|12 Months Ended|
Dec. 31, 2014
|Income Tax Disclosure [Abstract]|
The components of loss before income taxes consist of the following (in thousands):
The provision for income tax expense (benefit) consists of the following (in thousands):
Total income tax expense (benefit) differs from the expected income tax expense (benefit), computed by applying the federal statutory rate of 34% to earnings before income taxes as follows (in thousands):
The tax effects of temporary differences that give rise to significant portions of deferred tax assets (liabilities) are presented below (in thousands):
As of December 31, 2014, the Company had net operating loss carryforwards of $44.0 million for U.S. federal tax purposes. The Company also had $43.9 million of various state net operating loss carryforwards. The loss carryforwards for federal tax purposes will expire between 2023 and 2035 if not utilized. The loss carryforwards for state tax purposes will expire between 2022 and 2035 if not utilized.
As of December 31, 2014, the Company had federal and state research and development credit carryforwards of $2.8 million, net of Section 383 limitations, which will begin to expire in 2022 if not utilized.
As a result of its acquisition of Qumu, Inc. in October 2011, utilization of U.S. net operating losses and tax credits of Qumu, Inc. are subject to annual limitations under Internal Revenue Code Sections 382 and 383, respectively.
During the year ended December 31, 2012, the Company recorded a non-cash charge of approximately $14 million primarily associated with the establishment of a valuation allowance on its U.S. deferred tax assets, including the deferred tax assets established as part of the acquisition of Qumu, Inc. ASC 740, Income Taxes, requires that companies assess whether a valuation allowance should be established against their deferred tax assets based on the consideration of all available evidence, using a “more likely than not” standard. Accordingly, the Company determined a U.S. valuation allowance is appropriate, except to the extent of carryback potential. The valuation allowance will be reviewed quarterly and will be maintained until sufficient positive evidence exists to support the reversal of the valuation allowance.
As a result of Qumu's acquisition of Kulu Valley in October 2014, the Company established a deferred tax asset of approximately $0.2 million related to the tax benefits of acquired loss carryforwards. The net operating losses generated by Kulu Valley approximated $1.1 million and do not expire. The Company believes that it is more likely than not that the availability of deferred tax liabilities established primarily from acquired intangibles and the future results of operations will generate sufficient taxable income to realize the tax benefits related to the deferred tax assets established as part of the acquisition.
The Company generally believes that it is more likely than not that the future results of the operations of its subsidiary in Japan will generate sufficient taxable income to realize the tax benefits related to net deferred tax assets established in 2014 of approximately $0.1 million.
The Company has not provided deferred taxes on unremitted earnings attributable to its international subsidiaries that are considered to be reinvested indefinitely. Accumulated undistributed foreign earnings relate primarily to operations of the Company's subsidiaries in Japan and the U.K., and amount to approximately $1.8 million as of December 31, 2014. The amount of cash, cash equivalent and marketable securities held by the Company's international subsidiaries that are not available to fund domestic operations unless repatriated was $3.8 million as of December 31, 2014. The Company currently does not intend to repatriate the cash and related balances held by its international subsidiaries. However, if circumstances change and these funds are needed to meet cash requirements in the U.S., the Company may be required to accrue and pay U.S. taxes, net of related foreign tax credits, to repatriate these funds. Based on current tax laws and structures, the Company does not believe this would have a material impact on its consolidated financial statements and cash flows.
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits for the years ended December 31 is presented in the table below (in thousands):
Included in the balance of unrecognized tax benefits at December 31, 2014 are potential benefits of $8,000 that if recognized, would affect the effective tax rate. The Company does not anticipate that the total amount of unrecognized tax benefits as of December 31, 2014 will change significantly by December 31, 2015.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Total accrued interest and penalties amounted to $1,000 and $18,000 on a gross basis at December 31, 2014 and 2013, respectively, and are excluded from the reconciliation of unrecognized tax benefits presented above. Interest and penalties recognized in the Consolidated Statements of Operations related to uncertain tax positions amounted to a net tax benefit in 2014 of $18,000 and net tax expense in 2013 of $3,000.
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2014, the Company was no longer subject to income tax examinations for taxable years before 2013 in the case of U.S. federal taxing authorities, and taxable years generally before 2010 in the case of state taxing authorities, consisting primarily of Minnesota and California.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef