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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes | 15. Income Taxes For financial reporting purposes, income before income taxes includes the following components (in thousands):
|  | Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
United States |  | $ | (4,192 | ) |  | $ | 47,099 |  |  | $ | 44,400 |
Foreign |  |  | 69,460 |  |  |  | 17,214 |  |  |  | 4,302 |
Total |  | $ | 65,268 |  |  | $ | 64,313 |  |  | $ | 48,702 |
The expense (benefit) for income taxes consists of the following (in thousands):
|  | Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Federal |  |  |  |  |  |  |  |  |  |  |  |
Current |  | $ | 1,236 |  |  | $ | 4,150 |  |  | $ | 1,812 |
Deferred |  |  | 56 |  |  |  | 6,456 |  |  |  | 12,352 |
Total |  |  | 1,292 |  |  |  | 10,606 |  |  |  | 14,164 |
State |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 1,150 |  |  |  | 1,649 |  |  |  | 1,685 |
Deferred |  |  | (142 | ) |  |  | 621 |  |  |  | (725 | )
Total |  |  | 1,008 |  |  |  | 2,270 |  |  |  | 960 |
Foreign |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  | 9,258 |  |  |  | 5,149 |  |  |  | 6,366 |
Deferred |  |  | 4,864 |  |  |  | 436 |  |  |  | 17 |
Total |  |  | 14,122 |  |  |  | 5,585 |  |  |  | 6,383 |
Total |  | $ | 16,422 |  |  | $ | 18,461 |  |  | $ | 21,507 |
Differences between the income tax expense computed at the statutory federal income tax rate and per the consolidated statements of income are summarized as follows (in thousands):
|  | Years Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Tax expense at federal rate of 35% |  | $ | 22,844 |  |  | $ | 22,510 |  |  | $ | 17,045 |
State income taxes, net of federal benefit |  |  | 655 |  |  |  | 1,475 |  |  |  | 695 |
Change in valuation allowance |  |  | (2,680 | ) |  |  | 251 |  |  |  | (1,587 | )
Foreign tax rate differential |  |  | (8,940 | ) |  |  | (1,572 | ) |  |  | 1,304 |
Unrecognized tax benefit increase (decrease) |  |  | (1,665 | ) |  |  | (1,882 | ) |  |  | 328 |
Effect of intellectual property transfer |  |  | — |  |  |  | (2,100 | ) |  |  | 2,200 |
Tax effect of foreign operations |  |  | 5,311 |  |  |  | 373 |  |  |  | 919 |
Acquisition Costs |  |  | 2,659 |  |  |  | — |  |  |  | — |
Tax benefit of R&D costs |  |  | (1,749 | ) |  |  | — |  |  |  | — |
Other |  |  | (13 | ) |  |  | (594 | ) |  |  | 603 |
Income tax provision |  | $ | 16,422 |  |  | $ | 18,461 |  |  | $ | 21,507 |
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, 2012 and 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 year ended December 31, 2010 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):
|  | December 31, |
|  | 2012 |  |  | 2011 |
Deferred income tax assets: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 99,021 |  |  | $ | 5,382 |
Foreign tax credits |  |  | 19,359 |  |  |  | 1,909 |
Compensation |  |  | 20,668 |  |  |  | 19,466 |
Deferred revenue |  |  | 13,281 |  |  |  | 13,128 |
Tax basis in investments |  |  | 17,723 |  |  |  | 3,367 |
Deferred acquisition costs |  |  | 88 |  |  |  | 2,480 |
Deferred alliance costs |  |  | — |  |  |  | 8,287 |
Other |  |  | 8,356 |  |  |  | 2,211 |
Gross deferred income tax assets |  |  | 178,496 |  |  |  | 56,230 |
Less: valuation allowance |  |  | (37,941 | ) |  |  | (8,135 | )
Net deferred income tax assets |  | $ | 140,555 |  |  | $ | 48,095 |
Deferred income tax liabilities: |  |  |  |  |  |  |  |
Depreciation and amortization |  | $ | (57,957 | ) |  | $ | (8,685 | )
Total deferred income tax liabilities |  |  | (57,957 | ) |  |  | (8,685 | )
Net deferred income taxes |  | $ | 82,598 |  |  | $ | 39,410 |
Deferred income taxes / liabilities included in the balance sheet are: |  |  |  |  |  |  |  |
Deferred income tax asset - current |  | $ | 34,342 |  |  | $ | 25,944 |
Deferred income tax asset - noncurrent |  |  | 63,370 |  |  |  | 13,466 |
Deferred income tax liability - current |  |  | (174 | ) |  |  | — |
Deferred income tax liability - noncurrent |  |  | (14,940 | ) |  |  | — |
Net deferred income taxes |  | $ | 82,598 |  |  | $ | 39,410 |
