Netgear 2013 Annual Report Download - page 86

Table of Contents NETGEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Management's judgment is required in determining the Company's provision for income taxes, its deferred tax assets and any valuation allowance
recorded against its deferred tax assets. In management's judgment it is more likely than not that such assets will be realized in the future as of
December 31, 2013 , and as such no valuation allowance has been recorded against the Company's deferred tax assets.
The effective tax rate differs from the applicable U.S. statutory federal income tax rate as follows:
Income tax benefits in the amount of $0.4 million , $1.1 million and $3.5 million related to stock options were credited to additional paid-
in capital
during the years ended December 31, 2013 , 2012 , and 2011
, respectively. As a result of changes in fair value of available for sale securities, income
tax benefit of $16,000 , tax expense of $5,000 and $8,000 was recorded in comprehensive income related to the years ended December 31, 2013 , 2012
,
and 2011 , respectively.
As of December 31, 2013 , the Company has approximately $20.2 million and $0.1 million
of acquired federal and state net operating loss carry
forwards as well as $0.7 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 carryforwards have no expiration.
The Company files income tax returns in the U.S. federal jurisdiction and various state, local, and foreign jurisdictions. With few exceptions, the
Company is no longer subject to U.S. federal, state, 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. In November, 2012, the Italian Tax Authority (ITA) commenced an audit of the Company’
s 2004
through 2011 tax years, and has subsequently extended audit procedures to include the 2012 tax year. The Company has limited audit activity in various
states and other 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
$2.8
million , excluding the interest, penalties and the effect of any related deferred tax assets or liabilities.
83
Year Ended December 31,
2013 2012 2011
Tax at federal statutory rate
35.0
%
35.0
%
35.0
%
State, net of federal benefit
2.2
%
2.1
%
1.5
%
Impact of international operations
3.9
%
(4.8
)%
(9.5
)%
Stock-based compensation
1.8
%
0.6
%
—
%
Tax credits
(1.9
)%
0.1
%
(0.7
)%
Others
(0.4
)%
0.1
%
0.1
%
Provision for income taxes
40.6
%
33.1
%
26.4
%