Classmates.com 2008 Annual Report Download - page 145

Table of Contents
UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. INCOME TAXES (Continued)
Section 162(m) of the Code, foreign net operating losses and foreign tax credits due to uncertainty regarding utilization, it is more likely than not
that the remaining deferred tax assets will be realized.
At December 31, 2008 and 2007, the Company had gross unrecognized tax benefits of $11.8 million and $10.3 million, respectively, all of
which, if recognized, would have an impact on the Company's effective income tax rate, except for purchase accounting.
The Company recognizes interest and penalties for uncertain tax positions in income tax expense. The Company had $3.9 million and
$1.3 million accrued for interest and penalties relating to uncertain tax positions at December 31, 2008 and 2007, respectively, all of which is
included in income taxes payable.
At December 31, 2008, the Company had federal net operating loss and federal foreign tax credit carryforwards of $150 million and
$2.9 million, respectively, which will begin to expire in 2018 and 2015, respectively. The Company also has state and foreign net operating loss
carryforwards of $47.0 million and $2.9 million, respectively. The state net operating loss carryforwards begin to expire in 2009 and the foreign
net operating loss carryforwards have an indefinite life. 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.
The changes in gross unrecognized tax benefits for the years ended December 31, 2008 and 2007 is as follows, excluding interest and
penalties (in thousands):
The Company is currently under audit by certain taxing jurisdictions in the U.S.. Some audits may conclude in the next twelve months and
the unrecognized tax benefits we have recorded in relation to the audits may differ from actual settlement amounts and it is not possible to
estimate the effect, if any, of any such settlements. The Company anticipates that in the next twelve months, $3.2 million of gross unrecognized
tax benefits will lapse due to the statute of limitation and anticipates no material increase. The Company files income tax returns in the U.S.,
various state and local jurisdictions, the U.K., and in other foreign jurisdictions. With few exceptions, the Company is not subject to U.S.,
foreign, state or local examination for years prior to fiscal 2004.
In accordance with APB Opinion No. 23, Accounting for Income Taxes—Special Areas , the Company has not provided for U.S. deferred
income taxes on the cumulative undistributed earnings of certain of its non-U.S. affiliates that are indefinitely reinvested outside of the U.S.
F-50
Balance upon adoption of FIN 48 on January 1, 2007
$
6,795
Additions related to current year positions
1,915
Additions related to prior year positions
1,591
Balance at December 31, 2007
10,301
Additions due to FTD acquisition
1,508
Additions related to current year positions
72
Lapse of statute of limitations
(1,142
)
Additions related to prior year positions
1,068
Balance at December 31, 2008
$
11,807