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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Acacia’s provision for income taxes consists of the following (in thousands):
|  | 2013 |  | 2012 |  | 2011
Current: |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | 179 |
State taxes |  | 113 |  |  | 281 |  |  | 943 |
Foreign taxes |  | 4,405 |  |  | 11,890 |  |  | 7,586 |
Total current |  | 4,518 |  |  | 12,171 |  |  | 8,708 |
Deferred: |  |  |  |  |  |
Federal |  | (26,151 | ) |  | 10,085 |  |  | — |
State taxes |  | (325 | ) |  | (196 | ) |  | — |
Total deferred |  | (26,476 | ) |  | 9,889 |  |  | — |
Provision for income taxes |  | $ | (21,958 | ) |  | $ | 22,060 |  |  | $ | 8,708 |
The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following at December 31, 2013 and 2012 (in thousands):
|  | 2013 |  | 2012
Deferred tax assets: |  |  |  |
Net operating loss and capital loss carryforwards and credits |  | $ | 34,679 |  |  | $ | 15,668 |
Stock compensation |  | 3,052 |  |  | 1,140 |
Basis of investments in affiliates |  | 867 |  |  | 415 |
Accrued liabilities and other |  | 387 |  |  | 250 |
Unrealized loss on short-term investments |  | 337 |  |  | 415 |
State taxes |  | 18 |  |  | 212 |
Total deferred tax assets |  | 39,340 |  |  | 18,100 |
Deferred tax liabilities: |  |  |  |
Fixed assets and intangibles |  | (33,378 | ) |  | (39,457 | )
Other |  | (112 | ) |  | (60 | )
Net deferred tax liabilities |  | 5,850 |  |  | (21,417 | )
Less: valuation allowance |  | (7,585 | ) |  | (5,396 | )
Net deferred taxes |  | $ | (1,735 | ) |  | $ | (26,813 | )
A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows:
|  | 2013 |  | 2012 |  | 2011
Statutory federal tax rate - (benefit) expense |  | (35 | )% |  | 35 | % |  | 35 | %
State income and foreign taxes, net of federal tax effect |  | 5 | % |  | 15 | % |  | 27 | %
Foreign tax credit |  | (6 | )% |  | (15 | )% |  | (25 | )%
Noncontrolling interests in operating subsidiaries |  | 1 | % |  | — | % |  | (1 | )%
Nondeductible permanent items |  | 2 | % |  | 5 | % |  | 4 | %
Expired net operating loss carryforwards |  | 2 | % |  | — | % |  | 1 | %
Valuation allowance |  | 4 | % |  | (13 | )% |  | (12 | )%
|  | (27 | )% |  | 27 | % |  | 29 | %
At December 31, 2013 and 2012, the Company has recorded valuation allowances for certain tax attribute carryforwards and other deferred tax assets due to uncertainty regarding future realizability, as follows:
|  | December 31,
|  | 2013 |  | 2012
Capital loss carryforwards |  | $ | 1,562 |  |  | $ | 2,935 |
Net operating loss carryforwards |  | 1,281 |  |  | 2,046 |
Foreign tax credits |  | 4,405 |  |  | — |
Unrealized losses on short-term investments and other deferred tax assets |  | 337 |  |  | 415 |
Total valuation allowance |  | $ | 7,585 |  |  | $ | 5,396 |
Capital loss carryforwards and certain net operating loss carryforwards included in the valuation allowances for the periods presented, expire in varying amounts from 2014 through 2033. Foreign tax credits included in the valuation allowance were generated during the year ended December 31, 2013, and expire in 2023. In future periods, if the Company determines it will more likely than not be able to realize certain of these amounts, the applicable portion of the benefit from the release of the valuation allowance will generally be recognized in the statement of income in the period the determination is made. Release of Valuation Allowance. As of December 31, 2011, Acacia maintained a full valuation allowance against its net deferred tax assets. The net deferred tax liability resulting from the acquisition of ADAPTIX in January 2012 created an additional source of income to utilize against the majority of Acacia’s existing consolidated net deferred tax assets. In addition, Acacia estimated that certain other deferred tax assets related to foreign tax credits and other state related deferreds were more likely than not realizable in future periods. Accordingly, the valuation allowance on the majority of the Company’s net deferred tax assets was released, resulting in a financial statement income tax benefit of $10,651,000 for the year ended December 31, 2012. At December 31, 2013, Acacia had U.S. federal and state income tax NOLs totaling approximately $83,372,000 and $56,400,000, expiring between 2025 and 2033, and 2014 and 2033, respectively, for which $0 and $441,000 of federal and state net operating losses are included as a deferred tax asset which will be credited to additional paid-in capital when realized as a reduction of taxes payable on Acacia’s tax return. In addition, $1,928,000 and $37,725,000 of federal and state net operating losses are not included as a deferred tax asset and will be credited to additional paid-in capital when realized as a reduction of taxes payable on Acacia’s tax return as they relate to unrecognized excess tax benefits (see additional information regarding the ordering of windfall tax benefits and use of the “with-and-without” approach below). As of December 31, 2013, $0 and $441,000 of