Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
12 Months Ended
Dec. 31, 2013
Income Tax [Abstract]  
Income Taxes
Income Taxes

The consolidated income tax expense consists of the following for the years ended December 31:
 
2013
 
2012
 
2011
Current provision:
 
 
 
 
 
Federal
$
120,858

 
$
47,528

 
$
63,388

State and local
5,857

 
(4,368
)
 
5,157

Total current provision
126,715

 
43,160

 
68,545

Deferred provision
(19,635
)
 
4,252

 
2,142

Total provision for income taxes
$
107,080

 
$
47,412

 
$
70,687



The reconciliation of the tax provision at the U.S. Federal Statutory Rate to the provision for income taxes is as follows:
 
2013
 
2012
 
2011
Earnings from continuing operations, before income tax expense
$
268,917


$
122,791


$
188,350

Less flow through noncontrolling interest
960

 
(2,539
)
 
(2,855
)
Earnings from continuing operations, less noncontrolling interest, before income tax expense
267,957

 
125,330

 
191,205

 
 
 


 
 
Tax provision at the U.S. federal statutory rate
93,785

 
43,866

 
66,922

State income taxes, net of federal income tax benefit
2,871

 
(2,288
)
 
3,381

Nondeductible goodwill impairment

 
8,487

 

Nondeductible compensation
12,519

 
1,108

 
2,705

Other, net
(2,095
)
 
(3,761
)
 
(2,321
)
Income tax expense
$
107,080

 
$
47,412

 
$
70,687



The tax effects of temporary differences which give rise to deferred tax assets and liabilities are presented below for the years ended December 31:
 
2013
 
2012
Deferred tax assets:
 
 
 
Medical claims liability and other accruals
$
53,943

 
$
37,413

State net operating loss carry forward
9,530

 
9,055

Stock compensation
14,223

 
12,615

Other
30,199

 
20,573

Deferred tax assets
107,895

 
79,656

Valuation allowance
(8,119
)
 
(8,180
)
Net deferred tax assets
$
99,776

 
$
71,476

 
 
 
 
Deferred tax liabilities:
 
 
 
Intangible assets
$
18,278

 
$
12,441

Prepaid assets
5,621

 
4,767

Depreciation and amortization
30,411

 
31,741

Other
1,615

 
5,624

Deferred tax liabilities
$
55,925

 
$
54,573

 
 
 
 
Net deferred tax assets
$
43,851

 
$
16,903



The Company's deferred tax assets include federal and state net operating losses, or NOLs, of which $6,547 were acquired in business combinations. Accordingly, the total and annual deduction for those NOLs is limited by tax law. The Company's federal NOLs expire between the years 2020 and 2032 and the state NOLs expire between the years 2014 and 2034. Valuation allowances are recorded for those NOLs the Company believes are more likely than not to expire unused. During 2013 and 2012, the Company recorded valuation allowance additions in the tax provision of $1,301 and $2,093, respectively. In 2013 and 2012, the Company recorded valuation allowance reductions of $1,362 and $2,289, respectively.

The Company maintains a reserve for uncertain tax positions that may be challenged by a tax authority. A roll-forward of the reserve is as follows:
 
2013
 
2012
Gross unrecognized tax benefits, beginning of period
$
7,870

 
$
13,552

Gross increases:
 
 
 
Current year tax positions
338

 
4,107

Prior year tax positions
164

 
451

Gross decreases:
 
 
 
Prior year tax positions

 
(9,925
)
Settlements
(4,390
)
 
(53
)
Statute of limitation lapses
(708
)
 
(262
)
Gross unrecognized tax benefits, end of period
$
3,274

 
$
7,870


                                
Included in the balance of unrecognized tax benefits at December 31, 2013 and 2012 were reserve balances of $3,274 and $4,095, respectively, that, if recognized, would decrease the effective tax rate on income from continuing operations. Also included in the December 31, 2012 reserve balance were liabilities of $3,775 that, if recognized, would have been recorded as an adjustment to deferred taxes.

The Company recognizes interest accrued related to unrecognized tax benefits in the provision for income taxes. During the year ended December 31, 2013 and 2012, the Company recognized tax benefits generated from the net reduction in interest accrued of $310 and $170, respectively. Interest accrued, net of federal benefit, was $623, $933 and $1,157 as of December 31, 2013, 2012 and 2011, respectively. No penalties have been accrued.

During 2013, the IRS concluded its examination of the Company's 2010 and 2011 federal tax returns. The Company files in numerous state jurisdictions with varying statutes of limitation. The unrecognized state tax benefits are related to returns open from 2009 to 2013.