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TABLE OF CONTENTS
STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Income Taxes – (continued)
Our policy is to recognize interest and penalties expense, if any, related to unrecognized tax benefits as a component of
income tax expense. As of December 31, 2009, we have not recorded any interest and penalty expense.
We remain subject to examination by the relevant tax authorities. These include the 2006 through 2008 tax years for federal
purposes and the 2005 through 2008 tax years for California purposes.
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 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, 2009 and 2008 are presented below (in thousands):
We have an NOL carryforward of approximately $230 million and $150 million for federal and state income tax purposes,
respectively, at December 31, 2009 and approximately $240 million and $150 million for federal and state income tax purposes,
respectively, at December 31, 2008, which can be carried forward to offset future taxable income. We have available a tax credit
carryforward of approximately$5.1 million and $1.3 million at December 31, 2009 and 2008, respectively, which can be carried
forward to offset future taxable liabilities. Our federal NOLs will begin to expire in 2020; our state NOLs will begin to expire in
2014. The federal tax credits begin to expire in 2020. Under California law, California tax credits do not have an expiration date.
The Federal Tax Reform Act of 1986 and similar state tax laws contain provisions that may limit the NOL 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 “5% 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, 2009, we were at
approximately 26% compared with the 50% level that would trigger impairment of our NOLs.
2009
2008
Deferred tax assets (liabilities):
Net operating loss carryforward
$
87,091
$
90,068
Tax credits
2,766
1,299
Depreciation
379
(379
)
Amortization
1,189
606
Accruals
3,507
3,655
Total deferred tax assets
94,932
95,249
Valuation allowance
(91,261
)
(91,578
)
Net deferred tax assets
$
3,671
$
3,671
F-18