Income Taxes (Note)
|12 Months Ended|
Dec. 31, 2014
|Income Tax Disclosure [Abstract]|
The domestic and international components of loss before provision (benefit) from income taxes are presented as follows:
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, 2014, the Company had federal and state tax net operating loss carryforwards of approximately $36.2 million and $31.0 million, respectively. Included in the federal loss carryover is approximately $3.9 million of net operating loss carryover acquired in the Physpeed acquisition. These amounts include share-based compensation for federal and state of $11.7 million and $3.8 million, 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, 2014, the Company had federal and state tax credit carryforwards of approximately $10.4 million and $11.0 million, 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 $0.2 million that can be carried forward indefinitely.
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.
A future change of ownership may cause a limitation on the utilization of net operating loss or credit carryforwards.
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. During 2014, 2013 and 2012, the Company maintained a valuation allowance against all of its federal and state 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. The change in valuation allowance during 2014 related to operations was $3.1 million. Additionally, the Company completed the acquisition of Physpeed in the fourth quarter. As a result of the acquisition, there was a valuation allowance release resulting in a tax benefit of $2.3 million due to the purchase accounting adjustment for the net deferred tax liability acquired, which can be used as a future source of income to offset the existing deferred tax assets. The acquired deferred tax liability will reverse within the net operating loss carryover period.
At December 31, 2014, the Company’s unrecognized tax benefits totaled $10.8 million, $8.9 million 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, 2014, the Company had accrued approximately $0.1 million of 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 2014, 2013 and 2012:
The Company is subject to federal and state income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions. At December 31, 2014, the Company is no longer subject to federal, state or foreign income tax examinations for the years before 2011, 2010, and 2007, 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.
At December 31, 2013, the Company was under examination by the federal tax authorities for the tax years 2010 and 2011. This examination closed in January 2014. The impact of any adjustments has been reflected in 2013. At December 31, 2012, the Company was under examination by the California tax authorities for the tax years 2008 and 2009. This examination closed during the three months ended March 31, 2013 with no adjustment to taxable income.
On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted. The Act included several provisions related to corporate income tax including the reinstatement of the credit for qualified research and development. The credit was reinstated for years beginning after January 1, 2012. On December 19, 2014, the Tax Increase Prevention Act was enacted. The Act included several business tax provisions including the extension of the credit for qualified research and development through 2014.
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