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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | 14. INCOME TAXES The tax provision is based on the annual effective tax rate for the year, which includes estimated federal, state and foreign income taxes on the Company’s pre-tax income and estimated federal and state income taxes for certain noncontrolling interest subsidiaries that are not part of the Company’s consolidated income tax returns. The tax provisions also include discrete items, principally related to tax credits, tax provision vs. tax return differences and accrued interest for potential liabilities. The reconciliation of the federal statutory rate to the effective income tax rate for the years ended December 31 is as follows:
|  | 2013 |  |  | 2012 |  |  | 2011 |
Statutory federal tax rate |  |  | (34.0 | %) |  |  | (34.0 | %) |  |  | 35.0 | %
State income taxes, net of federal income tax benefit |  |  | 1.1 |  |  |  | (9.4 | ) |  |  | 3.4 |
Tax credits |  |  | (8.1 | ) |  |  | 0.6 |  |  |  | (4.0 | )
U.S. manufacturing deduction |  |  | 1.7 |  |  |  | (3.8 | ) |  |  | (2.0 | )
Permanent items |  |  | 0.6 |  |  |  | 2.2 |  |  |  | 0.5 |
Book income attributable to noncontrolling interest |  |  | 0.4 |  |  |  | 6.8 |  |  |  | (1.4 | )
Foreign rate differential and deferred items |  |  | (0.2 | ) |  |  | 0.1 |  |  |  | 0.6 |
Increase (decrease) in tax reserves |  |  | (0.1 | ) |  |  | 0.3 |  |  |  | 0.6 |
Increase in valuation allowance |  |  | 53.3 |  |  |  | 84.5 |  |  |  | — |
Other |  |  | 0.1 |  |  |  | (0.7 | ) |  |  | 1.0 |
|  |  | 14.8 | % |  |  | 46.6 | % |  |  | 33.7 | %
On January 2, 2013 the American Taxpayer Relief Act (“ATRA”) of 2012 was signed into law. Under prior law, a taxpayer was entitled to a research tax credit for qualifying amounts paid or incurred on or before December 31, 2011. The ATRA extended the research credit for two years to December 31, 2013. The extension of the research tax credit was retroactive and includes amounts paid or incurred after December 31, 2011. Since the law was enacted in 2013, the federal research tax credit for 2012 of $549,000 was recorded as a discrete item in the first quarter of 2013. For financial reporting purposes, income (loss) before income taxes for the years ended December 31 include the following components (in thousands):
|  | 2013 |  |  | 2012 |  |  | 2011 |
Domestic |  | $ | (20,466 | ) |  | $ | (3,109 | ) |  | $ | 13,406 |
Foreign |  |  | 1 |  |  |  | 518 |  |  |  | 626 |
|  | $ | (20,465 | ) |  | $ | (2,591 | ) |  | $ | 14,032 |
Significant components of the provision (benefit) for income taxes for the years ended December 31 are as follows (in thousands):
|  | 2013 |  |  | 2012 |  |  | 2011 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (1,848 | ) |  | $ | 920 |  |  | $ | 3,624 |
State |  |  | 284 |  |  |  | 425 |  |  |  | 496 |
Foreign |  |  | 112 |  |  |  | 231 |  |  |  | 455 |
|  |  | (1,452 | ) |  |  | 1,576 |  |  |  | 4,575 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 4,491 |  |  |  | (369 | ) |  |  | 148 |
|  | $ | 3,039 |  |  | $ | 1,207 |  |  | $ | 4,723 |
The Company intends to continue to reinvest certain of its foreign earnings indefinitely. Accordingly, no U.S. income taxes have been provided for approximately $2,810,000 of unremitted earnings of international subsidiaries. As of December 31, 2013, the amount of unrecognized deferred tax liability on these earnings was $219,000. Significant components of the Company’s deferred tax assets and liabilities as of December 31 were as follows (in thousands):
|  | 2013 |  |  | 2012 |
Deferred tax assets: |  |  |  |  |  |  |  |
Research and development tax credit carryforwards |  | $ | 8,754 |  |  | $ | 9,032 |
Stock-based compensation |  |  | 3,048 |  |  |  | 2,218 |
Inventory reserves |  |  | 2,687 |  |  |  | 2,651 |
Net operating loss carryforwards |  |  | 2,497 |  |  |  | 1,088 |
Vacation accrual |  |  | 1,645 |  |  |  | 1,569 |
Investment tax credit carryforwards |  |  | 1,367 |  |  |  | 1,335 |
Capital loss carryforward |  |  | 680 |  |  |  | 680 |
Unrealized loss on investments |  |  | 399 |  |  |  | 380 |
Alternative minimum tax credit carryforward |  |  | 340 |  |  |  | 556 |
Deferred revenue |  |  | 279 |  |  |  | 555 |
Warranty reserves |  |  | 88 |  |  |  | 90 |
Bad debt reserves |  |  | 65 |  |  |  | 99 |
Other |  |  | 428 |  |  |  | 694 |
Total deferred tax assets |  |  | 22,277 |  |  |  | 20,947 |
Less: Valuation allowance for deferred tax assets |  |  | (20,214 | ) |  |  | (11,480 | )
Net deferred tax assets |  |  | 2,063 |  |  |  | 9,467 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | (918 | ) |  |  | (2,261 | )
Prepaid expenses |  |  | (598 | ) |  |  | (733 | )
Patent amortization |  |  | (416 | ) |  |  | (477 | )
Unremitted Vicor Custom Power earnings |  |  | (335 | ) |  |  | (342 | )
Other |  |  | — |  |  |  | (355 | )
Total deferred tax liabilities |  |  | (2,267 | ) |  |  | (4,168 | )
Net deferred tax assets (liabilities) |  | $ | (204 | ) |  | $ | 5,299 |
