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Income Taxes
12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes

9. INCOME TAXES

The provision for income taxes is comprised of the following (in thousands):

 

     Year Ended December 31,  
     2014      2013      2012  

Current federal

   $ 3,198       $ 2,474       $ 58   

Current state

     1,605         1,444         273   

Deferred federal

     1,092         2,315         4,804   

Deferred state

     232         191         797   
  

 

 

    

 

 

    

 

 

 

Provision for income taxes

$ 6,127    $ 6,424    $ 5,932   
  

 

 

    

 

 

    

 

 

 

A reconciliation of income taxes at the statutory federal income tax rate to the provision for income taxes included in the accompanying consolidated statements of income is as follows (in thousands):

 

     Year Ended December 31,  
     2014      2013      2012  

Federal tax provision at the statutory rate

   $ 5,782       $ 5,194       $ 4,751   

State income tax provision, net of federal benefit

     1,350         898         974   

Tax credits

     (1,160      (54      —     

Change in state valuation allowance

     37         231         —     

Other

     118         155         207   
  

 

 

    

 

 

    

 

 

 

Provision for income taxes

$ 6,127    $ 6,424    $ 5,932   
  

 

 

    

 

 

    

 

 

 

Management periodically assesses the realizability of its deferred tax assets, and to the extent that a recovery is not likely, a valuation allowance is established to reduce the deferred tax asset to the amount estimated to be recoverable. At December 31, 2014, a valuation allowance of $0.4 million exists. As of December 31, 2014, the Company had federal and state net operating loss carryforwards of $7.8 million and $11.2 million, respectively. These loss carryforwards will expire in years 2015 through 2024. The Company is subject to income taxation at the federal and various state levels. The Company is subject to U.S. federal tax examinations for tax years 2011 through 2014. Loss carryforwards and credit carryforwards generated or utilized in years earlier than 2011 are also subject to examination and adjustment. The Company has no income tax examinations in process. The Company has research and development tax credit carryforwards of $2.0 million that expire in varying amounts through 2033. As of December 31, 2014, the Company had alternative minimum tax credit carryforwards of $791,000 that are available to offset future regular tax liabilities and they do not expire.

A reconciliation of the beginning and ending liability for gross unrecognized tax benefits at December 31, 2014 and 2013, are as follows (in thousands):

 

     December 31,  
     2014      2013  

Balance at beginning of year

   $ 167       $ —     

Additions for tax positions in the current year

     2,168         167   

Reductions for tax positions of prior years

     (167      —     
  

 

 

    

 

 

 

Balance at end of year

$ 2,168    $ 167   
  

 

 

    

 

 

 

The Company recognized approximately $125,000 and $2,000 for interest and penalties related to unrecognized tax benefits within the provision for income taxes during the years ended December 31, 2014 and 2013, respectively.

If recognized, approximately $278,000 of the unrecognized tax benefits at December 31, 2014, would reduce the Company’s effective tax rate. The Company estimates that it is reasonably possible the liability for unrecognized tax benefits could decrease up to $1.7 million within the next 12 months, as it expects to file a change in tax accounting method with the IRS for tangible property and deferred revenue.

 

Deferred federal and state income taxes reflect the 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. Significant components of deferred tax assets and deferred tax liabilities are as follows (in thousands):

 

     December 31,  
     2014      2013  

Deferred tax assets:

     

Allowance for doubtful accounts

   $ 134       $ 84   

Accrued liabilities

     1,565         1,225   

Tax credits

     791         702   

Stock based compensation

     1,015         966   

Deferred revenue

     616         —     

Depreciation

     715         —     

Net operating loss carryforwards

     355         1,256   
  

 

 

    

 

 

 

Total deferred tax assets

  5,191      4,233   

Less: Valuation allowance

  (355   (1,325
  

 

 

    

 

 

 

Deferred tax assets, net of valuation allowance

  4,836      2,908   

Deferred tax liabilities:

Deductible goodwill

  2,369      2,020   

Nondeductible intangible assets

  2,171      2,677   

Prepaid assets

  1,602      781   

Capitalized software development

  3,836      2,910   

Depreciation

  —        341   

Basis difference on investments

  343      533   
  

 

 

    

 

 

 

Total deferred tax liabilities

  10,321      9,262   
  

 

 

    

 

 

 

Net deferred tax liabilities

$ (5,485 $ (6,354