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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes The components of current and deferred income tax expense included in the Consolidated Statement of Operations for years ended December 31, 2014, 2013 and 2012 as determined in accordance with ASC 740, Income Taxes (“ASC 740”), are as follows:
|  | Year ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State and local |  |  | 94 |  |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |  |  |  | — |
|  |  | 94 |  |  |  | — |  |  |  | — |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 10,739 |  |  |  | — |  |  |  | — |
State and local |  |  | 1,664 |  |  |  | — |  |  |  | — |
Foreign |  |  | — |  |  |  | — |  |  |  | — |
|  |  | 12,403 |  |  |  | — |  |  |  | — |
Income tax expense from operations |  | $ | 12,497 |  |  | $ | — |  |  | $ | — |
The Company has recorded its non-income based taxes as part of other liabilities and other expenses. Net operating losses – U.S. The Company has generated net operating losses for tax purposes (“NOL”) during the years ended December 31, 2013 and 2012 and prior periods which may be used to minimize income taxes paid. The following table provides a summary of the NOL activity for the years indicated:
|  | Year ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Beginning NOL |  | $ | (140,959 | ) |  | $ | (136,515 | ) |  | $ | (106,939 | )
U.S. GAAP income |  |  | 77,609 |  |  |  | 51,537 |  |  |  | 11,030 |
Tax differences: |  |  |  |  |  |  |  |  |  |  |  |
Temporary |  |  | (1,425 | ) |  |  | 5,580 |  |  |  | (5,633 | )
Permanent |  |  | (45,064 | ) |  |  | (61,561 | ) |  |  | (37,618 | )
Net operating losses expired |  |  | — |  |  |  | — |  |  |  | 2,645 |
Ending NOL |  | $ | (109,839 | ) |  | $ | (140,959 | ) |  | $ | (136,515 | )
Temporary differences are primarily comprised of the timing difference between recognizing expenses for tax purposes and U.S. GAAP purposes associated with rent, stock-based compensation and depreciation of fixed assets. Permanent differences are primarily comprised of the difference between stock-based compensation amounts recognized for tax purposes and previously expensed at the date of grant for U.S. GAAP purposes at the time options are exercised (at the intrinsic value) or restricted stock is vested (at fair value of the share price). The Company may record additional NOLs from stock-based compensation awards which have been granted to employees and remain unexercised or unvested as of December 31, 2014. See Note 6 for additional details related to outstanding stock compensation awards. The Company’s net operating losses generally expire 20 years from the time they are generated. In addition, due to the Company incurring a series of changes in ownership as defined by Section 382 under the Internal Revenue Code, the Company is limited as to the amount of NOL it may use in a given year. Prior to the consideration of any limitations imposed due to ownership changes, the Company’s available NOLs will expire as follows:
Year Ending December 31: |
2018 |  | $ | 502 |
2019 |  |  | 5,101 |
2021 |  |  | 579 |
2023 |  |  | 608 |
2024 |  |  | 1,942 |
2027 |  |  | 18,039 |
2028 |  |  | 19,754 |
2029 |  |  | 14,218 |
2030 |  |  | 6,385 |
2031 |  |  | 6,052 |
2032 |  |  | 32,215 |
2033 |  |  | 4,444 |
|  | $ | 109,839 |
The amounts summarized above are subject to the following annual limitations as indicated by the years such NOLs were incurred:
NOLs generated between |  | Total |  |  | Annual Prospective Limitation |  |  | Amount Deemed Worthless |
1998 — 2004 |  | $ | 8,731 |  |  | $ | 524 |  |  | $ | 3,487 |
2005 — 2013 |  |  | 101,108 |  |  |  | — |  |  |  | — |
Net operating losses |  | $ | 109,839 |  |  | $ | 524 |  |  | $ | 3,487 |
Any NOL amounts not used because of the annual limitation can be used in future periods until expiration. Net operating losses – Non-U.S. During the year ended December 31, 2014, the Company’s foreign subsidiaries generated $4,061 of NOLs. At December 31, 2014, a deferred tax asset related to these NOLs has been fully offset by a valuation allowance of $816. Deferred tax asset As of December 31, 2014 and 2013, $101,108 and $111,635 of the NOLs has been generated from stock-based compensation amounts recognized for tax purposes at the time options are exercised (at the intrinsic value) or restricted stock is vested (at fair value of the share price) and previously expensed at the date of grant for U.S. GAAP purposes. Since these amounts cannot be recognized as a deferred tax asset under U.S. GAAP, accordingly, a deferred tax asset related to this amount is not recorded. A reconciliation of the NOL amount presented above and the amount utilized in calculating the deferred tax asset at December 31, 2014 and 2013, respectively, is as follows:
