Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

NOTE 20. Income Taxes

        The components of income tax expense/(benefit) from continuing operations reflected in the Consolidated Statements of Operations are set forth below for the years ended December 31:

(In thousands)	2011			2010			2009
Federal
Current	$	(1,494	)	$	3,209		$	19,831
Deferred		3,029			(10,985	)		(19,286	)
State and local
Current		(457	)		3,276			4,656
Deferred		1,129			(5,278	)		1,432
Foreign
Current		—			—			2
Deferred		—			—			122
Total income tax expense/(benefit) from continuing operations	$	2,207		$	(9,778	)	$	6,757

        A reconciliation of the U.S. federal statutory income tax rate to the Company's effective income tax rate is set forth below for the years ended December 31:

(In thousands)	2011			2010			2009
Federal statutory rate—35%	$	(21,657	)	$	(9,024	)	$	21,475
Goodwill impairment		24,172			—			—
Provision to return adjustments		(1,474	)		645			1,168
Gain on bargain purchase—ClearPoint acquisition		(816	)		—			—
State and local income taxes, net of federal income taxes		715			(1,797	)		4,569
Change in estimated state tax rates		530			281			1,431
Uncertain tax positions		334			(1,205	)		53
Meals and entertainment		222			250			269
Compensation		44			(565	)		780
(Decrease)/increase of deferred tax asset valuation allowance		—			—			(24,707	)
Series B Preferred Stock dividends		—			1,012			1,365
Loss on extinguishment of Series B Preferred Stock		—			563			—
Foreign income taxes		—			—			124
Other		137			62			230
Total income tax expense/(benefit) from continuing operations	$	2,207		$	(9,778	)	$	6,757

        The deferred tax assets and liabilities consisted of the following at December 31:

(In thousands)	2011			2010
Deferred tax assets, net
Stock-based compensation	$	17,259		$	28,780
Net operating loss carryforwards		9,733			8,113
Accrued liabilities		3,520			412
Investments		(2,252	)		(2,072	)
Uncertain tax positions		831			831
Fixed assets		732			1,252
Intangible assets		(645	)		(4,748	)
Deferred revenues		(33	)		293
Other		1,621			1,293
Total net deferred tax asset before valuation allowance		30,766			34,154
Less: valuation allowance		—			—
Total deferred tax assets, net of valuation allowance	$	30,766		$	34,154
Deferred tax liabilities
State effect of intangible assets	$	(363	)		(2,179	)
State effect of investments		(890	)		(984	)
Other		(369	)		(227	)
Total deferred tax liabilities	$	(1,622	)	$	(3,390	)

        No valuation allowance has been provided on the Company's DTAs as it is more likely than not that they will be realized. Such determination is based upon the Company's net cumulative income position, the Company's ability to carry back net operating losses, as well as the projection of future taxable income.

        However, if the Company does not generate sufficient taxable income in 2012, it is possible that the Company may be in a cumulative tax loss position and may need to re-evaluate the realizability of the deferred tax asset. If warranted, the establishment of a valuation allowance could be material, depending on its magnitude, in relation to the Company's operating results during the period in which it is recorded.

        In addition, a high concentration of the Company's deferred tax assets is attributable to stock-based compensation. To the extent that stock-based compensation vests at a share price less than the grant price, the related shortfall will first be applied against the cumulative windfall tax pool within additional paid-in capital, while any remaining shortfall (in excess of the cumulative windfall tax pool) will result in an increase in income tax expense.

        At December 31, 2011, the Company had federal net operating loss carryforwards of $24.0 million, which expire between 2023 and 2027. These net operating loss carryforwards have been reduced by the impact of an annual limitation described in the Internal Revenue Code Section 382. In general, the Internal Revenue Code Section 382 places an annual limitation on the use of certain tax attributes such as net operating losses. The annual limitation arose as a result of an ownership change which occurred on September 21, 2007. For state and local tax purposes, the Company's net operating loss carryforwards have expiration periods between 2 and 17 years and are also subject to various apportionment factors and limitations on utilization.

        The following table summarizes the activity related to the Company's unrecognized tax benefits:

(In thousands)
Balance—December 31, 2009	$	6,017
Decreases related to settlements		(2,198	)
Decreases related to expiration of statute of limitations		(503	)
Gross decreases related to prior year's tax positions		(165	)
Gross increases related to prior year's tax positions		122
Balance—December 31, 2010	$	3,273
Gross increases related to current year's tax positions		278
Balance—December 31, 2011	$	3,551

        The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate are $3.2 million. We currently anticipate that total unrecognized tax benefits will decrease by up to $2.7 million in the next twelve months, a portion of which will affect the effective tax rate, primarily as a result of the settlement of tax examinations.

        The Company recognizes interest and penalties as a component of income tax expense. During the years ended December 31, 2011, 2010 and 2009, the Company recognized $0.2 million, $0.3 million and $0.1 million, respectively, of interest expense as a component of income tax expense. The Company had approximately $0.4 million and $0.3 million for the payment of interest and penalties accrued at December 31, 2011 and 2010, respectively.

        The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state and local jurisdictions. As of December 31, 2011, with few exceptions, the Company and its subsidiaries were no longer subject to U.S. federal tax or state and local income tax examinations for years before 2006. The Company began an audit with New York City in December 2010 for the tax years 2006 through 2008.