|12 Months Ended|
Dec. 31, 2011
|Income Taxes [Abstract]|
5. Income Taxes
The Company accounts for income taxes using the liability method. Under the liability method, deferred taxes are determined based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax laws that will be in effect when the differences are expected to reverse.
Significant components of the Company's deferred tax assets and liabilities as of December 31, 2011 and 2010 were as follows:
Based on the Company's historical pattern of taxable income, the Company believes it will produce sufficient income in the future to realize its deferred income tax assets. Management provides a valuation allowance for any net deferred tax assets when it is more likely than not that a portion of such net deferred tax assets will not be recovered. Management established a valuation allowance during 2008 purchase accounting related to the tax net operating losses acquired in a stock acquisition in 2008. The acquired Company had state tax net operating losses of approximately $65.5 million which will fully expire by 2029. The acquired Company has two providers, one of which has generated cumulative income over the last three years and has shown increased profits. Management expects to continue to generate net revenue for this provider and therefore, the entire valuation allowance was released in the current year.
The components of the Company's income tax expense (benefit) from continuing operations, less noncontrolling interest, were as follows:
The above table does not include a deferred tax asset adjustment related to state income tax on the settlement. The amount of this adjustment is $214,000 and did not affect income tax expense for the year.
A reconciliation of the differences between income taxes expense on net income attributable to LHC Group, Inc., computed at the federal statutory rate and provisions for income taxes for each period is as follows:
The Company is subject to both federal and state income tax for jurisdictions within which it operates. Within these jurisdictions, the Company is open to examination for tax years ended after December 31, 2008.
As of December 31, 2011, $3.4 million was recorded in income tax payable as an unrecognized tax benefit which, if recognized, would decrease our effective tax rate. A reconciliation of the total amounts of unrecognized tax benefits follows:
The Company recognizes interest and penalties related to uncertain tax positions in interest expense and general and administrative expenses, respectively. During the years ended December 31, 2011, 2010 and 2009, the Company did not recognize any interest or penalties in its consolidated financial statements, nor has it recorded an accrued liability of interest or penalty payments related to uncertain tax positions.
The unrecognized tax benefit relates to the settlement with the United States of America. See Note 10 to these consolidated financial statements.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef