Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

11. Income Taxes

Total income taxes expense (benefit) for the years ended December 31, 2011, 2010 and 2009 was included within the following sections of the consolidated financial statements as follows (in thousands):

		2011		2010		2009
Income from continuing operations		$	35,841	$	33,791	$	34,347
Discontinued operations			2,164		(593)		1,627
Shareholders’ equity			(649)		(71)		(2)
Other comprehensive income			332		860		646
	Total	$	37,688	$	33,987	$	36,618

Income tax expense from continuing operations for the years ended December 31, 2011, 2010 and 2009 was comprised of the following (in thousands):

		2011		2010		2009
Current:
	Federal	$	11,809	$	11,233	$	16,409
	State		3,573		3,327		4,291
Deferred:
	Federal		17,976		16,402		11,552
	State		2,483		2,829		2,095
	Income tax expense	$	35,841	$	33,791	$	34,347

Income tax expense from continuing operations for the years ended December 31, 2011, 2010 and 2009 differed from the amount computed by applying the U.S. federal income tax rate of 35% to earnings before income taxes as a result of the following (in thousands):

		2011		2010		2009
Statutory federal income tax		$	79,486	$	74,655	$	73,830
Less federal income tax assumed directly by noncontrolling interests			(49,021)		(44,927)		(44,049)
State income taxes, net of federal income tax benefit			3,755		4,048		4,127
Increase in valuation allowances			1,563		222		327
Interest related to unrecognized tax benefits			(83)		(151)		2
Other			141		(56)		110
	Income tax expense	$	35,841	$	33,791	$	34,347

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Increases and (decreases) in interest obligations of $(109,000), $(191,000) and $18,000 were recognized in the consolidated statement of earnings for the years ended December 31, 2011, 2010 and 2009, respectively, resulting in a total recognition of interest obligations of approximately $1,264,000 and $1,373,000 in the consolidated balance sheet at December 31, 2011 and 2010, respectively. No amounts for penalties have been recorded.

The Company primarily has unrecognized tax benefits that represent an amortization deduction which is temporary in nature. A reconciliation of the beginning and ending amount of the liability associated with unrecognized tax benefits for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands):

		2011		2010		2009
Balance at beginning of year		$	7,144	$	6,766	$	6,190
Additions for tax positions of current year			342		378		576
Decreases for tax positions taken during a prior period			(190)		-		-
Lapse of statute of limitations			(44)		-		-
	Balance at end of year	$	7,252	$	7,144	$	6,766

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will increase $78,000 within the next 12 months due to continued amortization deductions. The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized is approximately $150,000.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2011 and 2010 were as follows (in thousands):

			2011		2010
Deferred tax assets:
	Allowance for uncollectible accounts		$	841	$	1,315
	Accrued assets and other			3,562		1,800
	Valuation allowances			(1,491)		(925)
		Total current deferred tax assets		2,912		2,190
	Share-based compensation			9,138		8,945
	Interest on unrecognized tax benefits			456		533
	Accrued liabilities and other			2,951		2,242
	Operating and capital loss carryforwards			7,624		4,155
	Valuation allowances			(6,133)		(4,045)
		Total non-current deferred tax assets		14,036		11,830
		Total deferred tax assets		16,948		14,020
Deferred tax liabilities:
	Prepaid expenses			783		681
	Property and equipment, principally due to differences in depreciation			4,143		2,255
	Goodwill, principally due to differences in amortization			124,060		99,664
		Total deferred tax liabilities		128,986		102,600
		Net deferred tax liabilities	$	112,038	$	88,580

The net deferred tax liabilities at December 31, 2011 and 2010 were recorded as follows (in thousands):

		2011		2010
Current deferred income tax assets		$	2,129	$	1,509
Non-current deferred income tax liabilities			114,167		90,089
	Net deferred tax liabilities	$	112,038	$	88,580

The Company has provided valuation allowances on its gross deferred tax assets to the extent that management does not believe that it is more likely than not that such asset will be realized. Capital loss carryforwards will begin to expire in 2013, and state net operating losses will begin to expire in 2015.