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STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We recognize excess tax benefits associated with the exercise of stock options directly to stockholders’
equity only when realized. Accordingly,
deferred tax assets are not recognized for NOL resulting from excess tax benefits. As of December 31, 2011, deferred tax assets do not include
approximately $8.0 million of these excess tax benefits from employee stock option exercises that are a component of our NOL carryforwards.
Accordingly, additional paid-in capital will increase up to an additional $8.0 million if and when such excess tax benefits are realized.
The Federal Tax Reform Act of 1986 and similar state tax laws contain provisions that may limit the NOL carryforwards to be used in any given
year upon the occurrence of certain events, including a significant change in ownership interests.
We maintain a study to understand the status of net operating losses. Based on that study, we believe that we have not undergone an Internal
Revenue Code (IRC) Section 382 change of ownership that would trigger an impairment of the use of our NOLs since our secondary offering in
December 1999. Under IRC Section 382 rules, a change in ownership can occur whenever there is a shift in ownership by more than 50
percentage points by one or more “5% shareholders” within a three-
year period. When a change of ownership is triggered, the NOLs may be
impaired. We estimate that, as of December 31, 2011, we were at approximately 15% compared with the 50% level that would trigger
impairment of our NOLs.
The provision for income taxes consists of (in thousands):
Differences between the provision for income taxes and income taxes at the statutory federal income tax rate are as follows (in thousands):
(1)
Other changes in valuation allowance, net includes the tax effect of utilization of net operating losses of $0, $401,000 and $3.0 million for the
years ended December 31, 2011, 2010 and 2009, respectively, which were provided for as part of the valuation allowance prior to utilization.
Table of Contents
2011
2010
2009
Current:
Federal
$
—
$
34
$
165
State
—
—
389
—
34
554
Deferred:
Federal
(7,245
)
(3,396
)
—
State
(1,230
)
(583
)
—
(8,475
)
(3,979
)
—
Provision (benefit) for income taxes
$
(8,475
)
$
(3,945
)
$
554
2011
2010
2009
Income tax at statutory federal rate
$
6,057
$
534
$
2,288
State income taxes, net of federal benefit
1,044
36
393
Effect of permanent differences
12
467
757
Change in valuation allowance
-
discrete release
(8,475
)
(3,979
)
—
Other changes in valuation allowance, net
(1)
(7,225
)
(1,026
)
(4,262
)
Unrecognized tax benefits
12
23
1,710
Other
100
—
(
332
)
$
(8,475
)
$
(3,945
)
$
554
F
-
21