INCOME TAXES

The components of pretax loss for the years ended December 31, 2009, 2010 and 2011 were as follows (in thousands):



	2009			2010			2011
United States	$	(1,093	)	$	(222,594	)	$	(42,775	)
International	—			(197,466		)	(211,290		)
Loss before provision for income taxes	$	(1,093	)	$	(420,060	)	$	(254,065	)

The provision (benefit) for income taxes for the year ended December 31, 2009, 2010 and 2011 consisted of the following components (in thousands):



	2009		2010			2011
Current taxes:
U.S. federal	$	226	$	—		$	16,430
State	22		57			604
International	—		618			(5,540		)
Total current taxes	$	248	$	675		$	11,494
Deferred taxes:
U.S. federal	$	—	$	—		$	(2,075	)
State	—		—			—
International	—		(7,349		)	34,278
Total deferred taxes	—		(7,349		)	32,203
Provision (benefit) for income taxes	$	248	$	(6,674	)	$	43,697

The items accounting for differences between income tax (provision) benefit computed at the federal statutory rate and the provision for income taxes for the years ended December 31 2009, 2010 and 2011 were as follows:



	2009		2010		2011
U.S. federal income tax rate	34.0	%	35.0	%	35.0	%
Impact of foreign differential	—		(1.7	)	(3.6	)
State income taxes, net of federal benefits	2.4		0.6		0.3
Valuation allowance	(57.5	)	(12.0	)	(36.2	)
Effect of foreign and state change on deferred items	(0.9	)	(0.1	)	(2.3	)
Non-deductible expenses - stock compensation expense	—		—		(4.8	)
Non-deductible expenses - book loss on investment	—		—		(3.6	)
Amortization of taxes on intercompany sales	—		—		(2.9	)
Non-deductible expenses	—		(18.0	)	—
Change in tax status	—		(2.5	)	—
Other	(0.7	)	0.3		0.9
	(22.7	)%	1.6	%	(17.2	)%

Supplemental Disclosure for Tax Impact of Noncontrolling Interest

The following summarizes the effect of noncontrolling interests on the effective tax rate as of the years ended December 31, 2009, 2010 and 2011:



	2009		2010		2011
Less: tax attributable to noncontrolling interest	—	%	—	%	(0.8	)%
Effective tax rate with noncontrolling interest	(22.7	)%	1.6	%	(18	)%

The deferred income tax assets and liabilities consisted of the following components as of December 31 (in thousands):



	2010			2011
Deferred tax assets:
Reserves and allowances	$	5,691		$	77,910
Foreign exchange loss	226			437
Deferred rent	349			3,705
Net operating loss and tax credit carryforwards	74,283			143,204
Stock‑based compensation	2,138			15,489
Other	—			333
Total deferred tax assets	82,687			241,078
Less valuation allowance	(55,956		)	(128,215		)
Deferred tax assets, net of valuation allowance	26,731			112,863
Deferred tax liabilities:
Unearned revenue for tax	(17,525		)	(116,287		)
Intangible assets	(11,249		)	(7,715		)
Prepaid and Other Expense	—			(1,520		)
Fixed assets	(1,227		)	(6,263		)
Net deferred tax liability	$	(3,270	)	$	(18,922	)

The deferred tax amounts have been classified on the consolidated balance sheets as of December 31 as follows (in thousands):



	2010			2011
Assets:
Deferred income taxes, current	$	—		$	19,243
Deferred income taxes, non-current	14,544			46,104
Liabilities:
Deferred income taxes, current	(17,210		)	(76,841		)
Deferred income taxes, non-current	(604		)	(7,428		)
Total	$	(3,270	)	$	(18,922	)

In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various taxing jurisdictions in which it operates to determine whether it is more likely than not that its deferred tax assets are recoverable. In assessing the ultimate realizability of its net deferred tax assets, the Company considers several factors including cumulative earnings by jurisdiction, expected future taxable income by jurisdiction, the carryforward periods available for tax reporting purposes, the ability to carryback losses, available tax strategies and other factors. At December 31, 2010 and 2011, the Company recorded a valuation allowance of $56.0 and $128.2 million, respectively, against its domestic and foreign net deferred tax assets, as it believes it is more likely than not that these benefits will not be realized.

The Company had $6.3 million and $12.0 million of federal and state net operating loss carryforwards, at December 31, 2010 and 2011, respectively, which will begin expiring in 2016. In addition, at December 31, 2010 and 2011, the Company had $0.3 million and $0.3 million of federal tax credit carryforwards, respectively, which will expire beginning in 2021. At December 31, 2010 and 2011, the Company had $223.1 million and $497.9 million of foreign net operating loss carryforwards, a significant portion of which carryforward for an indefinite period.

The Company is subject to taxation in the United States, various state and foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording the related income tax assets and liabilities. The Company's practice for accounting for uncertainty in income taxes is to recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not criteria, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company is currently under IRS audit for the 2009 and 2010 tax years. All of the Company's tax years are currently open to examination by state and foreign tax authorities.

From December 31, 2009 through December 31, 2010, the Company did not have any material unrecognized tax benefits recorded on its balance sheets. The following table summarizes activity related to the Company's gross unrecognized tax benefits from January 1, 2011 to December 31, 2011 (in thousands):



	2011
Balance as of December 31, 2010	$	—
Increases related to prior year tax positions	—
Decreases related to prior year tax positions	—
Increases related to current year tax positions	55,127
Decreases based on settlements with taxing authorities	—
Decreases due to lapse of statute limitations	—
Balance as of December 31, 2011	$	55,127

The Company's total unrecognized tax benefits that, if recognized within the next twelve months, would affect our effective tax rate are $3.2 million. No significant increases or decrease in unrecognized tax benefits are expected to occur by December 31, 2012.

The Company's practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company did not recognize any interest or penalties in its consolidated statement of operations for the years ended December 31, 2009, 2010 and 2011.

At December 31, 2011, no provision has been made for U.S. income taxes and foreign withholding taxes related to the undistributed earnings of the Company's foreign subsidiaries of approximately $221.6 million, as the Company currently does not expect to remit those earnings in the foreseeable future. The actual U.S. tax cost would depend on income tax laws and circumstances at the time of distribution. Determination of the amount of unrecognized U.S. deferred tax liability related to the undistributed earnings of the Company's foreign subsidiaries is not practical due to the complexities associated with the calculation.