LifeLock 2013 Annual Report Download - page 86

The following is a summary of the components of our deferred tax assets and liabilities at December 31:
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Deferred tax assets:
Net operating losses and credit carryforwards $ 62,570 $ 62,307
Stock options 6,580 5,513
Deferred rent 1,692 196
Deferred revenue 13 44
Accrued expenses 795 1,310
Other  118  -
Total deferred tax assets 71,768 69,370
Valuation allowance (1,229) (49,146)
Net deferred tax assets $ 70,539 $ 20,224
Deferred tax liabilities:
Property and equipment $ (18,777) $ (20,012)
Other (627) (212)
Total deferred tax liabilities (19,404) (20,224)
Net deferred tax assets $ 51,135 $ -
We estimate that U.S. federal and state net operating losses (“NOLs”) available to be carried forward approximated $ 199,408 and $147,321,
respectively, as of December 31, 2013. The U.S. federal NOLs expire in the years 2024 through 2033. The majority of the state NOLs will expire between 2014
and 2033. Our ability to utilize our U.S. federal and state NOLs may be limited if we experience an ownership change as defined by Section 382 of the Internal
Revenue Code. When a company undergoes such an ownership change, Section 382 limits the future use of NOLs generated before the change in ownership
and certain subsequently recognized “built-in” losses and deductions, if any, existing as of the date of the ownership change. A company’s ability to utilize
new NOLs arising after the ownership change is not affected. In 2012, we completed an analysis of prior year ownership changes, including whether there
were any limitations on the use of NOLs acquired in connection with our acquisition of ID Analytics, we determined that our NOLs as well as the NOLs of ID
Analytics were subject to annual limitations under Section 382. However, we determined that none of the NOL carryforwards will expire solely as a result of
Section 382 limitations. In 2013, in connection with the acquisition of Lemon, we completed an analysis of Lemon’s prior ownership changes, including the
change which arose as a result of our acquisition of Lemon. As a result of the analysis, we determined that none of Lemon’s NOL carryforwards will expire
as a result of 382 limitations. Inherent in this analysis is the risk that some of Lemon’s 5%or greater shareholders had their own ownership changes, which
may impact the results of our analysis. We have made inquiries to these parties as required by the regulations and have received no responses. If adverse
information is discovered in the future, we will treat this as new information and reflect the impact in that period. As of December 31, 2013, we had $451 of
federal alternative minimum tax credit carryover which does not expire.
As of December 31, 2013 and 2012, we have $14,821 and $1,845, respectively, of unrealized excess tax benefits from stock option exercises which
have been removed from our net operating loss deferred tax asset. When realized upon utilization or our net operating losses, the excess tax benefits will result
in a credit to additional paid in capital.
We are subject to taxation in the U.S. and various states. All of our tax years are still subject to U.S. federal, state, and local tax authorities due to our
net operating loss, which started in 2006. As of December 31, 2013 and 2012, our unrecognized tax benefits were $393. We had no unrecognized tax benefits
as of December 31, 2011. If recognized, the entire amount of unrecognized tax benefit would impact the effective rate. There are no positions for which it is
reasonably possible that the uncertain tax benefit will significantly increase or decrease within twelve months. As of December 31, 2013, there was no accrued
interest or penalties recorded in the consolidated financial statements.
On September 13, 2013, U.S. Treasury and the Internal Revenue Service issued final regulations regarding the deduction and capitalization of
expenditures related to tangible property. The final regulations under Internal Revenue Code Sections 162, 167 and 263(a) apply to amounts paid to acquire,
produce, or improve tangible property as well as dispositions of such property and are generally effective for tax years beginning on or after January 1, 2014.
We have evaluated these regulations and determined they will not have a material impact on our consolidated results of operations, cash flows, or financial
position.
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Following our acquisition of ID Analytics in the first quarter of 2012, we began operating our business and reviewing and assessing our operating
performance using two reportable segments: our consumer segment and our enterprise segment. In our consumer segment, we offer proactive identity theft
protection services to consumers on an annual or monthly subscription basis. In our enterprise segment, we offer fraud and risk solutions to our enterprise
customers.
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