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, 2012, the Company increased its valuation allowance by $29.8 million which relates primarily to tax attributes from acquisitions. At December 31, 2012, the Company had domestic tax net operating losses (“NOLs”) of $205.8 million which will begin to expire in 2018. The Company had foreign tax NOLs of $95.0 million, of which $83.8 million may be utilized over an indefinite life, with the remainder expiring over the next 11 years. The Company has provided a $6.7 million valuation allowance against the tax benefit associated with the foreign NOLs. The Company had U.S. foreign tax credit carryforwards at December 31, 2012 of $17.8 million, for which a $7.1 million 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, 2012 of $4.4 million relating to the pre-acquisition periods of acquired companies, which will begin to expire in 2020. The unrecognized tax benefit at December 31, 2012 and December 31, 2011 was $13.1 million and $4.0 million, respectively, all of which is included in other noncurrent liabilities in the consolidated balance sheet. Of these amounts, $12.2 million and $3.7 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):
|  | 2012 |  |  | 2011 |  |  | 2010 |
Balance of unrecognized tax benefits at beginning of year |  | $ | 4,012 |  |  | $ | 8,414 |  |  | $ | 10,916 |
Increases for tax positions of prior years |  |  | 10,729 |  |  |  | — |  |  |  | 398 |
Decreases for tax positions of prior years |  |  | (4 | ) |  |  | (310 | ) |  |  | — |
Increases for tax positions established for the current period |  |  | 49 |  |  |  | 750 |  |  |  | 421 |
Decreases for settlements with taxing authorities |  |  | (27 | ) |  |  | (36 | ) |  |  | (3,000 | )
Reductions resulting from lapse of applicable statute of limitation |  |  | (1,697 | ) |  |  | (4,678 | ) |  |  | (308 | )
Adjustment resulting from foreign currency translation |  |  | 17 |  |  |  | (128 | ) |  |  | (13 | )
Balance of unrecognized tax benefits at end of year |  | $ | 13,079 |  |  | $ | 4,012 |  |  | $ | 8,414 |
The increases for tax positions of prior years for 2012 in the above table are from acquisitions completed during 2012. The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and many foreign jurisdictions. The U.S., Canada, India, Ireland, South Africa, and United Kingdom 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 2008 are open for audit. In the foreign jurisdictions, the tax returns open for audit generally vary by jurisdiction between 2006 and 2012. The Company’s Indian income tax returns covering fiscal years 2002 through 2006 and 2010 through 2011 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 $1.6 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, 2012 and December 31, 2011, $1.8 million and $1.5 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, 2012, 2011, and 2010 is $(0.2) million, $(0.5) million, and $0.4 million, respectively. The undistributed earnings of the Company’s foreign subsidiaries of approximately $142.9 million are considered to be permanently 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. Undistributed foreign earnings of $54.2 million are from foreign subsidiaries acquired during 2012. On January 2, 2013 the American Taxpayer Relief Act of 2012 was enacted, which included retroactive reinstatement of several tax laws to January 1, 2012. The effects on the Company of these retroactive changes in the tax law related to fiscal 2012 is estimated to be between $1.0 million and $2.0 million, which will be recognized as a benefit to income tax expense in the first quarter of fiscal 2013, the quarter in which the law was enacted.

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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 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 2: 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 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: 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 6: 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 7: 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 8: 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 + Details
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