|12 Months Ended|
Dec. 31, 2011
|Income Taxes [Abstract]|
7. Income Taxes
Income tax provision (benefit) consists of the following:
The actual income tax provision (benefit) differs from the amount computed using the federal statutory rate as follows:
The components of the deferred income tax assets are as follows:
At December 31, 2011, the Company had federal and state tax net operating loss carryforwards of approximately $21,791 and $14,317, respectively. These amounts include share-based compensation for federal and state of $6,919 and $1,891, that will be recorded to contributed capital when realized. The federal and state tax loss carryforwards will begin to expire in 2026 and 2018, respectively, unless previously utilized.
At December 31, 2011, the Company had federal and state tax credit carryforwards of approximately $5,208 and $5,163, respectively. The federal tax credit carryforward will begin to expire in 2024, unless previously utilized. The state tax credits do not expire. In addition, the Company has federal alternative minimum tax credit carryforwards of $227 that can be carried forward indefinitely.
The Company has not provided for U.S. income and foreign withholding taxes on undistributed earnings from non-U.S. subsidiaries as these earnings are indefinitely invested outside the U.S. It is not practicable for the Company to determine the total amount of unrecognized deferred U.S. income tax liability.
Pursuant to Internal Revenue Code Section 382 and 383, use of the Company's net operating loss and credit carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has had two changes of ownership in April and November of 2004 resulting in an annual net operating loss and credit limitation. The annual limitations will not cause a loss of net operating loss or credit carryforwards. Additional limitations on the use of these tax attributes could occur in the event of possible disputes arising in examinations from various taxing authorities. Currently, the Company's 2008 and 2009 tax returns are under examination by the California Franchise Tax Board.
The Company evaluated its net deferred income taxes, which included an assessment of the cumulative income or loss over the prior three-year period and future periods, to determine if a valuation allowance is required. After considering its recent history of losses and management's expectations of additional near-term losses, the Company recorded a valuation allowance on its net federal deferred tax assets, with a corresponding charge to its income tax provision of approximately $6.7 million during 2011. In addition, the Company continues to maintain a valuation allowance to offset the California deferred tax assets as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines. The Company will continue to assess the need for a valuation allowance on the deferred tax assets by evaluating positive and negative evidence that may exist.
At December 31, 2011, the Company's unrecognized tax benefits totaled $3,020, $2,308 ,of which, if recognized at a time when the valuation allowance no longer exists, would affect the effective tax rate. The Company will recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. At December 31, 2011, the Company had no accrual for interest and penalties. The Company does not expect any significant increases or decreases to its unrecognized tax benefits within twelve months.
The following table summarizes the changes to the unrecognized tax benefits during 2011, 2010 and 2009:
The Company is subject to federal and California income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions. At December 31, 2011, the Company is no longer subject to federal, California or Chinese income tax examinations for the years before 2008, 2007 and 2008, respectively. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward amount.
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