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12. Income Taxes
Our anticipated annual effective tax rate before discrete events of approximately 35.2% has been applied to our consolidated pre-tax income for the three month period ended June 30, 2012. Our anticipated annual effective tax rate after discrete events of approximately 35.5% differs from the tax rate before the discrete event due to the additional accrued interest and penalties recorded on uncertain tax positions (discussed below). Our anticipated annual effective tax rate was different than the U.S. federal statutory rate primarily due to state taxes, a difference in rates between the U.S. and foreign jurisdictions, and certain permanent differences, such as nondeductible meals and entertainment and compensation expenses. For the three months ended June 30, 2011, the Company’s provision for income taxes reflects an effective benefit rate before discrete events of approximately 35.2% and an after discrete event benefit rate of 36.8%. The effective tax rate was higher than the U.S. statutory rate due to state taxes, a difference in rates between the U.S. and foreign jurisdictions, and certain permanent differences, such as nondeductible compensation expenses. For the three month periods ended June 30, 2012 and 2011, the Company recorded tax expense (benefit) of $3,634 and $(2,889) on pre-tax income (loss) of $10,234 and $(7,855), respectively.
As of June 30, 2012, we have established a long-term liability for uncertain tax positions in the amount of $1,307 and have recognized no material adjustments to the liability recorded as of March 31, 2012. All of our unrecognized tax benefits at June 30, 2012 would affect our effective income tax rate if recognized, though the Company does not expect to recognize any tax benefits in the next twelve months. The Company recognizes related accrued interest and penalties as income tax expense and has accrued $33 for the three months ending June 30, 2012, resulting in a cumulative total accrual of $235.
Tax years 2007 through 2010 generally remain open to examination by the major taxing jurisdictions to which we are subject. The Company’s U.S. federal income tax returns are under exam for the Predecessor’s tax years ending April 30, 2010 and March 31, 2010, and as of June 30, 2012 no adjustments have been proposed. The Company’s Canadian federal income tax returns are under exam for the Predecessor’s tax years ending March 31, 2008, 2009 and 2010. See Note 10, “Commitments and Contingencies”.
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