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Note 10 - Income Taxes
 12 Months Ended
Dec. 31, 2012
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,
2012
   
Year ended
December 31,
2011
   
Year ended
December 31,
2010
 
Income for the year before provision for income taxes
 
$
6,428,298
   
$
3,450,610
   
$
2,327,793
 
Computed expected tax expense
 
$
2,185,621
   
$
1,173,207
   
$
791,450
 
Increase (reduction) in income tax expense resulting from:
                       
State income taxes
   
16,071
     
8,627
     
5,819
 
Permanent differences, including foreign exchange
   
21,728
     
13,700
     
(22,812
)
Investment tax credits recovered
   
(106,941
)
   
(41,833
)
   
(50,311
)
Other, including alternative minimum tax and adjustments to opening deferred tax assets
   
(112,323
)
   
(218,252
)
   
82,928
 
Change in beginning of the year balance of the valuation allowance allocated to income tax expense
   
—
     
(3,655,070
)
   
(596,229
)
Provision for (recovery of) income taxes
 
$
2,004,156
   
$
(2,719,621
)
 
$
210,845
 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2012 and 2011 are presented below:

   
December 31,
2012
   
December 31,
2011
 
Deferred tax assets:
           
Deferred revenue
 
$
5,429,220
   
$
5,648,563
 
Amortization
   
541,242
     
1,231,814
 
Total gross deferred tax assets
   
5,970,462
     
6,880,377
 
Less valuation allowance
   
—
     
—
 
Net deferred tax assets
 
$
5,970,462
   
$
6,880,377
 
Deferred income tax asset, current portion
   
—
     
—
 
Deferred income tax asset, long-term portion
   
5,970,462
     
6,880,377
 
   
$
5,970,462
   
$
6,880,377
 
Deferred tax liabilities:
               
Reserves and other
 
$
(914,429
)
 
$
(880,008
)
Limited life intangible assets
   
(394,100
)
   
(505,700
) 
Indefinite life intangible assets
   
(4,840,000
)
   
(4,840,000
)
Total deferred tax liabilities
   
(6,148,529
)
   
(6,225,708
)
Less deferred tax liability, current portion
   
(914,429
)
   
(880,008
)
Deferred tax liability, long-term portion
 
$
(5,234,100
)
 
$
(5,345,700
)

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. During the fourth quarter of 2011 management released its remaining valuation allowance of $3.6 million.

At December 31, 2012 Tucows’ unrecognized tax benefits amounted to $0.4 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, unrecognized tax benefits for potential 2012 research and development tax credits as well as prior year German income tax. We will record the tax benefit of the 2012 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 benefits in tax expense. The Company did not have any significant interest and penalties accrued as of January 1, 2011 and December 31, 2012.

Tucows believes that it is reasonably possible that $0.4 million of the unrecognized tax benefit will decrease in the next twelve months as it is anticipated that the foreign tax authorities will finalize their review of prior years’ taxes owing in Pennsylvania and Germany respectively and that the 2012 ITC claim will be filed and assessed within that period.

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, 2011
 
$
167,000
 
Increase in uncertain tax benefits for the current year
   
100,000
 
Increase in uncertain tax benefits for the prior year
   
165,000
 
Decrease in uncertain tax benefits of prior years
   
(50,000
)
Balance as at December 31, 2012
 
$
382,000