Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

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 date of the change.

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 may be 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 on 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):

	Year Ended December 31,
	2012			2011			2010
Current:
Federal	$	-		$	-		$	(504	)
State and local		974			359			554
State and local - reserve for uncertain tax positions		(1,015	)		(905	)		(513	)
Current income tax benefit		(41	)		(546	)		(463	)
Deferred:
Federal		16,854			4,860			13,869
State and local		2,375			225			41
Deferred income tax expense		19,229			5,085			13,910
Total income tax expense	$	19,188		$	4,539		$	13,447

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

	December 31,
	2012			2011
Deferred tax liabilities:
Net book value of property and equipment	$	10,656		$	11,303
Broadcast licenses, goodwill and other intangibles		277,939			269,818
Loan acquisition costs		-			295
Liability for accrued bonus 481(a) adjustment		-			101
Restricted stock		-			2
Total deferred tax liabilities		288,595			281,519
Deferred tax assets:
Liability for accrued consulting		118			-
Liability for accrued vacation		850			825
Liability for accrued bonus		347			1,308
Loan acquisition costs		1,902			-
Allowance for doubtful accounts		309			406
Liability under health and welfare plan		636			425
Capital loss carryforwards		-			280
Liability for pension plan		15,228			13,417
Federal operating loss carryforwards		87,585			97,880
State and local operating loss carryforwards		10,886			13,662
Alternative minimum tax carryforwards		386			386
Unearned income		613			798
Network compensation		414			658
Stock options		508			566
Other		80			458
Total deferred tax assets		119,862			131,069
Valuation allowance for deferred tax assets		(3,157	)		(4,620	)
Net deferred tax assets		116,705			126,449
Deferred tax liabilities, net of deferred tax assets	$	171,890		$	155,070

We have approximately $250.2 million in federal operating loss carryforwards, which expire during the years 2021 through 2031. Additionally, we have an aggregate of approximately $259.1 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, 2012 and 2011 was $3.2 million and $4.3 million, respectively.

As of December 31, 2011, we had also recorded a valuation allowance of $0.3 million for capital loss carryforwards because we believed at the time that we did not meet the more likely than not threshold for generating sufficient capital gains in the carryforward period. However during the year ended December 31, 2012, we completely utilized our capital loss carryforwards and as a result, we reduced our valuation allowance for capital loss carryforwards to zero.

Our total valuation allowance provided for deferred income tax assets decreased $1.5 million for the year ended December 31, 2012 due to changes in estimated utilization of the state operating loss carryforwards and  the full utilization of our capital loss carryforwards.  Our total valuation allowance provided for deferred income tax assets decreased $0.3 million for the year ended December 31, 2011 due to changes in estimated utilization and expiration of certain state operating loss carryforwards.

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, 2012, 2011 and 2010 is as follows (in thousands):

	Year Ended December 31,
	2012			2011			2010
Statutory federal rate applied to income before income tax expense	$	16,561		$	4,751		$	12,814
Current year permanent items		825			229			618
State and local taxes, net of federal tax benefit		4,191			710			1,993
Change in valuation allowance		(1,463	)		(252	)		(1,591	)
Reserve for uncertain tax positions		(1,015	)		(905	)		(513	)
Other items, net		89			6			126
Income tax expense as recorded	$	19,188		$	4,539		$	13,447
Effective income tax rate		40.6	%		33.4	%		36.7	%

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 2012, we increased our recorded non-current pension liability by $6.2 million and recognized other comprehensive loss of $3.8 million, net of a $2.4 million tax benefit. 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 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.

In 2012 and 2011, we made income tax payments (net of refunds) of $0.8 million and $0.5 million, respectively.  In 2010, we received income tax refunds (net of payments) of $0.1 million, which included a $0.5 million federal refund for carrying back our alternative minimum tax net operating loss to 2004 and 2005. At December 31, 2012 and 2011, we had current income taxes payable of approximately $1.9 million and $2.8 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, 2012 and 2011, we had approximately $1.6 million and $2.6 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, 2012 and 2011, we had recorded a liability for potential penalties and interest of approximately $0.7 million and $1.0 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, 2012, 2011 and 2010 (in thousands):

	Year Ended December 31,
	2012			2011			2010
Balance at beginning of period	$	1,597		$	2,342		$	2,828
Reduction in benefit from lapse in statute of limitations		(717	)		(745	)		(486	)
Balance at end of period	$	880		$	1,597		$	2,342

While it is difficult to calculate with any certainty, we estimate a decrease of $0.1 million, 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 2001. This extended open adjustment period is due to material amounts of net operating loss carryforwards, which exist at the federal level and in multiple-state jurisdictions arising from the 2001, 2002 and 2003 tax years.