Support.com 2005 Annual Report Download - page 65

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SUPPORTSOFT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows (in
thousands):
In 2005, State taxes, net of federal benefit was $60,000 offset by a $63,000 true-up related to differences in estimated versus
actual state income taxes for fiscal 2004.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred
tax assets and liabilities are as follows (in thousands):
The Financial Accounting Standards Board’s Statement of Financial Accounting Standards No. 109 “Accounting for Income
Taxes” provides for the recognition of deferred tax assets if realization of such assets is more likely than not. Based upon the weight
of available evidence, which includes SupportSoft’s historical operating performance, reported cumulative net losses since inception
and difficulty in accurately forecasting our future results, the Company provided a full valuation allowance against its net deferred tax
assets in the U.S. We continue to monitor the need for our valuation allowance on a quarterly basis.
The net valuation allowance decreased by approximately $677,000, $1.4 million and $700,000 during the years ended
December 31, 2005, December 31, 2004, and December 31, 2003, respectively. Approximately $248,000 of the valuation allowance
for deferred tax assets as of December 31, 2005 is related to stock option deductions and will be credited to equity when realized.
63
Year Ended December 31,
2005
2004
2003
Expected provision, at federal statutory rate
$1,689 $ 3,662 $ 3,471
State taxes, net of federal benefit
(3)
120
131
Permanent differences
72
134
69
Stock based compensation
(472)
(1,060)
(1,220)
Valuation allowance utilized
(954)
(2,517)
(2,074)
Foreign taxes
70
(29)
119
Provision for income taxes
$402
$310
$496
December 31,
2005
2004
Deferred tax assets:
Net operating loss carryforwards
$15,034
$15,024
Research & development tax credits
3,958
2,961
Capitalized research and development
66
202
Intangible assets
2,724
2,810
Fixed assets
328
408
Deferred revenue
1,046
2,326
Other
580
536
Total deferred tax assets
23,736
24,267
Valuation allowance
(23,590)
(24,267)
Net deferred income tax assets
146
—
Intangible assets
(288)
—
Deferred income tax liabilities
(288)
—
Net deferred tax liabilities
$142
$
—