of federal benefit, excluding interest and penalties for the years ended December 31, 2011, 2010 and 2009 (in thousands):

	Year Ended December 31,
	2011		2010		2009
Balance at beginning of period	$	2,342	$	2,828	$	3,227
Increase resulting from positions taken in prior periods		-		-		48
Reduction in benefit from lapse in statute of limitations		(745)		(486)		(447)
Balance at end of period	$	1,597	$	2,342	$	2,828

While it is difficult to calculate with any certainty, we estimate a decrease of $717,000, exclusive of interest and penalties, will be recorded for uncertain tax positions over the next twelve months resulting from expiring statutes of limitations for state tax issues.

We file income tax returns in the U.S. federal and multiple state jurisdictions. With few exceptions, we are no longer subject to U.S. federal, or state and local tax examinations by tax authorities for years prior to 2000. This extended open adjustment period is due to material amounts of net operating loss carryforwards, which exist at the federal and multi-state jurisdictions originating from the 2001, 2002 and 2003 tax years.