|12 Months Ended|
Dec. 31, 2013
|Income Tax Disclosure [Abstract]|
NOTE 8 — INCOME TAXES
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of tax benefits which are not expected to be realized. Investment tax credits are recognized on the flow through method.
The FASB issued ASC Topic 740-10 Overall - Uncertainty in Income Taxes (“ASC Topic 740-10”) which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. ASC Topic 740-10 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The Company is subject to the provisions of ASC Topic 740-10 and has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.
Should the Company need to accrue a liability for uncertain tax benefits, any interest associated with that liability will be recorded as interest expense. Penalties, if any, would be recognized as operating expenses. There are no penalties or interest liabilities accrued as of December 31, 2013 or 2012, nor are any penalties or interest costs included in expense for each of the years ended December 31, 2013, 2012 and 2011. The years under which we conducted our evaluation coincided with the tax years currently still subject to examination by major federal and state tax jurisdictions, those being 2011 through 2013 for federal purposes and 2010 through 2013 for state purposes.
Pretax income from the Company’s foreign subsidiaries amounted to $0.2 million, $1.0 million and $0.9 million for 2013, 2012 and 2011, respectively. The balances of pretax earnings for each of those years were domestic.
The provision (benefit) for income taxes consists of the following:
The effective tax rates differ from the statutory federal income tax rate as follows:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
No provision has been made for U.S. federal or foreign taxes on that portion of certain foreign subsidiaries’ undistributed earnings ($3.8 million at December 31, 2013) considered to be permanently reinvested. It is not practicable to determine the amount of tax that would be payable if these amounts were repatriated to the U.S.
Significant components of the Company’s deferred tax assets and liabilities as of December 31, are as follows:
The net deferred tax assets and liabilities presented in the Consolidated Balance Sheets are as follows at December 31:
At December 31, 2013, state and foreign tax credit carryforwards amounted to approximately $1.5 million. These state and foreign tax credit carryforwards will expire from 2015 through 2028.
Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in certain states in the future and utilize certain of the Company’s state operating loss carryforwards before they expire, the Company has recorded a valuation allowance accordingly. These state net operating loss carryforwards amount to approximately $17.8 million and expire at various dates from 2027 through 2033. As a result, the excess tax benefits included in certain state net operating loss carryforwards but not reflected in deferred tax assets was approximately $4.8 million. The excess tax benefits associated with stock option exercises are recorded directly to shareholders’ equity only when realized and amounted to approximately $1.3 million and $1.2 million for the years ended December 31, 2013 and 2012 respectively.
We have unrecognized tax benefits which, if ultimately recognized, will reduce our annual effective tax rate. Reserves for uncertain income tax positions have been recorded pursuant to ASC Topic 740-10. An estimate of the range of possible change during 2014 to the reserves cannot be made as of December 31, 2013. A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties which are insignificant, is as follows:
In January 2013, the American Taxpayer Relief Act of 2012 extended the research and development tax credits for the year ended December 31, 2012. As the new law was not enacted until 2013, the 2012 tax provision contains no estimated benefit for research and development tax credits. Had the law been enacted in 2012, the company would have recognized approximately $0.7 million in tax benefits (net of a $0.7 million reserve) for the year ended December 31, 2012. The Company recognized a total benefit of $1.1 million in 2013 related to the 2012 credit.
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