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55
We do not believe, based on current knowledge, that any of the foregoing legal proceedings or claims is likely to have a
material adverse effect on our consolidated financial position, results of operations or cash flows. However, depending on the amount
and the timing, an unfavorable resolution of some or all of these matters could materially affect our consolidated financial position,
results of operations or cash flows in a particular period. In accordance with SFAS 5, Accounting for Contingencies, we have not
accrued for a loss contingency relating to these legal proceedings because unfavorable outcomes are not considered by management to
be probable or reasonably estimable.
8. Income Taxes
The provision for income tax consisted of the following (in thousands):
Years Ended December 31,
2008 2007 2006
Current:
Federal $ 27,716 $ 21,764 $ 17,660
State 3,389 3,557 2,613
Foreign 1,394 1,467 1,789
Total current 32,499 26,788 22,062
Deferred:
Federal (2,255) 136 (1,535)
State (751) 141 (208)
Foreign 98 (65) (218)
Total deferred (2,908) 212 (1,961)
Total provision $ 29,591 $ 27,000 $ 20,101
A reconciliation of the statutory federal income tax rate with j2 Global’s effective income tax rate is as follows:
Years Ended December 31,
2008 2007 2006
Statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net 1.7 2.5 2.1
Foreign rate differential (15.0) (15.1) (15.9)
Tax contingency reserve 7.2 6.3 6.0
Other 0.1 (0.4) 0.2
Effective tax rates 29.0% 28.3% 27.4%
Our effective rate for each year is normally lower than the 35% U.S. federal statutory income tax rate primarily due to earnings
of our subsidiaries outside of the U.S. in jurisdictions where the effective tax rate is lower than in the U.S.
Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of
existing assets and liabilities. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities are as
follows (in thousands):
Years Ended December 31,
2008 2007
Deferred tax assets:
Net operating loss carryforwards $ 2,705 $ 2,991
Tax credit carryforwards 808 400
Accrued expenses 1,317 175
Allowance for bad debt 1,070 459
Share-based compensation expense 3,506 2,815
Other 1,339 996
Net deferred assets $ 10,745 $ 7,836