|9 Months Ended|
Sep. 30, 2016
|Income Tax Disclosure [Abstract]|
In order to determine the quarterly provision for income taxes, the Company used an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. The provision for income taxes primarily relates to projected current federal and state income taxes and income taxes in certain foreign jurisdictions. Certain significant or unusual items are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.
The Company utilizes the asset and liability method of accounting for income taxes. The Company records deferred tax assets to the extent it believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence quarterly, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon the Company's review of all positive and negative evidence, the Company concluded that a full valuation allowance should continue to be recorded against its U.S. and certain foreign net deferred tax assets at September 30, 2016. Additionally, the Company completed the acquisition of Entropic in the second quarter 2015. As a result of the acquisition, there was a valuation allowance release that resulted in a tax benefit of $1.8 million due to the purchase accounting adjustment for the net deferred tax liability. Furthermore, the Company does not incur expense or benefit in certain tax free jurisdictions in which it operates.
The Company recorded a provision for income taxes of $1.1 million and $2.2 million in the three and nine months ended September 30, 2016, respectively, and a provision for income taxes of $0.5 million and a benefit of $0.6 million in the three and nine months ended September 30, 2015, respectively. The provision for income taxes in the three and nine months ended September 30, 2016 primarily relates to federal alternative minimum tax due to the Company’s limitation on use of net operating losses, credit carryforwards, state income taxes, and income taxes in certain foreign jurisdictions. During the quarter ended June 30, 2016, the Company adopted ASU No. 2016-09, Improvements to Share-Based Compensation, which resulted in the recognition of excess tax benefits within the provision for income taxes in the unaudited consolidated statement of operations. For the three and nine months ended September 30, 2016, the impact of including net excess tax benefits was to reduce the provision for income taxes by $0.9 million and $6.0 million in the unaudited consolidated statements of operations (Note 1). The income tax provision (benefit) in the three and nine months ended September 30, 2015 primarily relates to income taxes in certain foreign jurisdictions.
During the nine months ended September 30, 2016, the Company’s unrecognized tax benefits increased by $6.2 million. The Company expects decreases to its unrecognized tax benefits of $0.2 million within twelve months, due to the lapse of statutes of limitations. Accrued interest and penalties associated with uncertain tax positions as of September 30, 2016 were $0.2 million and $0.02 million, respectively.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of September 30, 2016, the Company is currently under examination in India for the 2014 and 2015 tax years. The Company is not currently under any other tax examinations.
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