Classmates.com 2007 Annual Report Download - page 119

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UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INCOME TAXES
The provision for income taxes for the years ended December 31, 2007, 2006 and 2005 is comprised of the following (in thousands):
The following is a reconciliation of the statutory federal income tax rate to the Company's effective income tax rate (in thousands):
For the year ended December 31, 2007, the Company recorded a tax provision of $40.9 million on pre-tax income of $98.7 million,
resulting in an effective tax rate of 41.5%. The effective tax rate differs from the statutory federal income tax rate primarily due to (1) state
income taxes, net of federal benefit; (2) compensation, including stock-based compensation, that is limited under Section 162(m) of the Internal
Revenue Code (the "Code"); (3) foreign losses, the benefit of which is not currently recognizable due to uncertainty regarding realization; (4) the
re-measurement of certain deferred tax assets in New York; (5) employee stock purchase plan compensation, the benefit of which is not
currently recognized under SFAS No. 123R but which is recognized upon a disqualified disposition; and (6) the benefit of federal tax exempt
interest income.
For the year ended December 31, 2006, the Company recorded a tax provision of $36.3 million on pre-tax income of $77.5 million,
resulting in an effective tax rate of 46.8%. The effective tax rate differs from the statutory federal income tax rate primarily due to (1) state
income taxes, net of federal benefit; (2) compensation, including stock-based compensation, that is limited under Section 162(m) of the Code;
(3) foreign losses, the benefit of which is not currently recognizable due to uncertainty
F-37
Year Ended December 31,
2007
2006
2005
Current:
Federal
$
27,278
$
33,433
$
33,043
State
6,389
6,469
5,625
33,667
39,902
38,668
Deferred:
Federal
6,070
(6,404
)
(2,339
)
State
803
2,795
3,916
Foreign
375
—
—
7,248
(3,609
)
1,577
Provision for income taxes
$
40,915
$
36,293
$
40,245
Year Ended December 31,
2007
2006
2005
Taxes on income at the statutory federal income tax rate of
35%
$
34,541
$
27,133
$
30,580
State income taxes, net of federal tax benefits
4,660
3,858
4,454
Re
-
measurement of deferred tax assets
(331
)
2,265
2,473
Other differences, net
(501
)
(427
)
6
Increase in valuation allowance
2,546
3,464
2,732
Provision for income taxes
$
40,915
$
36,293
$
40,245