Netgear 2012 Annual Report Download - page 82

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2012 , the Company has approximately $22.3 million and $0.2 million
of acquired federal and state net operating loss carry
forwards as well as $0.4 million of California tax credits carryforwards. All of these losses and $0.1 million
of these credits are subject to annual
usage limitations under Internal Revenue Code Section 382. The federal losses expire in different years beginning in fiscal 2021
. The state loss
begins to expire in fiscal 2015 . The state tax credit carryforward has no expiration.
The Company files income tax returns in the U.S. federal jurisdiction, various state and local, and foreign jurisdictions. With few exceptions,
the Company is no longer subject to U.S. federal, state and local, or foreign income tax examinations for years before 2008. In 2011, the US federal
Internal Revenue Service (IRS) commenced an audit of the Company's 2008 and 2009
tax years. The audit was completed in October 2012, and all
issues under examination by the IRS were effectively settled. The Company has limited audit activity in various states and foreign jurisdictions. Due
to the uncertain nature of ongoing tax audits, the Company has recorded its liability for uncertain tax positions as part of its long-
term liability as
payments cannot be anticipated over the next 12 months. The existing tax positions of the Company continue to generate an increase in the liability
for uncertain tax positions. The liability for uncertain tax positions may be reduced for liabilities that are settled with taxing authorities or on which
the statute of limitations could expire without assessment from tax authorities. The possible reduction in liabilities for uncertain tax positions
resulting from the expiration of statutes of limitation in multiple jurisdictions in the next 12 months is approximately $2.2 million
, excluding the
interest, penalties and the effect of any related deferred tax assets or liabilities.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows (in thousands):
The total amount of net UTB that, if recognized would affect the effective tax rate as of December 31, 2012 is $10.6 million
. The ending net
UTB results from adjusting the gross balance at December 31, 2012
for items such as U.S. federal and state deferred tax, foreign tax credits, interest,
and deductible taxes. The net UTB is included as a component of non-current income taxes payable within the consolidated balance sheet.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the years ended
December 31, 2012 , 2011 , and 2010 , total interest and penalties expensed were $74,000 , $30,000 and $262,000 ,
78
Federal, State, and
Foreign Tax
Gross UTB Balance at December 31, 2009
$
16,501
Additions based on tax positions related to the current year
3,371
Additions for tax positions of prior years
409
Settlements
(47
)
Reductions for tax positions of prior years
(1,805
)
Reductions due to lapse of applicable statutes
3
Gross UTB Balance at December 31, 2010
18,432
Additions based on tax positions related to the current year
1,795
Additions for tax positions of prior years
1,015
Settlements
(179
)
Reductions for tax positions of prior years
(2
)
Reductions due to lapse of applicable statutes
(3,699
)
Adjustments due to foreign exchange rate movement
(27
)
Gross UTB Balance at December 31, 2011
17,335
Additions based on tax positions related to the current year
711
Additions for tax positions of prior years
956
Settlements
(2,620
)
Reductions for tax positions of prior years
(3,590
)
Reductions due to lapse of applicable statutes
(449
)
Adjustments due to foreign exchange rate movement
(4
)
Gross UTB Balance at December 31, 2012
$
12,339