NOTE K – Income Taxes

The provision (benefit) for income taxes was as follows (in thousands):


	Year Ended December 31,
	2013			2012			2011
Current
Federal	$	—		$	—		$	—
State		192			74			89
Foreign		51			63			—
Deferred
Federal		450			188			(12,282	)
State		(7	)		(204	)		(426	)

	$	686		$	121		$	(12,619	)

A reconciliation of the provision (benefit) for income taxes to the statutory federal rate was as follows (in thousands):


	Year Ended December 31,
	2013			2012			2011
Expected federal income tax at statutory rate	$	593		$	459		$	396
State income taxes, net of federal tax effect		78			31			37
Tax impact of foreign activity		44			(8	)		55
Permanent book/tax differences		106			23			100
Change in valuation allowance		17			(88	)		(1,310	)
Release of valuation allowance		—			—			(12,802	)
Section 382 limitation		—			—			415
Change in state deferred rate		53			(162	)		—
Prior year true up		4			(135	)		43
General business credit		(202	)		—			—
State net operating loss adjustment		—			—			413
Other		(7	)		1			34

Total provision (benefit) for income taxes	$	686		$	121		$	(12,619	)

The significant components of our deferred tax assets (liabilities) were as follows (in thousands):


	December 31,
	2013			2012
Current
Current net operating loss and credit carryforwards	$	1,258		$	1,615
Accounts receivable allowance		157			143
Stock-based compensation expense		229			154
Accrued expenses		790			643

Total current deferred tax asset		2,434			2,555

Foreign operations		(53	)		—
Deferred operations		(985	)		(784	)

Total current deferred tax liability		(1,038	)		(784	)

Valuation allowance		(124	)		(39	)

Net current deferred tax asset	$	1,272		$	1,732

Non-current
Net operating loss and credit carryforwards	$	6,145		$	6,474
Deferred operations		3,029			2,533
Stock-based compensation expense		1,561			1,332
Depreciation and amortization		1,159			738
Other		34			18

Total non-current deferred tax asset		11,928			11,095
Valuation allowance		(1,058	)		(242	)

Net non-current deferred tax asset	$	10,870		$	10,853

As of December 31, 2013, we had net operating loss carryforwards of $71.3 million for U.S. federal tax purposes. We also had $30.3 million of various state net operating loss carryforwards. The loss carryforwards for federal tax purposes will expire between 2019 and 2034 if not utilized. The loss carryforwards for state tax purposes will expire between 2014 and 2034 if not utilized.

Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that might be used to offset taxable income when a corporation has undergone significant changes in stock ownership. We have performed a Section 382 analysis for the time period from our inception through December 8, 2010. During this time period it was determined that we had six separate ownership changes under Section 382. We have not updated the Section 382 analysis subsequent to December 8, 2010; however, we believe there have not been any events subsequent to that date that would materially impact the analysis. We believe that approximately $17.6 million of federal losses will expire unused due to Section 382 limitations. The maximum annual limitation of federal net operating losses under Section 382 is approximately $990,000. This limitation could be further restricted if any ownership changes occur in future years.

Our federal and state net operating losses at December 31, 2013 included $37.0 million and $10.2 million, respectively, of income tax deductions in excess of previously recorded tax benefits. Although these additional tax deductions are included in the net operating losses referenced above, the related tax benefit will not be recognized until the deductions reduce our income taxes payable. The tax benefit of these excess deductions will be reflected as a credit to additional paid in capital when recognized. Accordingly, our deferred tax assets are reported net of the excess tax deductions for stock compensation and Section 382 limitations.

As of December 31, 2013 we had federal research and development credit carryforwards, net of Section 383 limitations, of $322,000, which, if not utilized, will begin to expire in 2030. We had state research and development credit carryforwards of $82,000, which, if not utilized, will begin to expire in 2025.

As of December 31, 2013, we had a valuation allowance against our deferred tax assets of $1.2 million. The valuation allowance is established for various state net operating loss and credit carryforwards that we do not expect to utilize based on our current expectations of future state taxable income.

As of December 31, 2013 and 2012, we had income tax receivables of $26,000 and $72,000, respectively, which were included in prepaid expenses and other current assets on the consolidated balance sheets.

We are subject to income taxes in the U.S. federal and various state and international jurisdictions. We are generally subject to U.S. federal and state tax examinations for all prior tax years due to our net operating loss carryforwards and the utilization of the carryforwards in years still open under statute. As of December 31, 2013, we are not under any income tax audits by tax authorities.

As of December 31, 2013, we do not have any unrecognized tax benefits. It is our practice to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We do not expect any material changes in our unrecognized tax positions over the next 12 months.