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Note 10 - Income taxes:
 12 Months Ended
Dec. 31, 2011
Income Tax Disclosure [Text Block]
10. Income taxes:

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate of 34% to income before provision for income taxes as a result of the following:

   
Year ended
December 31,
2011
   
Year ended
December 31,
2010
   
Year ended
December 31,
2009
 
Income for the year before provision for income taxes
  $ 3,450,650     $ 2,327,793     $ 11,989,822  
Computed expected tax expense
  $ 1,173,207     $ 791,450     $ 4,076,539  
Increase (reduction) in income tax expense resulting from:
                       
State income taxes
    8,627       5,819       29,975  
Permanent differences, including foreign exchange
    13,700       (22,812 )     800,535  
Investment tax credits recovered
    (41,833 )     (50,311 )     (281,320 )
Other, including alternative minimum tax and adjustments to opening deferred tax assets
    (218,252 )     82,928       864,950  
Effect of change in income tax rates
    —       —       772,093  
Change in beginning of the year balance of the valuation allowance allocated to income tax expense
    (3,655,070 )     (596,229 )     (6,514,156 )
Provision for (recovery of) income taxes
  $ (2,719,621 )   $ 210,845     $ (251,384 )

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2011 and 2010 are presented below:

   
December 31,
2011
   
December 31,
2010
 
Deferred tax assets:
           
Deferred revenue
  $ 5,648,563     $ 5,732,912  
Amortization
    1,231,814       2,077,758  
Total gross deferred tax assets
    6,880,377       7,810,670  
Less valuation allowance
    —       (3,655,070 )
Net deferred tax assets
  $ 6,880,377     $ 4,155,600  
Deferred income tax asset, current portion
    —       —  
Deferred income tax asset, long-term portion
    6,880,377       4,155,600  
    $ 6,880,377     $ 4,155,600  
Deferred tax liabilities:
               
Reserves and other
  $ (880,008 )   $ (1,155,600 )
Limited life intangible assets
    (505,700 )     —  
Indefinite life intangible assets
    (4,840,000 )     (4,840,000 )
Total deferred tax liabilities
    (6,225,708 )     (5,995,600 )
Less deferred tax liability, current portion
    (880,008 )     (1,155,600 )
Less deferred tax liability, long-term portion
  $ (5,345,700     $ (4,840,000 )

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers projected future taxable income, uncertainties related to the industry in which the Company operates, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes that a valuation allowance against its deferred tax assets is no longer required. As such, during the fourth quarter of 2011 management released its remaining valuation allowance of $3.6 million. During fiscal 2011 the Company recorded a non-current deferred tax liability related to the temporary differences on acquired intangibles of $0.5 million.

At December 31, 2011 Tucows’ unrecognized tax benefits amounted to $0.2 million, which if recognized would favorably affect the income tax rate in future periods. The unrecognized tax benefit relates primarily to prior year Pennsylvania state franchise taxes and other insignificant US state taxes as well as unrecognized tax benefits for potential 2011 research and development tax credits. We will record the tax benefit of the 2011 research and development claim once we have reasonable assurance that it is more likely than not that all or a portion of the benefit arising from the claim will be realized.

The Company recognizes accrued interest and penalties related to unrecognized tax benefit in tax expense. The Company did not have any significant interest and penalties accrued as of January 1, 2010 and December 31, 2011.

Tucows believes that it is reasonably possible that $0.1 million of the unrecognized tax benefit will decrease in the next twelve months as it is anticipated that the U.S. tax authorities will finalize their review of prior years’ taxes owing in Pennsylvania within that period and that certain other state tax returns will be filed.

The following is a reconciliation of Tucows’ change in uncertain tax position under ASC 740, “Income Taxes”:

   
Total Gross
Unrecognized
Tax Benefits
 
Balance as at December 31, 2010
  $ 167,000  
Increase in uncertain tax benefits for the current year
    50,000  
Decrease in uncertain tax benefits of prior years
    (50,000 )
Balance as at December 31, 2011
  $ 167,000