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Income Taxes
 9 Months Ended
Sep. 30, 2013
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
3.
Income Taxes
 
The Company had unrecognized tax benefits of approximately $2.1 million at September 30, 2013 and $2.4 million at December 31, 2012.  The portion of unrecognized tax benefits relating to interest and penalties was approximately $0.7 million at both September 30, 2013 and December 31, 2012.  The unrecognized tax benefits as of September 30, 2013 and December 31, 2012, if recognized, would have an impact on the Company’s effective tax rate.
 
The following presents a roll-forward of the Company’s unrecognized tax benefits and associated interest for the nine months ended September 30, 2013 (amounts in thousands):
 
 
 
Unrecognized tax
benefits
 
Balance - January 1, 2013
 
$
2,350
 
Interest accrual
 
 
27
 
Foreign currency revaluation
 
 
(284)
 
Balance – September 30, 2013
 
$
2,093
 
 
The Company is subject to Federal income tax, as well as income tax in various states and foreign jurisdictions.  The Company is no longer subject to examination by Federal tax authorities for years prior to 2006 and by New Jersey tax authorities for years prior to 2012.  Various foreign subsidiaries currently have open tax years from 2003 through 2012.
 
The Synodex subsidiary of the IADS segment has not achieved significant revenue to date and has incurred losses since inception. The Company's U.S. entity has incurred losses primarily on account of the losses of Synodex. In assessing the realization of deferred tax assets, management considered whether it is more likely than not that all or some portion of the U.S. deferred tax assets will not be realizable. As the expectation of future taxable income resulting from Synodex cannot be predicted with certainty, the Company created a $7.1 million valuation allowance against all the U.S. deferred tax assets.  The Company also recorded a valuation allowance of $0.7 million on all deferred tax assets arising from unrealized losses on foreign currency forward contracts.
 
Pursuant to an income tax audit by the Indian Bureau of Taxation in March 2006, one of the Company’s Indian subsidiaries received a tax assessment approximating $259,000, including interest, through September 30, 2013, for the fiscal tax year ended March 31, 2003.  Management disagreed with the basis of the tax assessment and filed an appeal with the Appeal Officer against the assessment. In October 2010, the matter was resolved with a judgment in the Company’s favor. Under the Indian Income Tax Act, however, the income tax assessing officer has the right to appeal against the judgment passed by the Appeal Officer. In December 2010, the income tax assessing officer exercised this right, against which the Company has filed an application to defend the case, and the Company intends to contest it vigorously. The Indian Bureau of Taxation has also completed an audit of the Company’s Indian subsidiary’s income tax return for the fiscal tax year ended March 31, 2004. The ultimate outcome was favorable, and there was no tax assessment imposed for the fiscal tax year ended March 31, 2004. In 2008 and 2009, the Indian subsidiary received a final tax assessment for the fiscal years ended March 31, 2005 and 2006 from the Indian Bureau of Taxation. The tax assessment amounted to $280,000 and $281,000, including interest through September 30, 2013, for the fiscal years ended March 31, 2005 and 2006, respectively. Management disagrees with the basis of these tax assessments, has filed an appeal against the assessments and is contesting them vigorously. In January 2012, the Indian subsidiary received a final tax assessment of approximately $1.0 million, including interest, for the fiscal year ended March 31, 2008, from the Indian Bureau of Taxation. Management disagrees with the basis of this tax assessment, and has filed an appeal against it. Due to this assessment, the Company recorded a tax provision amounting to $439,000 including interest through September 30, 2013. Based on recent experience and the current regulatory environment, management believes that the tax provision of $439,000 including interest is adequate. The Indian Bureau of Taxation has also completed an audit of the Company’s Indian subsidiary’s income tax return for the fiscal tax year ended March 31, 2009. The ultimate outcome was favorable, and there was no tax assessment imposed for the fiscal tax year ended March 31, 2009. The Indian Bureau of Taxation commenced an audit of this subsidiary’s income tax return for the fiscal year ended March 31, 2010. The ultimate outcome cannot be determined at this time. As the Company is continually subject to tax audits by the Indian Bureau of Taxation, the Company continuously assesses the likelihood of an unfavorable assessment for all fiscal years for which the Company has not been audited, and as of September 30, 2013, the Company recorded a tax provision amounting to $834,000 including interest.
 
In January 2013, one of the Company’s Philippine subsidiaries received an informal tax assessment from the Internal Revenue Service of the Philippines for an amount totaling $3.8 million for the year ended December 31, 2009. The Company disagreed with the basis of the informal tax assessment and contested it vigorously. The Company has not yet received a formal notice of this assessment and the statute of limitations expired on April 15, 2013, for formal notice of the assessment. Management believes that it is reasonably likely that it will be successful in contesting an assessment, if any. Accordingly, the Company recorded no tax provision on said informal tax assessment. The Company will continuously monitor this matter and will record an appropriate tax provision in the event there is any change in circumstances.