NOTE 18. Income Taxes

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

(In thousands)	2013			2012			2011

Federal
Current	$	(485	)	$	(5,570	)	$	(5,539	)
Deferred		—			19,174			(568	)
State and local
Current		(597	)		(635	)		(1,193	)
Deferred		—			9,971			(122	)


Total income tax (benefit)/expense from continuing operations	$	(1,082	)	$	22,940		$	(7,422	)

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

(In thousands)	2013			2012			2011

Federal statutory rate—35%	$	(9,663	)	$	(9,452	)	$	(6,710	)
Increase in deferred tax asset valuation allowance		12,664			35,299			—
State and local income taxes, net of federal income taxes		(3,001	)		(2,935	)		(1,443	)
Expiration of statute of limitations		(608	)		—			—
Provision to return adjustments		(486	)		(274	)		530
Change in estimated state tax rates		—			—			(181	)
Uncertain tax positions		—			281			96
Other		12			21			286


Total income tax (benefit)/expense from continuing operations	$	(1,082	)	$	22,940		$	(7,422	)

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

(In thousands)	2013			2012

Deferred tax assets, net
Net operating loss carryforwards ("NOLs")	$	72,996		$	22,089
Compensation		5,007			12,061
Accrued liabilities		1,143			2,230
Investments		(4,050	)		(3,782	)
Uncertain tax positions		831			831
Fixed assets		—			(337	)
Intangible assets		—			(823	)
Deferred revenues		—			92
Other		417			1,323


Total net deferred tax asset before valuation allowance		76,344			33,684
Less: valuation allowance		(76,344	)		(33,684	)


Total deferred tax assets, net of valuation allowance	$	—		$	—

During the year ended December 31, 2012, the Company established a valuation allowance against its deferred tax assets. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence can be objectively verified. GAAP states that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome in determining that a valuation allowance is not needed against deferred tax assets. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses.

The Company entered a three-year cumulative loss position during the year ended December 31, 2012. This cumulative loss position, along with other evidence, merited the establishment of a valuation allowance against the deferred tax assets. A sustained period of profitability is required before the Company would change its judgment regarding the need for a valuation allowance against its net deferred tax assets.

At December 31, 2013, the Company had pre-tax net operating loss carryforwards of approximately $159 million, which expire between 2023 and 2033. These net operating loss carryforwards have been reduced by the impact of an annual limitation described in the Internal Revenue Code ("IRC") Section 382. In general, the IRC 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 1 and 20 years and are also subject to various apportionment factors and limitations on utilization. In the event that the Company experiences an ownership change under IRC Section 382, the Company's NOLs would be fully impaired (reduced nearly to zero). Absent an ownership change, including in the event of a dissolution, the Company's NOLs would be available to offset any income it may recognize, if any.

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

(In thousands)

Balance—December 31, 2011	$	3,551
Decreases related to settlements		(184	)
Decreases related to expiration of statute of limitations		(133	)
Gross increases related to current year's tax positions		285


Balance—December 31, 2012	$	3,519
Decreases related to expiration of statute of limitations		(671	)


Balance—December 31, 2013	$	2,848

The total amount of unrecognized tax benefits that, if recognized, would impact either the effective tax rate or discontinued operations is $2.3 million. We currently anticipate that total unrecognized tax benefits will decrease by up to $2.1 million in the next twelve months, 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, 2013, 2012 and 2011, the Company recognized $0.4 million, $0.4 million and $0.2 million, respectively, of interest expense as a component of income tax expense. The Company had approximately $1.0 million and $0.7 million for the payment of interest and penalties accrued at December 31, 2013 and 2012, respectively.

The Company is subject to U.S. federal income tax as well as income tax of multiple state and local jurisdictions. As of December 31, 2013, with few exceptions, the Company was no longer subject to U.S. federal tax or state and local income tax examinations for years before 2008. The Company began audits with the Internal Revenue Service in 2013 and New York State in 2012.