F-24
16. Income Taxes
Our income tax provisions (benefits) for the years ended December 31 were:
2013
2012
2011
Current:
Federal...................................................................................... $
32 $
(82) $
5,924
Foreign .....................................................................................
300
—
—
State..........................................................................................
228
47
512
Total current....................................................................
560
(35)
6,436
Deferred:
Federal......................................................................................
12,953 (14,107)
(1,247)
Foreign .....................................................................................
(87)
—
—
State..........................................................................................
3,165
(1,349)
223
Total deferred..................................................................
16,031 (15,456)
(1,024)
Total provision (benefit) for income taxes...................... $ 16,591 $ (15,491) $
5,412
Deferred tax assets and liabilities at December 31 were:
2013
2012
Deferred tax assets:
Net operating loss carryforwards ................................................... $
6,416 $
4,773
Research and development tax credit carryforwards .....................
8,790
7,564
Stock-based compensation expense...............................................
6,153
5,945
Deferred revenue ...........................................................................
7,040
5,197
Reserves and accrued expenses .....................................................
1,745
3,034
Alternative minimum tax credit .....................................................
2,091
2,101
Identified intangibles accounting...................................................
110
1,785
Deferred compensation ..................................................................
372
275
Deferred financing fees..................................................................
482
—
Other ..............................................................................................
1,197
1,386
Total deferred tax assets .......................................................
34,396
32,060
Deferred tax liabilities:
Capitalized software development costs ........................................
(2,103) (12,017)
Depreciation and amortization.......................................................
(2,009)
(3,269)
Other ..............................................................................................
—
(30)
Total deferred tax liabilities .................................................
(4,112) (15,316)
Net deferred tax asset ...........................................................
30,284
16,744
Valuation allowance for net deferred tax asset........................................ (30,284)
(698)
Net deferred tax asset .............................................................................. $
— $ 16,046
We account for income taxes using the asset and liability approach. Deferred tax assets and liabilities are determined based upon
differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. Net deferred tax assets are recorded when it is more likely than not
that the tax benefits will be realized. In accordance with ASC 740, we determined that recent losses were significant evidence of the
need for a full valuation allowance on our net deferred tax assets of $30,284 in the fourth quarter of 2013 and that near-term full
realization of these assets is not more likely than not. However, as noted below, our deferred tax assets have expiry dates many years
into the future such that we anticipate being able to use these assets at some point to offset prospective tax liabilities.
At December 31, 2013, we had $14,581 of U.S. federal net operating loss carryforwards reflected in deferred tax assets plus
$4,230 of net operating loss carryforwards from excess tax benefits related to stock-based compensation which will be recognized as
an increase to additional paid in capital once the benefit is realized through a reduction of income taxes payable. Of the total $19,081
loss carryforwards, $9,416 is the remaining net operating loss carryforwards acquired with Xypoint in 2001, usable at the rate of
$1,401 per year, and which will begin to expire in 2021. The remaining $9,665 of U.S. federal net operating loss carryforwards which
were generated in 2006, 2009, and 2013 will begin to expire in 2026, 2029, and 2033.The timing and manner in which we may utilize
net operating loss carryforwards and tax credits in future tax years will be limited by the amounts and timing of future taxable income
and by the application of the ownership change rules under Section 382 of the Internal Revenue Code.