the valuation allowance related to the tax benefits of stock option deductions included in Acacia’s federal and state NOLs deferred tax asset, respectively. At December 31, 2013, approximately $29,318,000 of the U.S. federal NOLs, acquired in connection with the acquisition of ADAPTIX, are subject to an annual utilization limitation of approximately $14,100,000, pursuant to the “change in ownership” provisions under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). As of December 31, 2013 Acacia has approximately $24,718,000 of foreign tax credits, expiring between 2015 and 2023, of which $20,313,000 has been utilized for financial statement purposes. Future realization of the credits as a reduction of taxes payable on Acacia’s tax return will result in an income tax benefit recognizable through additional paid in capital since the entire amount of the credits have been utilized for financial statement purposes under the “with-and-without approach.” In general, foreign taxes withheld may be claimed as a deduction on future U.S. corporate income tax returns, or as a credit against future U.S. income tax liabilities, subject to certain limitations. Excluding the impact of the change in valuation allowance in fiscal years 2013, 2012 and 2011, our annual effective tax rates were (31%), 40% and 41%, respectively. In 2013, the rate at which we recorded the tax benefit associated with the pre-tax loss for the period was reduced from the statutory rate primarily due to certain nondeductible permanent items and expired capital loss carryforwards. The Company recorded a valuation allowance on foreign tax credits generated in fiscal year 2013 totaling $4,605,000, as discussed above, and therefore, did not recognize the related tax benefit in fiscal year 2013. The Company generated pretax income in 2012 and had significant nondeductible permanent items which increased our effective tax rate as shown above. The Company generated pretax income in fiscal year 2012, resulting in tax expense for the period. The fiscal year 2012 effective tax rate was lower than the U.S. federal statutory rate primarily due to $10.2 million of tax benefits recognized resulting from the release of valuation allowance on the majority of our net deferred tax assets in the first quarter of 2012, as discussed above. The Company has elected to utilize the “with-and-without approach” regarding ordering of windfall tax benefits to determine whether the windfall tax benefit has reduced taxes payable. Under this approach, the windfall tax benefits would be recognized in additional paid in capital only if an incremental tax benefit is realized after considering all other tax benefits presently available to the Company. The deductions related to the exercise and vesting of equity-based incentive awards during the periods presented are, in general, available to offset taxable income on Acacia’s consolidated tax returns. Accordingly, the excess tax benefit related to the exercise and vesting of equity-based incentive awards for the periods presented, was credited to additional paid-in capital, not taxes payable. The actual tax benefit realized for excess tax deductions resulting from the exercise and vesting of equity-based incentive awards (noncash tax expense) totaled $13,210,000 and $583,000 for the years ended December 31, 2012 and 2011, respectively. For the year ended December 31, 2013, the Company incurred approximately $1,398,000 of net short falls from the exercise and vesting of equity-based incentive awards, of which $1,398,000 was recorded against its additional paid-in capital pool with no impact to the income statement. Acacia is subject to taxation in the U.S. and various state jurisdictions. With no material exceptions, Acacia is no longer subject to U.S. federal or state examinations by tax authorities for years before 1997. At December 31, 2013, the Company had total unrecognized tax benefits of approximately $2,127,000, including a recorded noncurrent liability of $85,000, related to unrecognized tax benefits primarily associated with state taxes. No interest and penalties have been recorded for the unrecognized tax benefits as of December 31, 2013. If recognized, approximately $2,127,000 would impact the Company’s effective tax rate. The Company does not expect that the liability for unrecognized tax benefits will change significantly within the next 12 months. Activity related to the gross unrecognized tax benefits for the year ended December 31, 2013 was as follows (in thousands):
Balance at January 1, 2012 |  | $ | 85 |
Additions based on tax positions related to the current year |  | — |
Additions for tax positions related to prior years |  | 772 |
Additions resulting from the acquisition of ADAPTIX |  | 1,270 |
Reductions |  | — |
Balance at December 31, 2012 |  | 2,127 |
Reductions |  | — |
Balance at December 31, 2013 |  | $ | 2,127 |

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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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