Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
INCOME TAXES
 
Income tax provision (benefit) included in our reported net loss consisted of the following (in thousands): 
 
 
Year Ended December 31,
 
 
2011
 
2010
 
2009
Current:
 
 
 
 
 
 
Federal
 
$
—

 
$
—

 
$
—

State
 
—

 
—

 
—

Foreign
 
277

 
—

 
—

Total current
 
277

 
—

 
—

 
 
 
 
 
 
 
Deferred:
 
 
 
 
 
 
Federal
 
$
—

 
$
—

 
$
—

State
 
—

 
—

 
—

Foreign
 
(117
)
 
—

 
—

Total deferred
 
(117
)
 
—

 
—

 
 
 
 
 
 
 
Total income tax provision (benefit)
 
$
160

 
$
—

 
$
—


 
The reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows: 
 
 
Year Ended December 31,
 
 
2011
 
2010 (1)
 
2009 (1)
U.S. statutory tax rate
 
(35.0
)%
 
(35.0
)%
 
(35.0
)%
State tax benefit (net of federal benefits)
 
(6.2
)%
 
(9.2
)%
 
(7.1
)%
Foreign income tax provision
 
—
 %
 
—
 %
 
—
 %
Deferred tax asset valuation reserve
 
42.1
 %
 
26.0
 %
 
42.6
 %
Loss on early extinguishment of debt
 
—
 %
 
17.8
 %
 
—
 %
Other
 
(0.9
)%
 
0.4
 %
 
(0.5
)%
Effective tax rate as reported
 
—
 %
 
—
 %
 
—
 %
 
 
 
 
 
(1)    We have made certain changes in the classification and presentation of certain items. These changes do not affect the
disclosed effective tax rate.

Significant components of our deferred tax assets and liabilities at December 31, 2011 and 2010 are as follows (in thousands): 
 
 
Year Ended December 31,
 
 
2011
 
2010
Deferred tax assets
 
 
 
(As Adjusted (1))
Net operating loss carryforwards (2)
 
 
 
 
Federal
 
$
365,811

 
$
276,415

State
 
49,847

 
37,485

Capital gains
 
81,388

 
81,388

Share-based compensation expense
 
4,165

 
6,918

United Kingdom deferred tax assets
 
117

 
—

Other
 
19,565

 
7,290

Total deferred tax assets
 
$
520,893

 
$
409,496

 
 
 
 
 
Deferred tax liabilities
 
 

 
 

Investment in limited partnership
 
$
(79,281
)
 
$
(43,425
)
Other
 
(4,856
)
 
(12,952
)
Total deferred tax liabilities
 
$
(84,137
)
 
$
(56,377
)
 
 
 
 
 
Net deferred tax assets
 
436,756

 
353,119

Less: net deferred tax asset valuation allowance (3)
 
(436,639
)
 
(353,119
)
 
 
$
117

 
$
—

 
(1)
We have made changes to the disclosed 2010 share-based compensation gross deferred tax asset and the disclosed 2010 investment in limited partnership gross deferred tax liability, which had a corresponding change in the 2010 valuation allowance. These changes do not affect the 2010 disclosed net deferred tax asset.
(2)
The federal net operating loss ("NOL") carryforward expires between 2017 and 2031. The state NOL carryforward expires between 2020 and 2026.
 (3)     A valuation allowance equal to our U.S. and state net deferred tax asset balance has been established due to the uncertainty of realizing the tax benefits related to our U.S. and state net deferred tax assets. The change in the U.S. and state deferred tax asset valuation allowance is $83.5 million and $33.4 million for the years ended December 31, 2011 and 2010, respectively.

Changes in the balance of unrecognized tax benefits are as follows (in thousands): 
Balance as January 1, 2011
$
20,969

Additions based on tax positions related to current year
115,073

Additions for tax positions of prior years
—

Reductions for tax positions of prior years
(693
)
Settlements
—

Balance at December 31, 2011
$
135,349

 
At December 31, 2011, the amount of unrecognized tax benefits related to our federal NOL carryforward associated with uncertain tax positions was $135.3 million. Our effective tax rate would not be affected if the unrecognized federal tax benefits provided above were recognized. Currently, we do not recognize any accrued liabilities, interest and penalties associated with the unrecognized tax benefits provided above in our Consolidated Statements of Operations or our Consolidated Balance Sheets. We record interest and penalties related to unrecognized tax benefits to our income tax provision.
During the third quarter of 2010, largely due to the increased level of trading activity in our shares, we experienced an ownership change within the provisions of Internal Revenue Code Section 382 (“Section 382”) that will subject approximately $855 million of our existing federal NOL carryforwards to an annual NOL utilization limitation.  The applicable Section 382 limitation may affect our ability to fully utilize approximately $855 million of our existing federal NOL carryforward.  Our ability to fully utilize our existing federal NOL carryforward is dependent on the amount of any net unrealized built in gains on the ownership change date and increasing the recognition of built-in gains in the five-year period following the above-referenced ownership change. We will continue to monitor trading activity in our shares which may cause an additional ownership change which may ultimately affect our ability to fully utilize our existing federal NOL carryforward.

We currently file tax returns in the U.S. federal jurisdiction, the United Kingdom and various state and local jurisdictions. We are no longer subject to U.S. federal, state or local income tax examinations by tax authorities for tax years prior to 2008. The Louisiana Department of Revenue is currently examining our 2007 through 2009 income tax returns.

In 2011, we generated a federal NOL of $595.4 million which is expected to be carried forward and applied against regular taxable income in future periods. Accounting for share-based compensation provides that when settlement of a share-based award contributes to an NOL carryforward, neither of the associated excess tax benefits nor the credit to additional paid-in-capital ("APIC") should be recorded until the share-based award deduction reduces income tax payable. Upon utilization of the loss in future periods, a benefit of $21.2 million will be reflected in APIC.