Stamps.com 2007 Annual Report Download - page 52

During 2007, 2006 and 2005, depreciation expense was approximately $2.0 million, $1.8 million and $1.8 million,
respectively.
8. Income Taxes
The provision for income taxes consists solely of alternative minimum state and federal taxes. Our effective tax rate differs
from the statutory federal income tax rate primarily as a result of the establishment of a valuation allowance for the future
benefits to be received from the deferred tax assets including net operating
Less accumulated depreciation and amortization
(15,430
)
(13,468
)
Property and equipment, net
$
3,790
$
5,084
F-50
TABLE OF CONTENTS
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
8. Income Taxes – (continued)
loss carryforwards and research tax credit carryforwards. The tax effect of temporary differences that give rise to a significant
portion of the deferred tax assets and liabilities at December 31, 2007 and 2006 are presented below (in thousands):
Because we have experienced net loss since inception and up to fiscal year 2004, we have placed a valuation allowance
against our otherwise recognizable deferred tax assets. We have a net operating loss carryforward of approximately $252 million
and $149 million for federal and state income tax purposes at December 31, 2007, respectively, and approximately $269 million
and $199 million for federal and state income tax purposes at December 31, 2006, respectively, which can be carried forward to
offset future taxable income. We have available a tax credit carryforward of approximately$1.5 million and $1.1 million at
December 31, 2007 and 2006, respectively, which can be carried forward to offset future taxable liabilities. Our federal net
operating losses will begin to expire in 2019; state net operating will begin to expire in 2012. The federal and state credits begin
to expire in 2027. The Federal Tax Reform Act of 1986 and similar state tax laws contain provisions which may limit the net
operating losses carryforwards to be used in any given year upon the occurrence of certain events, including a significant change
in ownership interests.
We maintain a study to understand the status of net operating losses. Based on that study, we believe that we have not
undergone an Internal Revenue Code (IRC) Section 382 change of control that would trigger an impairment of the use of our
NOLs since our secondary offering in December 1999. Under IRC Section 382 rules, a change in ownership can occur whenever
there is a shift in ownership by more than 50 percentage points by one or more five-percent shareholders within a three-year
period. When a change of ownership is triggered, the NOLs may be impaired. We estimate that, as of December 31, 2007, we
are approximately at 34% compared with the 50% level that would trigger impairment of our NOLs.
The provision for income taxes is comprised of (in thousands):
2007 2006
Deferred tax assets (liabilities):
Net operating loss carryforward
$
94,288
$
103,046
Tax credits
1,514
1,128
Depreciation
(423
)
(551
)
Capitalized start-up costs
659
485
Accruals
2,274
1,340
Total deferred tax assets
98,312
105,448
Valuation allowance
(98,312
)
(105,448
)
Net deferred tax assets
$
—
$
—
2007 2006 2005