As of December 31, 2013, the Company has a valuation allowance of approximately $20,214,000 primarily against all domestic net deferred tax assets, for which realization cannot be considered more likely than not at this time. Management assesses the need for the valuation allowance on a quarterly basis. In assessing the need for a valuation allowance, the Company considers all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and past financial performance. In 2013, the Company recorded an increase to the valuation allowance of approximately $10,241,000 for all remaining domestic net deferred tax assets not previously covered by a valuation allowance due to the following factors: (1) the Company’s forecast of future taxable income, of the appropriate nature, based on its quarterly assessment was not sufficient to support the recoverability of the remaining domestic deferred tax assets; (2) recent cumulative losses and the Company’s projection of continued losses into 2014; (3) while the Company has the ability to carryback federal net operating losses or credits to utilize against federal taxable income, it will generate only $1,600,000 in cash refunds; and (4) our lack of prudent and feasible tax planning strategies. During 2012, the Company recorded an increase to the valuation allowance of approximately $1,489,000 for all remaining state deferred tax assets not previously covered by a valuation allowance at that time due to the following factors: (1) the Company’s forecast of future taxable income, of the appropriate nature, based on its quarterly assessment was not sufficient to support the recoverability of those state deferred tax assets; (2) the Company did not have the ability to carryback state net operating losses or credits to utilize against state taxable income; and (3) state tax net operating losses and credits have a shorter carryforward period to be utilized than do the federal tax attributes. The valuation allowance against these deferred tax assets may require adjustment in the future based on changes in the mix of temporary differences, changes in tax laws, and operating performance. If and when management determines the valuation allowance should be released, the adjustment would result in a tax benefit in the Consolidated Statements of Operations and may include a portion to be accounted for through “Additional paid-in capital”, a component of Stockholders’ Equity. The amount of the tax benefit to be recorded in a particular quarter could be material. As a result of certain realization requirements under the stock-based compensation guidance, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets as of December 31, 2013 that arose directly from tax deductions related to stock-based compensation greater than stock-based compensation recognized for financial reporting. Equity will be increased by $2,804,000 if and when such deferred tax assets are ultimately realized. The Company uses ASC 740 ordering when determining when excess tax benefits have been realized. The research and development tax credit carryforwards expire beginning in 2014 for state purposes and in 2025 for federal purposes. The Company has federal net operating loss carryforwards which expire in 2033, as well as net operating loss carryforwards in certain states, which expire beginning in 2014 and through 2033. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | 2013 |  |  | 2012 |  |  | 2011 |
Balance on January 1 |  | $ | 1,506 |  |  | $ | 1,405 |  |  | $ | 1,102 |
Additions based on tax provisions related to the current year |  |  | 566 |  |  |  | 134 |  |  |  | 269 |
Additions (reductions) for tax positions of prior years |  |  | — |  |  |  | (33 | ) |  |  | 34 |
Balance on December 31 |  | $ | 2,072 |  |  | $ | 1,506 |  |  | $ | 1,405 |
The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. The total amount of unrecognized tax benefits, that is the aggregate tax effect of differences between tax return positions and the benefits recognized in the Company’s financial statements, as of December 31, 2013, 2012 and 2011 of $2,072,000, $1,506,000 and $1,405,000, respectively, if recognized, may decrease the Company’s income tax provision and effective tax rate. None of the unrecognized tax benefits as of December 31, 2013 are expected to significantly change during the next twelve months. The Company recognizes accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2013, 2012 and 2011, the Company recognized approximately ($28,000), $32,000 and $68,000, respectively, in net interest (benefit) expense. As of December 31, 2013 and 2012, the Company had accrued approximately $149,000 and $177,000, respectively, for the potential payment of interest. The Company files income tax returns in the United States and various foreign tax jurisdictions. These tax returns are generally open to examination by the relevant tax authorities from three to seven years from the date they are filed. The tax filings relating to the Company’s federal and state taxes are currently open to examination for tax years 2010 through 2012 and 2006 through 2012, respectively. In addition, the 2003, 2004 and 2007 tax years resulted in losses. These years may also be subject to examination since the losses were carried forward and utilized in future years. In August 2013, the Company received notice from the Internal Revenue Service that its federal corporate tax returns for the tax years 2010 and 2011 had been selected for audit. The audit is in the early stages. There are no other income tax audits currently in process.

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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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: 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 6: 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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