Note 7 – Income Taxes

Income from continuing operations before income taxes was generated in the following jurisdictions. Domestic income excludes $30,752 of intercompany dividend income taxable in the US and eliminated in consolidation.


	For the years ended December 31,
	2013			2012		2011
Domestic	$	(2,024	)	$	1,492	$	6,220
Foreign		16,138			20,205		19,588

Total	$	14,114		$	21,697	$	25,808

The provision for income taxes consists of the following:


	For the years ended December 31,
	2013			2012		2011
Current:
Federal	$	11		$	—	$	244
State		22			1		443
Foreign		3,121			4,402		4,933

Total current		3,154			4,403		5,620

Deferred:
Federal		338			866		(4,543	)
State		(289	)		93		(285	)
Foreign		(56	)		106		765

Total deferred		(7	)		1,065		(4,063	)

Total	$	3,147		$	5,468	$	1,557

The U.S. federal corporate tax rate varies with taxable income. In 2013, inclusion of the intercompany dividend increased our statutory rate to 35% from 34% in 2012 and 2011. The differences between the income tax provisions computed using the statutory federal income tax rate and the provisions for income taxes reported in the consolidated statements of operations are as follows:


	For the years ended December 31,
	2013			2012			2011
Expected tax at statutory rate	$	4,940		$	7,377		$	8,775
Foreign taxes at other rates		(2,520	)		(2,513	)		(1,758	)
US dividend income, net of foreign tax credit		212			—			—
State income taxes, net of federal benefit		(310	)		53			—
Change in valuation allowance due to:
NOL valuation reserve adjustments		—			—			(1,639	)
Utilization of NOL carryforwards		—			(43	)		(4,873	)
Generation of NOL carryforwards		6			—			134
Disallowed expenses and other		819			594			918

Total	$	3,147		$	5,468		$	1,557

Current deferred tax assets and long-term deferred tax liabilities are presented as separate line items in the balance sheet. Long-term deferred tax assets of $6,334 and $2,565 as of December 31, 2013 and 2012, respectively, are included in other assets, net of accumulated amortization. Current deferred tax liabilities were $726 in 2013 and $543 in 2012 and are included in other accrued liabilities. Deferred income tax balances are comprised of the following:


	As of December 31,
	2013			2012
Deferred tax assets:
U.S. foreign tax credit	$	5,058		$	—
U.S. net operating loss carryforwards		—			859
Stock and long-term compensation plans		1,318			2,410
Foreign NOL & other carryforwards		2,930			2,675
US state income taxes		574			285
US alternative minimum tax		395			456
Deferred revenue		965			255
Reserve for uncertain tax issues		(560	)		(560	)
US tax on unremitted foreign earnings		(380	)		—
Accrued expenses and other		67			183

Total gross deferred tax assets		10,367			6,563
Less: Valuation allowance		(2,399	)		(2,284	)

Net deferred income tax assets	$	7,968		$	4,279

Deferred tax liabilities:
Swiss tax allowances	$	726		$	543
Intangible assets		321			141

Deferred tax liabilities	$	1,047		$	684

Prior to 2013, we considered our unremitted foreign earnings permanently invested and, consequently, did not provide deferred incremental U.S. taxes on them. In the fourth quarter of 2013, we determined that the earnings of certain subsidiaries are available for distribution.

In December 2013, a foreign subsidiary paid a dividend of €22,600 (approximately $30,752 at an exchange rate of 1.36 U.S. Dollars per Euro). At December 31, 2013, unremitted foreign earnings available for distribution at current exchange rates are $46,012. We have provided a deferred tax liability of $380 for the incremental U.S. tax to be paid upon remittance as dividends. The net effect on 2013 tax expense for the dividend policy change was $212.

The earnings of certain subsidiaries will remain permanently invested. At December 31, 2013, total unremitted foreign earnings considered permanently invested at current exchange rates are $50,398.

We utilized U.S. net operating loss (NOL) carryforwards of $10,586 in 2013 including $9,741 related to U.S. tax deductions for employee stock option gains. The stock option tax benefit of $3,318 was credited to additional paid-in capital.

Foreign tax credit carryforwards were $5,058 at December 31, 2013. Foreign tax credits of $944 expire in 2015 and the remaining $4,114 expire in 2023. We have not provided a valuation reserve for the foreign tax credits as we believe it is more likely than not they will be realized.

At December 31, 2013, we had foreign NOL carryforwards of $5,093 and other foreign deductible carryforwards of $3,898. The foreign NOL carryforwards have no expiration dates and the other deductible carryforwards expire from 2016 to 2020. At December 31, 2013, we had a valuation allowance of $2,399 for certain foreign deferred tax assets.

The net change in the valuation allowance for the years ended December 31, 2013, 2012, and 2011 were increases of $115 and $196 and a decrease of $5,625, respectively. This valuation allowance will be reviewed on a regular basis and adjustments made as appropriate. In addition to the utilization of NOLs as noted above, the change in the valuation allowance also reflects other factors including, but not limited to, changes in our assessment of our ability to use existing NOLs and other deduction carryforwards, changes in currency rates, and adjustments to reflect differences between the actual returns filed and the estimates we made at financial reporting dates. The company expects to generate adequate taxable income to realize deferred tax assets in foreign jurisdictions where no valuation reserve exists.

We had no accrued interest or penalties for income tax liabilities at December 31, 2013. Our policy is to record interest expense and penalties on income taxes as income tax expense.

ASC 740-10, Accounting for Uncertainty in Income Taxes sets a “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions. We have identified one such exposure concerning cost allocations related to the implementation of our worldwide strategy related to the ownership of our intellectual property for which we had a reserve of $560 at December 31, 2013 and 2012. The reserve is an offset to our U.S. deferred tax asset.

Our primary tax jurisdictions and the earliest tax year subject to audit are presented in the following table.


Australia			2005
Austria			2007
Belgium			2006
Netherlands			2008
Singapore			2007
Switzerland			2011
United States			2005