Note 4. Income Taxes

Following are the income tax provisions and effective tax rates for the three and nine months ended September 30, 2012 and 2011 (dollars in thousands):

The decrease in the effective tax rate during 2012 as compared to the same period of 2011 was due primarily to a decrease in our effective state tax rate. The effective tax rates differ from the statutory U.S. federal income tax rate of 35.0% due primarily to state income taxes.

Our accounting policy is to include interest and penalties related to income tax liabilities in income tax expense. As of September 30, 2012, we did not have any estimated interest and penalties related to uncertain tax positions.

The tax years 2007 to 2011 remain open to examination by the major taxing jurisdictions to which we are subject. The statute of limitations for tax years 1997 to 2006 has expired, except that the tax years 1997 to 2002 are subject to adjustment of net operating losses by the Internal Revenue Service. We are subject to taxation in the United States and various state jurisdictions. A state examination has been initiated for one of our subsidiaries. The outcome of such examination cannot be predicted with certainty; however, we believe that the ultimate resolution will not have a material effect on our financial position, results of operations or cash flows.

We make our best estimate of the tax rate expected to be applicable for the full fiscal year. The rate so determined is used to compute our income tax expense for an interim period.