Classmates.com 2007 Annual Report Download - page 121

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UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. INCOME TAXES (Continued)
compensation that is expected to be limited under Section 162(m) of the Code and to foreign losses due to uncertainty regarding realization.
The Company adopted the provisions of FIN 48 on January 1, 2007. The implementation of FIN 48 did not result in a change in the
estimated liability for unrecognized tax benefits at January 1, 2007. At December 31, 2007, the Company had gross unrecognized tax benefits of
approximately $10.3 million, all of which, if recognized, would have an impact on the Company's effective tax rate.
The Company recognizes interest and penalties for uncertain tax positions in income tax expense. The Company had approximately
$1.3 million accrued for interest and penalties relating to uncertain tax positions at December 31, 2007, all of which is included in income taxes
payable.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
At December 31, 2007, as a result of the expiration of the statute of limitations for specific taxing jurisdictions, gross unrecognized tax
benefits for the related tax positions will be reduced by approximately $0.8 million over the next twelve months.
The tax years 2003 through 2007 remain open to examination by the major taxing jurisdictions to which the Company is subject. The
Company is currently under examination by a state tax authority for the years ended December 31, 2004, 2005 and 2006.
In accordance with APB Opinion No. 23, Accounting for Income Taxes—Special Areas , the Company has not recognized federal deferred
income taxes on the cumulative undistributed earnings of certain of its foreign subsidiaries that are indefinitely reinvested outside of the U.S.
The Company has indefinitely reinvested approximately $2.0 million of the cumulative undistributed earnings of certain of its foreign
subsidiaries, of which $0.4 million was earned during the year ended December 31, 2007. If these earnings were distributed, a U.S. income tax
liability would result.
At December 31, 2007, the Company had net operating loss and tax credit carryforwards for federal and state income tax purposes of
approximately $163 million and $51 million, respectively, which begin to expire in 2018 and 2008, respectively. With respect to the state net
operating loss carryforwards, certain amounts will be further reduced pursuant to the state allocation and apportionment laws. These
carryforwards have been adjusted to reflect the Company's estimate of limitations under Section 382 of the Code. For the years ended
December 31, 2007, 2006 and 2005, income tax benefits attributable to equity-based compensation transactions that were allocated to
stockholders' equity amounted to $4.6 million, $5.8 million and $7.2 million, respectively.
F-39
Year Ended
December 31, 2007
Beginning balance, gross
$
6,795
Additions related to current year positions
1,915
Additions related to prior year positions
1,591
Ending balance, gross
$
10,301