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Income Taxes | 12 Months Ended
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Dec. 31, 2012
Income Taxes | 12. Income Taxes Our provision for income tax expense (benefit) is comprised of the following:
|  | For the Years Ended December 31, |
(in thousands) |  | 2012 |  |  | 2011 |  |  | 2010 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 184 |  |  | $ | 129 |  |  | $ | 113 |
State |  |  | (88 | ) |  |  | 116 |  |  |  | 71 |
International |  |  | 196 |  |  |  | 236 |  |  |  | 224 |
|  |  | 292 |  |  |  | 481 |  |  |  | 408 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (5,590 | ) |  |  | (10,384 | ) |  |  | 1,434 |
State |  |  | (374 | ) |  |  | (748 | ) |  |  | 170 |
International |  |  | (3 | ) |  |  | (6 | ) |  |  | 354 |
|  |  | (5,967 | ) |  |  | (11,138 | ) |  |  | 1,958 |
|  | $ | (5,675 | ) |  | $ | (10,657 | ) |  | $ | 2,366 |
Variations from the federal statutory rate are as follows:
(in thousands) |  | 2012 |  |  | 2011 |  |  | 2010 |
Expected federal income tax expense (benefit) at statutory rate of 34% |  | $ | (807 | ) |  | $ | (12,215 | ) |  | $ | 2,528 |
Effect of permanent goodwill impairment and worthless stock differences |  |  | — |  |  |  | 7,668 |  |  |  | (114 | )
Effect of permanent subsidiary’s acquisition-related costs |  |  | — |  |  |  | 461 |  |  |  | — |
Effect of permanent enhanced charitable donation differences |  |  | (31 | ) |  |  | (25 | ) |  |  | (260 | )
Effect of permanent other differences |  |  | 106 |  |  |  | 131 |  |  |  | 49 |
Effect of change in financial statement carrying value of investment |  |  | (5,077 | ) |  |  | (5,534 | ) |  |  | — |
State income tax expense (benefit), net of federal benefit |  |  | (40 | ) |  |  | (871 | ) |  |  | 238 |
Federal tax credits |  |  | — |  |  |  | (164 | ) |  |  | (16 | )
Other |  |  | 209 |  |  |  | (55 | ) |  |  | (42 | )
Effect of differences between U.S. taxation and foreign taxation |  |  | (35 | ) |  |  | (53 | ) |  |  | (17 | )
Income tax expense (benefit) |  | $ | (5,675 | ) |  | $ | (10,657 | ) |  | $ | 2,366 |
Deferred income taxes reflect net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of the net accumulated deferred income tax assets as of December 31, 2012 and 2011 are as follows:
|  | December 31, |
(in thousands) |  | 2012 |  |  | 2011 |
Deferred tax assets (liabilities): |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |
Provision for doubtful accounts |  | $ | 245 |  |  | $ | 306 |
Inventory-related expense |  |  | 699 |  |  |  | 724 |
Accrued liabilities |  |  | 3,888 |  |  |  | 3,530 |
Charitable carryforward |  |  | — |  |  |  | 187 |
Net operating loss carryforward |  |  | 3,617 |  |  |  | 2,229 |
Impaired loans to affiliate |  |  | 959 |  |  |  | — |
Prepaid and deferred catalog costs |  |  | (250 | ) |  |  | (266 | )
Other |  |  | (29 | ) |  |  | (24 | )
Total current deferred tax assets |  | $ | 9,129 |  |  | $ | 6,686 |
Non-current: |  |  |  |  |  |  |  |
Depreciation and amortization |  | $ | 288 |  |  | $ | (1,032 | )
Section 181 qualified production expense |  |  | (4,579 | ) |  |  | (4,414 | )
Net operating loss carryforward |  |  | 13,737 |  |  |  | 15,975 |
Charitable carryforward |  |  | 1,681 |  |  |  | 1,464 |
Loss (gain) from change in financial statement carrying value of investment, net |  |  | 228 |  |  |  | (4,849 | )
Gain from foreign business acquisition |  |  | (347 | ) |  |  | (347 | )
Impairment of intangibles |  |  | 5,412 |  |  |  | 6,032 |
Tax credits |  |  | 899 |  |  |  | 899 |
Other |  |  | 42 |  |  |  | (3 | )
Total non-current deferred tax assets |  |  | 17,361 |  |  |  | 13,725 |
Valuation allowance |  |  | (2,669 | ) |  |  | (1,089 | )
Total non-current deferred tax assets, net of valuation allowance |  |  | 14,692 |  |  |  | 12,636 |
Total net deferred tax assets |  | $ | 23,821 |  |  | $ | 19,322 |
The sources of income (loss) before income taxes and noncontrolling interests are as follows:
(in thousands) |  | 2012 |  |  | 2011 |  |  | 2010 |
Domestic |  | $ | (18,745 | ) |  | $ | (34,918 | ) |  | $ | 6,094 |
International |  |  | 493 |  |  |  | (1,009 | ) |  |  | 1,341 |
|  | $ | (18,252 | ) |  | $ | (35,927 | ) |  | $ | 7,435 |
