Stamps.com 2009 Annual Report Download - page 71

TABLE OF CONTENTS
STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Property and Equipment – (continued)
During 2009, 2008 and 2007, depreciation expense was $1.2 million, $1.6 million and $2.0 million, respectively. We did not
dispose of any property and equipment in 2009 and 2007. We disposed of $3.6 million of fully depreciated property and
equipment in 2008.
9. Income Taxes
During 2009, our income tax expense consisted of alternative minimum federal tax and state income tax. Our effective
income tax rate differs from the statutory income tax rate primarily as a result of our use of federal net operating losses (NOLs)
to offset current federal tax expense. A valuation allowance was originally recorded against our deferred tax assets as we
determined the realization of these assets did not meet the more likely than not criteria. During the first quarter of 2008, we
determined that a full valuation allowance against our deferred tax assets was not necessary and recorded a partial reversal of the
deferred tax valuation allowance of $3.7 million. During 2009, we re-evaluated our deferred tax assets and determined that the
realization of our net deferred tax asset of $3.7 million continues to be more likely than not. In making such determination, we
considered all available positive and negative evidence, including our recent earnings trend and expected continued future
taxable income. We continue to maintain a valuation allowance for the remainder of our deferred tax assets. In September 2008,
the State of California passed legislation temporarily suspending the use of NOLs to offset current state income tax expense for
the tax years 2008 and 2009. As a result of not being able to use our state NOLs, we incurred approximately $370,000 and
$523,000 of additional California state income tax expense during the year ended December 31, 2009 and 2008, respectively.
We recorded a current tax provision for corporate alternative minimum federal taxes and state taxes of approximately $165,000
and $389,000, respectively for 2009.
Effective January 1, 2007, we have adopted guidance related to uncertain tax positions. Under the guidance, we are required
to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical
merits of the position. A tax position that meets the more likely than not recognition threshold is measured to determine the
amount of benefit to recognize in the financial statements.
In accordance with the guidance we have evaluated our tax credits for uncertain tax positions. As of December 31, 2009 we
have net tax credits totaling $2.8 million for Federal and California purposes. In addition, we had $1.7 million of unrecognized
tax benefits which is subject to examination by the taxing authorities and upon further examination, we may increase or decrease
our unrecognized tax benefit based on the results of the examination.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the years ended December 31,
2009, 2008 and 2007 (in thousands):
Unrecognized
Tax Benefits
Balance at January 1, 2006
$
—
Additions for tax positions of prior years
—
Addition for tax position of the current year
—
Settlement
—
Balance at December 31, 2007
—
Additions for tax positions of prior years
—
Addition for tax position of the current year
—
Settlement
—
Balance at December 31, 2008
—
Additions for tax positions of prior years
(1,557
)
Addition for tax position of the current year
(153
)
Settlement
—
Balance at December 31, 2009
$
(1,710
)