NOTE 6: INCOME TAXES

The jurisdictions where we generate income (or loss) before income taxes have a significant effect on our effective tax rate. For 2014, we are projecting that we will incur a pre-tax loss in the U.S. and pre-tax income in our primary foreign jurisdictions. We estimate that our income (or loss) earned in the United States will be subject to an approximate 42% combined statutory federal and state tax rate. Our foreign-sourced income (or loss), which is earned primarily in the United Kingdom, will be subject to a statutory rate of approximately 22%. While we compute interim period tax expense (or benefit) related to income (or loss) before income taxes based on a projected worldwide estimated annual effective tax rate for the entire year, the table below illustrates the amount of tax allocable between jurisdictions for the nine month periods ended September 30, 2014 and 2013.

	Nine Months Ended September 30, 2014									Nine Months Ended September 30, 2013
	United States			Foreign			Total			United States			Foreign			Total
	(in thousands)
Income (loss) before income taxes	$	(17,557	)	$	12,886		$	(4,671	)	13,019			$	3,561		$	16,580
Provision for (benefit from) income taxes	(6,742		)	2,778			(3,964		)	4,489			1,077			5,566
Net income (loss)	$	(10,815	)	$	10,108		$	(707	)	$	8,530		$	2,484		$	11,014

Summary effective tax rate	38.40		%	21.56		%	84.86		%	34.48		%	30.24		%	33.57		%

The utilization of a significantly higher tax rate in computing the tax benefit on the projected U.S. losses than the tax rate used in computing the tax expense on the projected foreign income results in an overall estimated annual effective tax rate that is not customary. After taking into account changes in actual income (loss) generated in each jurisdiction for the nine months ended September 30, 2014 and our forecast of operations for the remainder of 2014, we calculated our expected estimated annual effective tax rate for 2014 and recorded a corresponding tax (benefit) for the three months ended September 30, 2014. The tax benefit recognized resulted from recording the year to date provision based on the estimated annual effective tax rate and the year-to-date net ordinary loss.

We have sufficient U.S. federal taxable income in 2013 and 2012 that can be offset by federal net operating loss carry backs and have recognized tax benefits accordingly. In addition, we have certain state net operating losses that can be carried back or carried forward and have recorded a corresponding state tax benefit.

During the three months ended September 30, 2014, lapses in the statute of limitations for certain federal and state returns resulted in recognition of $0.4 million of net unrecognized tax benefits of which $0.4 million had an impact on our effective tax rate. It is reasonably possible that approximately $0.5 million of unrecognized tax benefits will be recognized in the next twelve months due to the lapses of federal and state statutes of limitation and $0.5 million will have an impact on our effective tax rate.

During the three months ended September 30, 2014, we also concluded our 2010 - 2011 New York City and 2009 - 2011 New York State income tax audits resulting in immaterial settlement payments.