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Income Taxes | 12 Months Ended
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Dec. 31, 2011
Income Taxes | 15. Income Taxes For financial reporting purposes, income before income taxes includes the following components (in thousands):
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Years Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
United States |  | $ | 47,099 |  |  | $ | 44,400 |  |  | $ | 22,020 |
Foreign |  |  | 17,214 |  |  |  | 4,302 |  |  |  | 11,088 |
Total |  | $ | 64,313 |  |  | $ | 48,702 |  |  | $ | 33,108 |
The expense (benefit) for income taxes consists of the following (in thousands):
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Years Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Federal |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 4,150 |  |  | $ | 1,812 |  |  | $ | 9,964 |
Deferred |  |  | 6,456 |  |  |  | 12,352 |  |  |  | (3,259 | )
Total |  |  | 10,606 |  |  |  | 14,164 |  |  |  | 6,705 |
State |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 1,649 |  |  |  | 1,685 |  |  |  | 1,415 |
Deferred |  |  | 621 |  |  |  | (725 | ) |  |  | (2,356 | )
Total |  |  | 2,270 |  |  |  | 960 |  |  |  | (941 | )
Foreign |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 5,149 |  |  |  | 6,366 |  |  |  | 6,465 |
Deferred |  |  | 436 |  |  |  | 17 |  |  |  | 1,253 |
Total |  |  | 5,585 |  |  |  | 6,383 |  |  |  | 7,718 |
Total |  | $ | 18,461 |  |  | $ | 21,507 |  |  | $ | 13,482 |
Differences between the income tax expense (benefit) computed at the statutory federal income tax rate and per the consolidated statements of income are summarized as follows (in thousands):
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Years Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Tax expense at federal rate of 35% |  | $ | 22,510 |  |  | $ | 17,045 |  |  | $ | 11,588 |
State income taxes, net of federal benefit |  |  | 1,475 |  |  |  | 695 |  |  |  | (293 | )
Change in valuation allowance |  |  | 251 |  |  |  | (1,587 | ) |  |  | (723 | )
Foreign tax rate differential |  |  | (1,572 | ) |  |  | 1,304 |  |  |  | 3,499 |
Tax reserve increase (decrease) |  |  | (1,882 | ) |  |  | 328 |  |  |  | (840 | )
Effect of intellectual property transfer |  |  | (2,100 | ) |  |  | 2,200 |  |  |  | 2,200 |
Tax effect of foreign operations |  |  | 373 |  |  |  | 919 |  |  |  | (742 | )
Other |  |  | (594 | ) |  |  | 603 |  |  |  | (1,207 | )
Income tax provision |  | $ | 18,461 |  |  | $ | 21,507 |  |  | $ | 13,482 |
Prior year amounts reflected in the above table have been expanded into additional categories for enhanced disclosure. The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” for the year ended December 31, 2011 are Canada, Ireland and United Kingdom. The countries having the greatest impact on the tax rate adjustment line shown in the above table as “Foreign tax rate differential” for the years ended December 31, 2010 and 2009 are Ireland and United Kingdom. The deferred tax assets and liabilities result from differences in the timing of the recognition of certain income and expense items for tax and financial accounting purposes. The sources of these differences at each balance sheet date are as follows (in thousands):
|  |  | September 30, |  |  |  | September 30, |
|  | December 31, |
|  | 2011 |  |  | 2010 |
Current net deferred tax assets: |  |  |  |  |  |  |  |
Allowance for uncollectible accounts |  | $ | 1,184 |  |  | $ | 1,414 |
Deferred revenue |  |  | 9,170 |  |  |  | 4,622 |
Alliance deferred costs |  |  | 8,287 |  |  |  | (203 | )
Deferred acquisition costs |  |  | 2,480 |  |  |  | — |
Compensation |  |  | 6,364 |  |  |  | 6,268 |
Other |  |  | 999 |  |  |  | 1,250 |
Total current deferred tax assets |  |  | 28,484 |  |  |  | 13,351 |
Less: valuation allowance |  |  | (2,540 | ) |  |  | (1,034 | )
Net current deferred tax assets |  | $ | 25,944 |  |  | $ | 12,317 |
Noncurrent net deferred tax assets: |  |  |  |  |  |  |  |
Noncurrent deferred tax assets |  |  |  |  |  |  |  |
Foreign tax credits |  | $ | 2,260 |  |  | $ | 6,706 |
General business credits |  |  | 125 |  |  |  | 1,246 |
Stock based compensation |  |  | 12,785 |  |  |  | 9,921 |
Foreign net operating loss carryforwards |  |  | 3,217 |  |  |  | 4,612 |
Capital loss carryforwards |  |  | 3,221 |  |  |  | 3,259 |
Deferred revenue |  |  | 3,913 |  |  |  | 8,394 |
Alliance deferred costs |  |  | 87 |  |  |  | 9,962 |
U.S. net operating loss carryforwards |  |  | 1,783 |  |  |  | — |
Other |  |  | 209 |  |  |  | 276 |
Total noncurrent deferred tax assets |  |  | 27,600 |  |  |  | 44,376 |
Noncurrent deferred tax liabilities |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | (8,539 | ) |  |  | (9,415 | )
Total noncurrent deferred tax liabilities |  |  | (8,539 | ) |  |  | (9,415 | )
Less: valuation allowance |  |  | (5,595 | ) |  |  | (6,818 | )
Net noncurrent deferred tax assets |  | $ | 13,466 |  |  | $ | 28,143 |
