Income Taxes
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Dec. 31, 2014
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
The Company is taxed in accordance with U.S. tax laws. As of December 31, 2014, the Company had accumulated tax loss carry-forward for federal and state tax purposes of approximately $20,324 and $10,814, respectively. If not utilized, these carryforwards will expire starting in 2027 and 2016 for federal and state tax purposes, respectively. Included in the above net operating loss carryforwards are $1,413 and $1,172 of federal and state net operating loss carryforwards, respectively, associated with a windfall tax benefit that will be recorded as additional paid in capital when realized. In addition, as of December 31, 2014, the Company had federal credit carryforwards of approximately $294. If not utilized, the federal tax carryforward will expire between 2016 and 2032. Utilization of U.S. net operating losses may be subject to substantial annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
Deferred 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. The Company’s deferred tax assets are derived from its U.S. net operating loss carry forwards and other temporary differences. In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. Based on the Company’s history of losses in the US and Israel jurisdictions, the Company established a valuation allowance on its US and Israel deferred tax assets.
A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company, and the actual tax expense (benefit) as reported in the consolidated statements of operations is as follows:
There was $577 of unrecognized income tax benefits that, if recognized, $552 would impact the effective tax rate in the period in which each of the benefits is recognized. The Company includes interest and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations. The total amount of penalties and interest is approximately $40 as of December 31, 2014.
1. Israel tax benefits under the Law for the Encouragement of Capital Investments, 1959 (the “Investment Law”): Conditions for entitlement to the benefits: The benefits available to a Beneficiary Enterprise relate only to taxable income attributable to the specific investment program and are conditioned upon terms stipulated in the Investment Law and the related regulations and the criteria set forth in the applicable certificate of approval (for an Beneficiary Enterprise). If VSL does not fulfill these conditions, in whole or in part, the benefits can be cancelled, and VSL may be required to refund the benefits, in an amount linked to the Israeli consumer price index plus interest. The Office of the Chief Scientist at Israel’s Ministry of Industry, Trade and Labor approved the Israeli subsidiary as an R&D-incentive enterprise for a foreign resident company in accordance with the Encouragement of Capital Investments (Consolidated Version) Law.
If cash dividends are distributed out of tax exempt profits in a manner other than upon complete liquidation, VSL will then become liable for tax at the rate of 10%-25% (depending on the level of foreign investments in VSL) in respect of the amount distributed. 2. Undistributed earnings of foreign subsidiaries: As of December 31, 2014, approximately $2,147 of undistributed earnings from non-U.S. operations held by the Company’s foreign subsidiaries are designated as indefinitely reinvested outside the U.S. Accordingly, no additional U.S. income taxes or additional foreign withholding taxes have been provided thereon. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.
The Company has final tax assessments in the U.S. through 2009, VSL in Israel through 2008, VSUK in UK through 2011, VSF in France through 2011, and VSG in Germany through 2011. In 2013, the Israeli Tax Authorities (“ITA”) initiated a tax assessment audit on VSL for the years 2009- 2011. On December 30, 2013, the ITA issued an assessment for the year 2009, amounting to approximately $115 (including interest and adjustment to inflation). The Company has filed an objection letter. The Company believes it has valid arguments to support its positions and intends to defend against such tax assessment. The Company has recorded a provision with respect to its uncertain tax positions in accordance with ASC 740. VSC does not have a final tax assessment since its inception. 3. Carryforward losses of foreign subsidiaries As of December 31, 2014, VSL had a net operating tax loss carryforward of approximately $5,187. These carryforward losses have no expiration dates and may be carried forward indefinitely. As of December 31, 2014, VSL also has credits in Israel totaling $226. These credits have no expiration date. |