Note 8. Income Taxes
The Company recognizes
interest and penalties related to uncertain tax positions as a component of income tax expense. The Company had no unrecognized
tax benefits as of September 30, 2014, and December 31, 2013.
As of December 31,
2013, the Company’s valuation allowance against deferred tax assets decreased by approximately $20,960,000 due to write off
of expired deferred tax assets and partial release of the Company’s valuation allowance.
The Company will
continue to assess the need for a valuation allowance on the deferred tax assets by evaluating both positive and negative evidence
that may exist on a quarterly basis. Any adjustment to the deferred tax asset valuation allowance would be recorded in the unaudited
condensed consolidated statements of income for the period that the adjustment is determined to be required.
Deferred tax assets consist of the following
(in thousands):
|
|
September 30, |
|
December 31, |
|
|
2014 |
|
2013 |
Deferred tax assets |
|
|
|
|
|
|
|
|
Credit carryforward |
|
$ |
2,660 |
|
|
$ |
2,660 |
|
Stock based compensation |
|
|
287 |
|
|
|
287 |
|
Other |
|
|
59 |
|
|
|
59 |
|
Net operating losses |
|
|
144,839 |
|
|
|
146,637 |
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets |
|
|
147,845 |
|
|
|
149,643 |
|
Valuation allowance |
|
|
(139,840 |
) |
|
|
(139,840 |
) |
Net deferred tax assets |
|
$ |
8,005 |
|
|
$ |
9,803 |
|
The Tax Reform Act
of 1986 limits the use of net operating loss and tax credit carryforwards in certain situations where stock ownership changes occur.
In the event the Company has had a change in ownership, the future utilization of the Company’s net operating loss and tax
credit carryforwards could be limited.
A portion of deferred
tax assets relating to NOLs, pertains to NOL carryforwards resulting from tax deductions upon the exercise of employee stock options
of approximately $1,800,000. When recognized, the tax benefit of these loss carryforwards will be accounted for as a credit to
additional paid-in capital rather than a reduction of the income tax expense.
As of September
30, 2014, the Company had net operating loss carryforwards for federal income tax purposes of approximately $426,000,000. The federal
net operating loss carryforwards, if not offset against future income, will expire by 2032, with the majority of such NOLs expiring
by 2021. |