Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes [Abstract]  
Income Tax Disclosure [Text Block]
INCOME TAXES
The components of domestic and foreign income before income taxes as of December 31, 2009, 2010 and 2011, are as follows: 
 
2009
 
2010
 
2011
Domestic
$
22,702,229

 
$
36,854,815

 
$
44,569,161

Foreign
4,154,533

 
4,056,936

 
924,531

 
$
26,856,762

 
$
40,911,751

 
$
45,493,692


The income tax provision for the years ended December 31, 2009, 2010 and 2011 is as follows: 
 
2009
 
2010
 
2011
Current:
 

 
 

 
 

   Federal
$
(1,415,107
)
 
$
10,305,627

 
$
(10,122,674
)
   State
548,246

 
1,640,500

 
(223,869
)
   Foreign
4,146,311

 
280,064

 
(277,157
)
 
3,279,450

 
12,226,191

 
(10,623,700
)
Deferred:
 

 
 

 
 

   Federal
7,095,001

 
(741,160
)
 
18,724,198

   State
587,252

 
(368,604
)
 
1,826,239

   Foreign
(4,012,089
)
 
1,069,208

 
840,435

 
3,670,164

 
(40,556
)
 
21,390,872

 
$
6,949,614

 
$
12,185,635

 
$
10,767,172

 
The Company's deferred income tax assets and liabilities result primarily from temporary differences between financial reporting and tax recognition of depreciation, reserves, and certain accrued liabilities. Deferred income tax assets and liabilities at December 31, 2010 and 2011 consist of the following:
 
 
2010
 
2011
Deferred income tax assets:
 

 
 

   Compensation accruals
$
2,230,154

 
$
1,710,319

   Reserves
2,974,387

 
2,296,691

   Other accruals
2,251,753

 
541,408

   Net operating losses
411,206

 
334,033

   Interest rate swaps
1,426,162

 
2,601,154

   Credits
614,578

 
3,434,973

Gross deferred income tax assets
9,908,240

 
10,918,578

Valuation allowance
—

 
(2,869,637
)
Total deferred income tax assets
$
9,908,240

 
$
8,048,941

Deferred income tax liabilities:
 

 
 

   Depreciation
$
(9,044,625
)
 
$
(27,787,503
)
   Contract refinancing
(975,039
)
 
(1,029,451
)
   Canada
(1,407,643
)
 
(2,248,078
)
   Acquisition accounting
(586,492
)
 
(480,341
)
Total deferred income tax liabilities
(12,013,799
)
 
(31,545,373
)
Deferred income tax assets and liabilities, net
$
(2,105,559
)
 
$
(23,496,432
)
 
The Company recorded a valuation allowance in the amount of $2,869,637 related to the following items. The Company recorded a deferred tax asset relating to interest rate swaps in the amount of $2,601,154 as of December 31, 2011. The deferred tax asset represents a future capital loss which can only be recognized for income tax purposes to the extent of capital gain income.  Although the Company anticipates sufficient future taxable income, it is more likely than not, it will not be of the appropriate character to allow for the recognition of the future capital loss. The Company recorded a deferred tax asset relating to a state net operating loss of $268,483 at one of its subsidiaries. It is more likely than not that the Company will not generate sufficient taxable income at the subsidiary level to utilize the net operating loss.

The provision for income taxes is based on the various rates set by federal and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements. The following is a reconciliation of the effective tax rates for 2009, 2010 and 2011: 
 
2009
 
2010
 
2011
Income before income tax
$
26,856,762

 
$
40,911,751

 
$
45,493,692

 
 
 
 
 
 
Federal statutory tax expense
$
9,399,917

 
$
14,319,113

 
$
15,922,792

State income taxes, net of federal benefit
1,259,719

 
1,271,896

 
1,602,370

Net state impact of deferred rate change
(997,011
)
 
—

 
(259,339
)
Meals and entertainment
88,798

 
99,128

 
115,629

Stock-based compensation expense
459,439

 
12,132

 
240,557

Energy efficiency preferences
(2,973,669
)
 
(4,246,589
)
 
(6,247,283
)
Foreign items and rate differential
(413,467
)
 
(70,656
)
 
239,692

Other state benefits
(309,752
)
 
—

 
—

Miscellaneous
435,640

 
800,611

 
(847,246
)
 
$
6,949,614

 
$
12,185,635

 
$
10,767,172

 
 
 
2009
 
2010
 
2011
Effective tax rate:
 
 
 
 

 
 

Federal statutory rate expense
 
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal benefit
 
4.7
 %
 
3.1
 %
 
3.5
 %
Net state impact of deferred rate change
 
(3.7
)%
 
—
 %
 
(0.6
)%
Meals and entertainment
 
0.3
 %
 
0.3
 %
 
0.3
 %
Stock-based compensation expense
 
1.7
 %
 
—
 %
 
0.5
 %
Energy efficiency preferences
 
(11.1
)%
 
(10.4
)%
 
(13.7
)%
Foreign items and rate differential
 
(1.5
)%
 
(0.2
)%
 
0.5
 %
Other state benefits
 
(1.2
)%
 
—
 %
 
—
 %
Miscellaneous
 
1.6
 %
 
2.0
 %
 
(1.8
)%
 
 
25.8
 %
 
29.8
 %
 
23.7
 %
 
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits for the years ended December 31, 2010 and 2011 is as follows:
 
 
2010
 
2011
Balance, beginning of year
 
$
4,400,000

 
$
8,100,000

Additions for prior year tax positions
 
3,800,000

 
100,000

Settlements paid to tax authorities
 
—

 
—

Reductions of prior year tax positions
 
(100,000
)
 
(6,800,000
)
Balance, end of year
 
$
8,100,000

 
$
1,400,000

 At December 31, 2010 and 2011, the Company had approximately $8,100,000 and $1,400,000, respectively, of total gross unrecognized tax benefits. The current year reduction in unrecognized tax benefits relates primarily to a change in accounting method which qualified for automatic consent. Of the total gross unrecognized tax benefits as of December 31, 2010 and 2011, $1,800,000 and $600,000, respectively, (both net of the federal benefit on state amounts) represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.
At December 31, 2011 the Company had Federal and state net operating loss carryforwards of approximately $21,100,000 and $8,900,000, respectively, which will expire from 2014 through 2031. The portion of the Federal and state net operating loss relating to excess stock option deductions are approximately $20,900,000 and $8,900,000 respectively, the tax benefit of which will be recorded as an adjustment to additional paid in capital when realized.

The tax years 2007 through 2011 remain open to examination by major taxing jurisdictions. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal and state income taxes.