|  | December 31, |
|  | 2014 |  |  | 2013 |
Net operating losses |  | $ | 109,839 |  |  | $ | 140,959 |
Net operating losses deemed worthless |  |  | (3,487 | ) |  |  | (3,487 | )
Unrecognized stock-based compensation |  |  | (101,108 | ) |  |  | (111,635 | )
Gross net operating losses available for deferred tax asset |  |  | 5,244 |  |  |  | 25,837 |
Tax rate |  |  | 38.38 | % |  |  | 45.43 | %
Tax affected |  | $ | 2,013 |  |  | $ | 11,738 |
At December 31, 2014 and 2013, the composition of the deferred tax asset is summarized as follows:
|  | December 31, |
|  | 2014 |  |  | 2013 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating losses |  | $ | 2,013 |  |  | $ | 11,738 |
Foreign net operating losses |  |  | 816 |  |  |  | — |
Stock-based compensation |  |  | 6,046 |  |  |  | 7,579 |
Accrued expenses |  |  | 5,236 |  |  |  | — |
Deferred rent liability |  |  | 2,170 |  |  |  | 1,855 |
Other |  |  | 82 |  |  |  | 82 |
Deferred tax assets |  |  | 16,363 |  |  |  | 21,254 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Incentive compensation |  |  | 4,092 |  |  |  | — |
Fixed assets |  |  | 1,965 |  |  |  | 7 |
Unrealized gains |  |  | — |  |  |  | 26 |
Deferred tax liabilities |  |  | 6,057 |  |  |  | 33 |
Total deferred tax assets less deferred tax liabilities |  |  | 10,306 |  |  |  | 21,221 |
Less: valuation allowance |  |  | (816 | ) |  |  | (21,221 | )
Net deferred tax assets and liabilities |  | $ | 9,490 |  |  | $ | — |
At December 31, 2014 and 2013, the deferred tax asset has been offset by a valuation allowance of $816 and $21,221 respectively. During the first quarter of 2014, management determined that although realization is not assured, it believed that it is more likely than not that its gross deferred tax asset would be realized. Therefore, it released the valuation allowance previously recorded resulting in an income tax benefit of $21,221 on the Company’s Consolidated Statements of Operations. In addition, during 2014, the Company generated foreign losses resulting in a deferred tax asset of $816 that is currently not expected to be realized in the foreseeable future and, accordingly, a valuation allowance has been established. During the third quarter of 2014, the Company completed a state income tax study, which resulted in a reduction in its current baseline operating tax rate in the U.S. from 45% to approximately 38%. The Company recorded a charge to income tax expense in the third quarter to reduce the value of our deferred tax asset, which had previously been recorded using a 45% rate. The Company recorded a credit to additional paid-in capital of $21,893 for the amount of NOLs from stock-based compensation utilized to reduce taxes payable during the period. A reconciliation of the statutory federal income tax rate of 35% and the Company’s effective rate is as follows:
|  | December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Federal statutory rate |  |  | 35.00 | % |  |  | 35.00 | % |  |  | 35.00 | %
Permanent differences |  |  | 0.69 | % |  |  | 0.09 | % |  |  | 0.37 | %
State income tax rate, net of federal benefit |  |  | 1.55 | % |  |  | 10.06 | % |  |  | 9.44 | %
Foreign tax differential |  |  | 0.82 | % |  |  | — |  |  |  | — |
Decrease in valuation allowance |  |  | (27.74 | %) |  |  | (45.13 | %) |  |  | (44.82 | %)
Change in effective state rate |  |  | 6.86 | % |  |  | — |  |  |  | — |
Other differences, net |  |  | (0.19 | %) |  |  | (0.02 | %) |  |  | 0.01 | %
Effective rate |  |  | 16.99 | % |  |  | 0.00 | % |  |  | 0.00 | %
Uncertain tax positions As of December 31, 2014, the Company determined that it has no uncertain tax positions, interest or penalties as defined within ASC 740-10. The Company does not have unrecognized tax benefits. The Company does not believe that it is reasonably possible that the total unrecognized benefits will significantly increase within the next 12 months. The Company is not currently under audit by any taxing authority. Tax returns filed with each jurisdiction remain open to examination under the normal three-year statute of limitations.

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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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