9. INCOME TAXES:

The provision (benefit) for income taxes consisted of the following for the years ended December 31, 2012, 2011 and 2010 (in thousands):

	2012			2011		2010
Provision for income taxes - continuing operations	$	67,852		$	44,785	$	40,226
Provision for income taxes - discontinued operations	663			477		77
	$	68,515		$	45,262	$	40,303
Current:
Federal	$	56,106		$	678	$	1,263
State	4,095			1,055		596
	60,201			1,733		1,859
Deferred:
Federal	9,151			41,361		37,010
State	(837		)	2,168		1,434
	8,314			43,529		38,444
	$	68,515		$	45,262	$	40,303

The following is a reconciliation of federal income taxes at the applicable statutory rate to the recorded provision from continuing operations:

	2012		2011		2010
Federal statutory rate	35.0	%	35.0	%	35.0	%
Adjustments-
State income taxes, net of federal tax benefit	1.3	%	1.7	%	1.5	%
Non-deductible expenses	0.3	%	0.4	%	0.4	%
Basis in subsidiaries stock	—	%	—	%	(2.1	)%
Taxes on consolidated VIEs	(3.4	)%	(0.7	)%	(1.2	)%
Other	(1.2	)%	0.6	%	0.8	%
Effective income tax rate	32.0	%	37.0	%	34.4	%

We recorded a deferred tax benefit of $2.5 million during the year ended December 31, 2010 related to the recovery of historical losses attributable to the basis in stock of certain subsidiaries.

For the year ended December 31, 2012, the taxes on consolidated VIEs include a release of $7.7 million of valuation allowance related to certain deferred tax assets of Cunningham, one of our consolidated VIEs, as the weight of all available evidence supports realization of the deferred tax assets. This assessment was based primarily on the sufficiency of forecasted taxable income necessary to utilize net operating loss carryforwards expiring in years 2022 — 2029. This VIE files separate income tax returns. Any resulting tax liabilities are nonrecourse to us, and we are not entitled to any benefit resulting from the deferred tax assets of the VIE.

Temporary differences between the financial reporting carrying amounts and the tax bases of assets and liabilities give rise to deferred taxes. As of December 31, 2012 and 2011, total deferred tax assets and deferred tax liabilities, including those classified as held for sale of $1.3 million, as of December 31, 2012, were as follows (in thousands):

	2012			2011
Current and Long-Term Deferred Tax Assets:
Net operating and capital losses:
Federal	$	5,738		$	1,550
State	66,990			87,623
Broadcast licenses	29,170			18,087
Intangibles	5,871			5,390
Other	33,803			20,965
	141,572			133,615
Valuation allowance for deferred tax assets	(59,407		)	(79,136		)
Total deferred tax assets	$	82,165		$	54,479

Current and Long-Term Deferred Tax Liabilities:
Broadcast licenses	$	(13,090	)	$	(10,115	)
Intangibles	(216,505		)	(204,230		)
Property & equipment, net	(25,359		)	(24,877		)
Contingent interest obligations	(52,388		)	(52,298		)
Other	(10,213		)	(5,571		)
Total deferred tax liabilities	(317,555		)	(297,091		)
Net tax liabilities	$	(235,390	)	$	(242,612	)

Our remaining federal and state capital and net operating losses will expire during various years from 2013 to 2032.

As discussed in Note 1. Income taxes, we establish valuation allowances in accordance with the guidance related to accounting for income taxes. As of December 31, 2012, a valuation allowance has been provided for deferred tax assets related to a substantial portion of our available state net operating loss carryforwards, based on past operating results, expected timing of the reversals of existing temporary book/tax basis differences, alternative tax strategies and projected future taxable income. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that they will be realized in the future. During the year ended December 31, 2012, we decreased our valuation allowance by $19.7 million. The reduction in valuation allowance was primarily due to the settlement of several audits, which resulted in the utilization of certain state net operating loss carryforwards which were previously fully reserved, as well as due to changes in estimates of apportionment for certain states. During the year ended December 31, 2011, we increased our valuation allowance by $1.6 million, from $77.6 million, and during the year December 31, 2010, we increased our valuation allowance by $0.7 million, from $76.8 million. The change in valuation allowance was primarily due to the creation of additional state net operating loss carryforwards.

As of December 31, 2012 and 2011, we had $26.0 million and $26.1 million of gross unrecognized tax benefits, respectively. Of this total, for the years ended December 31, 2012 and 2011, $15.0 and $15.1 million respectively (net of federal effect on state tax issues) and $6.8 million for both years (net of federal effect on state tax issues) represent the amounts of unrecognized tax benefits that, if recognized, would favorably affect our effective tax rates from continuing operations and discontinued operations, respectively.

The following table summarizes the activity related to our accrued unrecognized tax benefits (in thousands):

	2012			2011			2010
Balance at January 1,	$	26,088		$	26,125		$	26,148
(Reductions) increases related to prior years tax position	(123		)	(127		)	(210		)
Increases related to current year tax positions	—			90			187
Reductions related to settlements with taxing authorities	—			—			—
Reductions related to expiration of the applicable statute of limitations	—			—			—
Balance at December 31,	$	25,965		$	26,088		$	26,125

In addition, we recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized $1.5 million, $1.3 million and $1.0 million of income tax expense for interest related to uncertain tax positions for the years ended December 31, 2012, 2011 and 2010, respectively.

Management periodically performs a comprehensive review of our tax positions and accrues amounts for tax contingencies. Based on these reviews, the status of ongoing audits and the expiration of applicable statute of limitations, these accruals are adjusted as necessary. Amounts accrued for these tax matters are included in the table above and long-term liabilities in our consolidated balance sheets. We believe that adequate accruals have been provided for all years.

We are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. All of our 2009 and subsequent federal and state tax returns remain subject to examination by various tax authorities. Some of our pre-2009 federal and state tax returns may also be subject to examination. In addition, our 2006 and 2007 federal tax returns are currently under audit, and several of our subsidiaries are currently under state examinations for various years. We do not anticipate the resolution of these matters will result in a material change to our consolidated financial statements. In addition, we believe it is reasonably possible that our liability for unrecognized tax benefits related to continuing and certain discontinued operations will be reduced by $1.2 million and $5.1 million, respectively, in the next twelve months as a result of expected statute of limitations expirations, the application of limits under available state administrative practice exceptions, and the resolution of examination issues and expected settlements with federal and certain state tax authorities.