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income, carryback opportunities and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowances recorded. During the year ended December 31, 2011, the Company increased its valuation allowance by $0.3 million. At December 31, 2011, the Company had domestic tax net operating losses (“NOLs”) of $6.0 million which will begin to expire in 2025. The Company had foreign tax NOLs of $12.8 million, of which $11.3 million may be utilized over an indefinite life, with the remainder expiring over the next 12 years. The Company has provided a $2.7 million valuation allowance against the tax benefit associated with the foreign NOLs. At December 31, 2011, the Company had domestic capital loss carryforwards of $8.9 million for which a full valuation allowance has been provided. The Company had foreign capital loss carryforwards for tax purposes of $0.5 million for which a full valuation allowance has been provided. The domestic losses expire in 2014 and the foreign capital losses are available indefinitely to offset future capital gains. The Company had U.S. foreign tax credit carryforwards at December 31, 2011 of $0.5 million, for which a full valuation allowance has been provided. The U.S. foreign tax credits will begin to expire in 2014. The Company also had domestic general business credit carryforwards at December 31, 2011 of $0.1 million relating to the pre-acquisition periods of acquired companies, which will begin to expire in 2020. At December 31, 2011, the Company had tax credits associated with various foreign subsidiaries of $1.4 million. The Company has provided a $1.0 million valuation allowance related to these tax credits. The unrecognized tax benefit at December 31, 2011 and December 31, 2010 was $4.0 million and $8.4 million, respectively, all of which is included in other noncurrent liabilities in the consolidated balance sheet. Of these amounts, $3.7 million and $5.7 million, respectively, represent the net unrecognized tax benefits that, if recognized, would favorably impact the effective income tax rate in respective years. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows (in thousands):
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Balance of unrecognized tax benefits at beginning of year |  | $ | 8,414 |  |  | $ | 10,916 |  |  | $ | 11,535 |
Increases for tax positions of prior years |  |  | — |  |  |  | 398 |  |  |  | 5,469 |
Decreases for tax positions of prior years |  |  | (310 | ) |  |  | — |  |  |  | (4,327 | )
Increases for tax positions established for the current period |  |  | 750 |  |  |  | 421 |  |  |  | 19 |
Decreases for settlements with taxing authorities |  |  | (36 | ) |  |  | (3,000 | ) |  |  | (299 | )
Reductions resulting from lapse of applicable statute of limitation |  |  | (4,678 | ) |  |  | (308 | ) |  |  | (1,602 | )
Adjustment resulting from foreign currency translation |  |  | (128 | ) |  |  | (13 | ) |  |  | 121 |
Balance of unrecognized tax benefits at end of year |  | $ | 4,012 |  |  | $ | 8,414 |  |  | $ | 10,916 |
The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and many foreign jurisdictions. The U.S., United Kingdom and Canada are the main taxing jurisdictions in which the Company operates. The years open for audit vary depending on the tax jurisdiction. In the U.S., the Company’s tax returns for years following 2007 are open for audit. In the United Kingdom, the Company’s tax returns for the years following 2009 are open for audit, while in Canada, the Company’s tax returns for years following fiscal year 2004 are open for audit. The Company’s Canadian income tax returns covering fiscal years 2006 and 2007 are under audit by the Canada Revenue Agency. The Company’s Indian income tax returns covering fiscal years 2002 through 2006, plus 2010 are under audit by the Indian tax authority. Other foreign subsidiaries could face challenges from various foreign tax authorities. It is not certain that the local authorities will accept the Company’s tax positions. The Company believes its tax positions comply with applicable tax law and intends to vigorously defend its positions. However, differing positions on certain issues could be upheld by tax authorities, which could adversely affect the Company’s financial condition and results of operations. The Company believes it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next 12 months by approximately $3.0 million due to the settlement of various audits and the expiration of statutes of limitations. The Company accrues interest related to uncertain tax positions in interest expense or interest income and recognizes penalties related to uncertain tax positions in other income or other expense. As of December 31, 2011 and December 31, 2010, $1.5 million and $2.2 million, respectively is accrued for the payment of interest and penalties related to income tax liabilities. The aggregate amount of interest and penalties recorded in the statement of income for the years ended December 31, 2011, 2010, and 2009 is $(0.5) million, $0.4 million, and $0.3 million, respectively. The undistributed earnings of the Company’s foreign subsidiaries of approximately $71.5 million are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided for such undistributed earnings. The determination of the additional U.S. federal and state income taxes or foreign withholding taxes that have not been provided is not practicable.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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