Chegg 2013 Annual Report Download - page 142

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CHEGG, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of December 31, 2013, we have net operating loss carryforwards for federal and state income tax
purposes of approximately $98.3 million and $37.5 million, respectively, which will begin to expire in years
beginning 2025 and 2014, respectively.
As of December 31, 2013, we have tax credit carryforwards for federal and state income tax purposes of
approximately $1.7 million and $2.0 million, respectively. The federal credits expire in various years beginning
in 2031. The state credits do not expire.
Utilization of our net operating losses and tax credit carryforwards may be subject to substantial annual
limitations due to ownership change limitations provided by the Internal Revenue Code and similar state
provisions. Such annual limitations could result in the expiration of the net operating losses and tax credit
carryforwards before utilization.
As of December 31, 2013 and 2012, we have permanently reinvested approximately $2.3 million and
$1.7 million of earnings from our international subsidiaries, respectively, and have not provided for U.S. federal
income and foreign withholding taxes. If we were to distribute these earnings, such earnings could be subject to
income or other taxes upon repatriation. Determination of the amount of unrecognized deferred tax liability
related to these earnings is not practicable.
We recorded unrecognized tax benefits of approximately $1.1 million during 2013, and had a cumulative
unrecognized tax benefit balance of approximately $3.0 million as of December 31, 2013. We do not anticipate
that the amount of existing unrecognized tax benefits will significantly increase or decrease within the next
12 months. The amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is
$0.8 million. One or more of these unrecognized tax benefits could be subject to a valuation allowance if and
when recognized in a future period, which could impact the timing of any related effective tax rate benefit.
We recognize interest and penalties related to uncertain tax positions as a component of income tax expense.
During 2013, 2012 and 2011, we recognized $0.1 million, $0.1 million and $0.7 million of interest and penalties,
respectively. Accrued interest and penalties as of December 31, 2013 and 2012 were approximately $0.4 million
and $0.4 million, respectively.
We file tax returns in U.S. federal, state, and certain foreign jurisdictions with varying statutes of
limitations. Due to net operating loss and credit carryforwards, all of the years since inception through the 2013
tax year remain subject to examination by the federal, state, and foreign tax authorities.
A reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits,
excluding accrued interest and penalties, is as follows (in thousands):
Year Ended December 31,
2013 2012 2011
Balance, beginning of period ........................... $1,942 $ 565 $ 5
Increase in tax positions for prior years ............... 318 1,090 —
Decrease in tax position for prior years ............... (2) (258) —
Decrease in tax positions for prior year settlement ....... (16) — —
Increase in tax positions for current year .............. 742 495 560
Change due to translation of foreign currencies ......... 10 50 —
Balance, end of period ................................. $2,994 $1,942 $565
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