|12 Months Ended|
Dec. 31, 2011
|Income Taxes [Abstract]|
NOTE 11—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 liability accrued as of December 31, 2011 or 2010, nor are any penalties or interest costs included in expense for each of the years ended December 31, 2011, 2010 and 2009. 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 2010 and 2011 for federal purposes and 2008 through 2011 for state purposes.
Pretax income from the Company’s foreign subsidiary amounted to $0.9 million, $0.1 million and $0.3 million for 2011, 2010 and 2009, 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 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.
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2011 and 2010 are as follows:
The net deferred tax assets and liabilities are presented in the consolidated balance sheet as follows at December 31, 2011 and 2010:
At December 31, 2011, state and foreign tax credit carryforwards amounted to approximately $1.2 million. These state and foreign tax credit carryforwards will expire between 2015 through 2025.
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 certain state net operating loss carryforwards amount to approximately $11.8 million and expire at various dates from 2015 through 2031. The excess tax benefits associated with stock option exercises are recorded directly to shareholders’ equity only when realized. As a result, the excess tax benefits included in certain state net operating loss carryforwards but not reflected in deferred tax assets was approximately $3.3 million.
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 2012 to the reserves cannot be made as of December 31, 2011. A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties which are insignificant, is as follows:
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