Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

11. Income Taxes

Total income taxes expense (benefit) for the years ended December 31, 2012, 2011 and 2010 was included within the following sections of the consolidated financial statements as follows (in thousands):

		2012		2011		2010
Income from continuing operations		$	42,627	$	35,254	$	32,991
Discontinued operations			1,311		2,751		207
Shareholders’ equity			(1,581)		(649)		(71)
Other comprehensive income			-		332		860
	Total	$	42,357	$	37,688	$	33,987

Income tax expense from continuing operations for the years ended December 31, 2012, 2011 and 2010 was comprised of the following (in thousands):

		2012		2011		2010
Current:
	Federal	$	15,313	$	11,643	$	10,959
	State		4,971		3,534		3,263
Deferred:
	Federal		19,135		17,693		16,422
	State		3,208		2,384		2,347
	Income tax expense	$	42,627	$	35,254	$	32,991

Income tax expense from continuing operations for the years ended December 31, 2012, 2011 and 2010 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):

		2012		2011		2010
Statutory federal income tax		$	92,741	$	78,514	$	73,397
Less federal income tax assumed directly by noncontrolling interests			(55,916)		(48,607)		(44,351)
State income taxes, net of federal income tax benefit			5,309		3,629		3,470
Increase in valuation allowances			419		1,622		441
Interest related to unrecognized tax benefits			(109)		(83)		(151)
Other			183		179		185
	Income tax expense	$	42,627	$	35,254	$	32,991

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Decreases in interest obligations of $132,000, $109,000 and $191,000 were recognized in the consolidated statement of earnings for the years ended December 31, 2012, 2011 and 2010, respectively, resulting in a total recognition of interest obligations of approximately $1,132,000 and $1,264,000 in the consolidated balance sheet at December 31, 2012 and 2011, 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, 2012, 2011 and 2010 is as follows (in thousands):

		2012		2011		2010
Balance at beginning of year		$	7,252	$	7,144	$	6,766
Additions for tax positions of current year			119		342		378
Increases (decreases) for tax positions taken during a prior period			1,985		(190)		-
Lapse of statute of limitations			(121)		(44)		-
	Balance at end of year	$	9,235	$	7,252	$	7,144

The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits will increase $188,000 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, 2012 and 2011 were as follows (in thousands):

			2012		2011
Deferred tax assets:
	Allowance for uncollectible accounts		$	884	$	841
	Accrued assets and other			5,212		3,562
	Valuation allowances			(2,084)		(1,491)
		Total current deferred tax assets		4,012		2,912
	Share-based compensation			9,500		9,138
	Interest on unrecognized tax benefits			363		456
	Accrued liabilities and other			3,077		2,951
	Operating and capital loss carryforwards			9,169		7,624
	Valuation allowances			(7,265)		(6,133)
		Total non-current deferred tax assets		14,844		14,036
		Total deferred tax assets		18,856		16,948
Deferred tax liabilities:
	Prepaid expenses			925		783
	Property and equipment, principally due to differences in depreciation			3,997		4,143
	Goodwill, principally due to differences in amortization			148,494		124,060
		Total deferred tax liabilities		153,416		128,986
		Net deferred tax liabilities	$	134,560	$	112,038

The net deferred tax liabilities at December 31, 2012 and 2011were recorded as follows (in thousands):

		2012		2011
Current deferred income tax assets		$	3,088	$	2,129
Non-current deferred income tax liabilities			137,648		114,167
	Net deferred tax liabilities	$	134,560	$	112,038

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.