NOTE 14. INCOME TAXES

The (benefit from) provision for income taxes consists of the following (in thousands):

	Year Ended December 31,

	2013			2012			2011
Current:
Federal	$	60,874		$	(19	)	$	(466	)
State		3,593			(75	)		858
Foreign		3			3			4


		64,470			(91	)		396


Deferred:
Federal	$	(97,690	)	$	—		$	—
State		(5,512	)		—			—
Foreign		—			—			—


		(103,202	)		—			—




Total (benefit) provision for income taxes	$	(38,733	)	$	(91	)	$	396

A reconciliation of income taxes at the statutory federal income tax rate to the actual tax rate included in the statements of operations is as follows (in thousands):

	Year Ended December 31,

	2013			2012			2011
Tax at federal statutory rate	$	1,603		$	(10,454	)	$	24,893
State tax, net of federal benefit		(3,177	)		(48	)		558
Foreign tax		3			3			4
Research Credit		(258	)		—			—
Net Operating Losses not benefited (benefited)		(17,510	)		9,094			(25,510	)
Federal—AMT		—			(19	)		(466	)
Stock Based Compensation		923			1,038			774
Non deductible meals and entertainment		442			131			17
Non-deductible other expense		(133	)		164			126
Change in Valuation Allowance		(20,626	)		—			—


Total	$	(38,733	)	$	(91	)	$	396

During 2013, the Company recognized an income tax benefit of approximately $38.7 million which resulted primarily from our reversal of a valuation allowance on all of our U.S. federal deferred tax assets and most of our state deferred tax assets as more fully described below.

The Company's tax benefits for the year ended December 31, 2012 was due to Federal and state refundable credits offset by foreign taxes wittheld on royalty revenue related to the Company's agreement with LG by the Republic of Korea .

On January 2, 2013, the enactment of the American Taxpayer Relief Act of 2013 extended retroactively through the end of calendar 2013 the U.S. federal research and development credit which had expired on December 31, 2011. As a result, an income tax benefit for the year ended December 2013 includes the tax benefit for the reinstatement of the 2012 federal research tax credit.

The Company's tax provision for 2011 is due to state taxes and foreign taxes withheld on royalty revenue related to the Company's agreement with LG by the Republic of Korea, offset by federal and state refundable credits.

As of December 31, 2013, the Company had net operating loss carry forwards for federal income tax purposes of approximately $11.0 million, which expire in the years 2021 through 2032. Net operating loss carryforwards for state income tax purposes were approximately $84.0 million, which expire in the years 2017 through 2032 and state research and development tax credits were approximately $1.2 million which have no expiration date. The Company has state alternative minimum tax credit carryforwards of approximately $0.1 million that have no expiration date.

Utilization of the Company's net operating loss and credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Deferred income taxes reflect the net tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows (in thousands):

	Year Ended December 31,

	2013			2012
Deferred Tax Assets:
Net operating loss carryforwards	$	4,237		$	21,500
Tax carryforwards		133			4,700
In-process research and development		665			1,100
Deferred revenue		88,248			7,500
Intangibles		1,363			500
Other, net		11,226			7,200


Total deferred tax assets		105,872			42,500
Valuation allowance for deferred tax assets		(2,670	)		(42,500	)


Deferred tax assets, net	$	103,202		$	—

Management regularly assesses the ability to realize deferred tax assets based on the weight of all available evidence, including such factors as the history of recent earnings and expected future taxable income on a jurisdiction by jurisdiction basis. Management determined that a valuation allowance was no longer needed for a substantial portion of the deferred tax assets based on an assessment of the relative impact of all positive and negative evidence as of December 31, 2013, including an evaluation of cumulative income in recent years, future sources of taxable income exclusive of reversing temporary differences, and significant risks and uncertainties related to our business. The valuation allowance decreased by $39.8 million, increased by $7.8 million and decreased by $27.6 million during the years ended December 31, 2013, 2012 and 2011 respectively.

At December 31, 2013, the portion of the federal and state net operating loss carryforwards related to stock option deductions is approximately $11.0 million, which is not included in the Company's gross or net deferred tax assets. Pursuant to ASC 718-740-25-10, the tax effect of the stock option benefit of approximately $4.5 million will be recorded to equity when they reduce cash taxes payable in the future.

The Company files income tax returns in the United States federal jurisdiction and in various states, and the tax returns filed for the years 1996 through 2013 and the applicable statutes of limitation have not expired with respect to those returns. Because of net operating loss carryovers, substantially all of the Company's tax years remain open to examination.

Interest and penalties, if any, related to unrecognized tax benefits would be recognized as income tax expense by the Company. As of the date of adoption of authoritative guidance for Accounting for Uncertainty in Income Taxes, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits.

The following table summarizes the activity related to our unrecognized tax benefits for the 2 years ended December 31, 2013 (in thousands):


Unrecognized tax benefits—January 1, 2012	$	3,573
Gross increases—current year tax positions		21
Settlements with taxing authorities		—
Expiration of statute of limitations		—


Unrecognized tax benefits—December 31, 2012		3,594
Gross increases—current year tax positions		174
Gross increases—prior year tax positions		111


Unrecognized tax benefits—December 31, 2013	$	3,879

Though our unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business, we do not expect any such change to be significant.