8. INCOME TAXES

The Company and its wholly-owned subsidiaries file income tax returns in the United States and in the United Kingdom. Income tax expense (benefit) is determined using the asset and liability method provided for in the authoritative guidance issued by the FASB. Deferred income taxes are recognized at currently enacted tax rates for the expected future tax consequences attributable to temporary differences between amounts reported for income tax purposes and financial reporting purposes. Deferred taxes are provided for the undistributed earnings as if they were to be distributed. The Company records a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has not recorded any liability for unrecognized tax benefits.

The Company is no longer subject to examinations by income tax authorities in most jurisdictions for years prior to 2009.

The benefit from income taxes consisted of the following:

	Years Ended December 31,
		2012		2011		2010
Current tax (benefit):
Federal		$	—	$	—	$	—
State and local			—		—		—
Foreign			—		—		—
		$	—	$	—	$	—
Deferred tax (benefit):
Federal			—		—		—
State and local			—		—		—
Foreign			—		—		—
			—		—		—

Benefit from income taxes		$	—	$	—	$	—

The domestic and foreign components of pre-tax income (loss), including discontinued operations, are as follows:

	Years Ended December 31,
	2012			2011			2010

Domestic	$	11,425		$	(15,790	)	$	(29,370	)
Foreign		(1,882	)		(1,294	)		(2,270	)
Pre-tax income (loss)	$	9,543		$	(17,084	)	$	(31,640	)

	Years Ended December 31,
	2012			% of Pretax			2011			% of Pretax			2010			% of Pretax

Tax at Federal statutory rate	$	3,340			35.0	%	$	(5,979	)		(35.0	)%	$	(11,074	)		(35.0	)%
Increase (decrease) in:
Valuation allowances		3,179			33.3	)		6,353			37.2			12,564			39.7
Capital loss carryforward		(7,086	)		(74.2	)		—			—			—			—
Permanent differences		11			0.1			16			0.1			10			—
State and local taxes - net		556			5.8			(390	)		(2.3	)		(1,500	)		(4.7	)
Income tax (benefit) provision	$	—			—	%	$	—			—	%	$	—			—	%

The components of the net deferred tax assets (liabilities) are as follows:

	December 31,
	2012			2011
Deferred Tax Assets:
Investments	$	—		$	4,939
Film and television costs		—			672
Accounts receivable allowances		87			109
Net operating loss carryforwards		48,046			44,018
Capital loss carryforwards		2,428			4,575
Restricted stock/Stock options		—			1,923
Contributions		102			100
Deferred rent		—			187
Property and equipment		48			759
Gross deferred tax assets	$	50,711		$	57,282

Valuation allowance	$	(50,711	)	$	(57,282	)

Net deferred tax asset	$	—		$	—

A reconciliation of activity for the Company's deferred tax asset valuation allowance is provided as follows:

	Years Ended December 31,
		2012			2011		2010


Beginning balance		$	57,282		$	51,046	$	43,500
Additions (reductions) to provision			(6,571	)		6,236		10,490
Credit to accumulated other comprehensive loss			—			—		(2,944	)
		$	50,711		$	57,282	$	51,046

The expiration terms and amounts for which an allowance has been provided with respect to the loss and credit carryforwards reflected in the gross deferred tax assets above are comprised as follows:

Loss Carryforwards	Expiration		Gross Amount

Federal	2031		$	115,642
State and local		2016-2031		128,007

Capital Loss Carryforwards

Federal		2015	$	6,072
State and local		2015		6,072

The Company records U.S. taxes on undistributed earnings of subsidiaries to the extent such earnings are planned to be remitted and not permanently reinvested. On August 16, 2012, the Company's Board of Directors determined to discontinue the operations of its UK subsidiary, 4Kids International, effective September 30, 2012.

The Company has no unrecognized tax benefits recorded for the years ended December 31, 2012 and 2011.

When and if the Company were to recognize interest or penalties related to unrecognized tax benefits, they would be reported net of federal tax benefit in tax expense.

It is difficult to predict what would occur to change the Company's unrecognized tax benefits over the next twelve months. The Company believes, however, that there should be no change during the next twelve months.