On December 31, 2011, we adjusted the financial statement carrying value of our equity method investment in Real Goods Solar to its estimated fair value due to deconsolidation. Accordingly, we also adjusted the related deferred tax liability for the temporary difference in basis for this investment, thereby recognizing during 2011 an income tax benefit of $7.1 million and a credit to additional paid-in capital of $0.6 million. Income tax benefit for 2012 includes $6.0 million due to the reducing of a deferred tax liability related to the carrying value of our equity method investment in Real Goods Solar and the reduction of the carrying value of our loans to Real Goods Solar. See Note 3. Equity Method Investment and Receivable From Investee. Certain of our subsidiaries, namely those for which we own less than 80% of their shares and voting rights and/or are foreign entities, file tax returns separately from Gaiam’s consolidated tax group. At December 31, 2012, we had made a provision for U.S. federal and state income taxes on approximately $0.6 million of undistributed foreign earnings, which are not expected to remain outside of the U.S. indefinitely. Deferred tax liabilities have been established for future taxes on distribution of foreign earnings in the form of dividends or otherwise, in order to derive, for financial statement purposes, the U.S. income taxes (net of tax on foreign tax credits), state income taxes, and withholding taxes payable to the various foreign countries. At December 31, 2012, we had $15.8 million in tax effected federal net operating loss carryforwards. Additionally, we had $1.6 million in tax effected state net operating loss carryforwards. These operating loss carryforwards, if unused, will begin to expire in 2018. The Internal Revenue Code contains provisions that limit the net operating loss available for use in any given year upon the occurrence of certain events, including significant changes in ownership interest. A change in ownership of a company of greater than 50% within a three-year period results in an annual limitation on the utilization of net operating loss carryforwards from tax periods prior to the ownership changes. Certain of our net operating loss carryforwards as of December 31, 2012 are subject to annual limitations due to changes in ownership. We have alternative minimum tax credit carryforwards, which have no expiration dates, of approximately $0.5 million that are available to offset future regular tax liabilities. We also have general business tax credit carryforwards and foreign tax credit carryforwards for federal income tax purposes at December 31, 2012 of approximately $254,000 and $164,000, respectively that are available to reduce future federal income taxes, if any, and begin to expire in 2018. Periodically, we perform assessments of the realization of our net deferred tax assets considering all available evidence, both positive and negative. Based on Real Goods Solar’s establishment of a valuation allowance for all its net deferred tax assets at December 31, 2012, we established a valuation allowance, by charging loss from equity method investment, for our entire $1.6 million deferred tax asset related to our Tax Sharing Agreement with Real Goods Solar. See Note 3. Equity Method Investment and Receivable From Investee. We concluded that no other changes to our existing valuation allowances were necessary. We expect our net deferred tax assets, less the valuation allowances, at December 31, 2012 to be fully recoverable through the reversal of taxable temporary differences and normal business activities in future years. No stock options were exercised during 2012. We realized $13,000 in tax write-offs recorded to additional paid-in capital as a result of the exercise of stock options for the year ended December 31, 2011. Also, we charged $0.9 million to additional paid-in capital during the year ended December 31, 2011 as a result of adjustments to a deferred tax liability caused by temporary changes in the financial statement carrying value of our investment in Real Goods Solar. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. We measure the tax benefits recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The application of income tax law is inherently complex. Laws and regulations in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding our income tax exposures. Interpretations of and guidance surrounding income tax law and regulations change over time and may result in changes to our subjective assumptions and judgments which can materially affect amounts recognized in our consolidated balance sheets and consolidated statements of operations. The result of our assessment of our uncertain tax positions did not have a material impact on our consolidated financial statements. Our federal and state tax returns for all years after 2008 are subject to future examination by tax authorities for all our tax jurisdictions. We recognize interest and penalties related to income tax matters in interest and other income (expense) and corporate, general and administration expenses, respectively.

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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 Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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=6881521&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 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: 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 7: 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 8: 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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