TeleNav 2014 Annual Report Download - page 109

Table of Contents
In fiscal 2014, we recorded a valuation allowance on the majority of our deferred tax assets, net of liabilities, since the assets are not more
likely than not to be realized based upon our assessment of all positive and negative evidence. Realization of deferred tax assets is dependent
upon future taxable earnings and losses, the timing of which is uncertain. Due to losses in fiscal 2014 and expected losses in fiscal 2015 and
potentially future years in the U.S., we established in fiscal 2014 a valuation allowance on deferred tax assets in the U.S. that we believe will not
be realized by the carryback provisions of U.S. tax law. U.S. tax law allows for the two-year carryback of losses and one-year carryback of
credits to previous tax years which can generate a tax refund to the extent taxes were paid. Due to foreign operating losses in previous years and
continued foreign earnings volatility, we continued to maintain a full valuation allowance for our foreign deferred tax assets. Our valuation
allowance increased from the prior year by approximately $10.1 million , $699,000 , and $264,000 in fiscal 2014, 2013 and 2012, respectively.
We provide for U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are permanently reinvested
outside the U.S. To the extent that the foreign earnings previously treated as permanently reinvested are repatriated, the related U.S. liability may
be reduced by any foreign income taxes paid on these earnings. As of June 30, 2014, the cumulative amount of earnings upon which U.S.
income taxes have not been provided was approximately $3.6 million . The net unrecognized deferred tax liability for these earnings was
approximately $480,000 .
As of June 30, 2014, we had federal and California net operating loss carryforwards for income tax purposes of $2.3 million and $26.5
million , respectively. These loss carryforwards will begin to expire in fiscal 2020 for federal purposes and fiscal 2016 for California purposes.
In addition, we had federal and California research and development tax credit carryforwards of $383,000 and $3.4 million , respectively, as of
June 30, 2014. The federal research credits will begin to expire in fiscal 2023 and the California research credits can be carried forward
indefinitely. The loss carryforwards and certain credits are subject to annual limitation under Internal Revenue Code Section 382.
As of June 30, 2014, we also had foreign net operating loss carryforwards of $9.0 million , which begin to expire in fiscal 2019. Due to
uncertainty regarding our ability to utilize the foreign net operating loss carryforwards, we have continued to maintain a full valuation allowance
for these deferred tax assets.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):
At June 30, 2014, 2013 and 2012, there were $5.5 million , $4.8 million and $3.6 million of unrecognized tax benefits that if recognized
would affect the annual effective tax rate.
We file income tax returns in the U.S. federal jurisdiction, California, various states, and foreign tax jurisdictions in which we have
subsidiaries. During fiscal 2012, the IRS concluded its audit of our fiscal 2009 through fiscal 2010 tax returns, which resulted in no adjustments
having a material impact on our financial statements. The statute of limitations remains open for fiscal 2011 through fiscal 2013 in the U.S., for
fiscal 2010 through fiscal 2013 in state jurisdictions, and for fiscal 2009 through 2013 in foreign jurisdictions. Fiscal years outside the normal
statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward
and may be audited in subsequent years when utilized.
We believe it is reasonably possible that, as of June 30, 2014, the gross unrecognized tax benefits could decrease (whether by payment,
release, or a combination of both) by approximately $1.6 million in the next 12 months. We recognize interest and penalties related to
unrecognized tax positions as part of our provision for federal, state and foreign income taxes. During fiscal 2014, 2013 and 2012, we recognized
approximately $278,000 , $159,000 and $101,000 in interest and penalties. We had accrued $603,000 and $314,000 for the payment of interest
and penalties at June 30, 2014 and 2013, respectively.
F-26
Fiscal Year Ended June 30,
2014 2013 2012
Unrecognized tax benefit—beginning of period
$
6,340
$
4,431
$
4,520
Increase in tax positions taken during the current period
623
2,157
1,200
Increase in tax positions taken during the prior period
555
219
101
Decrease in tax positions taken during the prior period
(261
)
(467
)
(1,390
)
Lapse of statute of limitations
(326
)
—
—
Unrecognized tax benefit—end of period
$
6,931
$
6,340
$
4,431