Income Taxes

3 Months Ended

Mar. 29, 2012

Income Taxes

Income Taxes

(5)   Income Taxes

The provision for (benefit from) income taxes of $1.5 million and $(0.6) million for the quarters ended March 29, 2012 and March 31, 2011, respectively, reflect effective tax rates of approximately 38.5% and 40.0%, respectively.  The effective tax rates for the quarters ended March 29, 2012 and March 31, 2011 reflect the impact of certain non-deductible expenses.

In assessing the realizable value of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which these temporary differences become deductible. The Company maintains a valuation allowance against deferred tax assets of $2.6 million as of March 29, 2012 and December 29, 2011 as management believes it is more likely than not that certain deferred tax assets will not be realized in future tax periods. Future reductions in the valuation allowance associated with a change in management’s determination of the Company’s ability to realize these deferred tax assets will result in a decrease in the provision for income taxes.

The Company files income tax returns in the U.S. federal jurisdiction and certain state jurisdictions as part of the REG income tax filings and files separate income tax returns in various other state jurisdictions as well.  REG and the Company are no longer subject to U.S. federal income tax examinations by taxing authorities for years before 2008, and with limited exceptions, are no longer subject to state income tax examinations for years before 2007.  However, the taxing authorities still have the ability to review the propriety of tax attributes created in closed tax years if such tax attributes are utilized in an open tax year.

REG maintains an investment in National CineMedia, a pass-through entity for federal income tax purposes. The Internal Revenue Service is currently examining National CineMedia’s 2007 and 2008 income tax returns and has proposed an adjustment related to agreements entered into in conjunction with NCM Inc.’s IPO.  Management is currently evaluating the proposed adjustment but does not anticipate the adjustment would result in a material change to the Company’s results of operations or financial position. The Company believes it is reasonably possible that an increase in unrecognized tax benefits related to this position may be necessary within the next twelve months, however the amount of such unrecognized tax benefits is not reasonably estimable as of March 29, 2012.