Support.com 2014 Annual Report Download - page 59

Table of Contents
The reconciliation of the Federal statutory income tax rate to our effective income tax rate is as follows (in thousands):
Year Ended December 31,
2014 2013 2012
Provision at Federal statutory rate $ (1,000) $ 3,900 $ (1,865)
State taxes 53 156 82
Permanent differences/other 633 520 375
Stock-based compensation 2,311 1,113 178
Federal valuation allowance (used) provided (1,257) (4,917) 1,438
Provision for income taxes $ 740 $ 772 $ 208
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Significant components of our deferred tax assets and liabilities are as follows (in thousands):
December 31,
2014 2013
Deferred Tax Assets
Fixed assets $ 165 $ 187
Deferred revenue 19 14
Accruals and reserves 649 498
Stock options 1,663 3,570
Net operating loss carryforwards 42,854 43,562
Federal and state credits 3,327 3,169
Foreign credits 185 197
Intangible assets 1,208 986
Gross deferred tax assets 50,070 52,183
Valuation allowance (49,679) (51,726)
Total deferred tax assets 391 457
Deferred Tax Liabilities:
Intangible assets (1,302) (1,016)
Total deferred tax liability (1,302) (1,016)
Net deferred tax liabilities $ (911) $ (559)
ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Based on management’s review of both the positive and negative
evidence, which includes our historical operating performance, reported cumulative net losses since inception and difficulty in accurately forecasting its results, the Company has concluded that it is not more likely
than not that the Company will be able to realize all of the Company’s U.S. deferred tax assets. Therefore, the Company has provided a full valuation allowance against its U.S. deferred tax assets.
Based on management’s review of both positive and negative evidence, which includes the historical operating performance of our Canadian subsidiary, the Company has concluded that it is more likely than
not that the Company will be able to realize a portion of the Company’s Canadian deferred tax assets. Therefore, the Company has a partial valuation allowance on Canadian deferred tax assets. There is no
valuation allowance against the Company’s Indian deferred tax assets. The Company reassesses the need for its valuation allowance on a quarterly basis.
Based on management’s review discussed above, the realization of deferred tax assets is dependent on improvements over present levels of consolidated pre-tax income. Until the Company is consistently
profitable in the U.S., it will not realize its deferred tax assets. Deferred income taxes have not been provided on the cumulative undistributed earnings of foreign subsidiaries. The amount of such earnings at
December 31, 2014 was $1.5 million. These earnings have been permanently reinvested and the Company does not plan to initiate any action that would precipitate the payment of income tax thereon. It is not
practicable to estimate the amount of additional tax that might be payable on undistributed foreign earnings.
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