Note 9 - Income Taxes

9 Months Ended

Sep. 30, 2015

9.	Income Taxes

The Company files income tax returns in the United States Federal jurisdiction, in a limited number of foreign jurisdictions, and in many state jurisdictions. Internal Revenue Service examinations have been completed for years prior to 2011. With few exceptions, the Company is no longer subject to U.S. Federal, state or foreign income tax examinations for years before 2011. The Company is currently under Colorado income tax audit for the years 2009 to 2013. It is reasonably possible that the Company will close the audit within the next 12-month period. Such resolution is not anticipated to have a significant impact on our results of operations. There are no other income tax audits in progress.

The Company had $4.7 million and $2.3 million of unrecognized tax benefits at September 30, 2015 and December 31, 2014, respectively. The Company believes it is reasonably possible that the total amounts of unrecognized tax benefits will decrease in the following twelve months due to the expiration of certain statues of limitations; however, actual results could differ from those currently expected. Effectively all the unrecognized tax benefits would affect the Company’s effective tax rate if recognized at some point in the future. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

The Company provided for income taxes from continuing operations at an estimated effective tax rate of 79.7% and 35.5% for the three and nine months ended September 30, 2015, and an estimated effective tax rate of 35.9% and 35.8% for the three and nine months ended September 30, 2014, respectively.

The Company completed a research and development (R&D) tax credit study for 2014 in the third quarter of 2015, resulting in a significantly higher credit than previously estimated; therefore, a discrete benefit of $2.5 million was recorded, which affected the Company’s effective tax benefit rate in the third quarter of 2015. In the first nine months ended September 30, 2015, after considering the guidance for accounting for income taxes, and weighing the positive and negative evidence including the Company’s recent history of cumulative losses, the Company recorded a $1.9 million valuation allowance on a portion of its deferred tax assets, primarily related to state net operating loss carry forwards and state credits.

The effective tax rate for the nine months ended September 30, 2015 includes the impact of the recognition of R&D tax credits (which increased the effective benefit rate) as well as the non-deductibility of expense related to the impairment of goodwill and the valuation allowance recorded (both of which decreased the effective benefit rate).