Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes [Abstract]

Income Taxes

12. Income Taxes

The Company classifies accrued interest and penalties as part of the accrued liability for uncertain tax positions and records the corresponding expense in the provision for income taxes.

Components of the required reserve at June 30, 2011 and December 31, 2010 are as follows (in thousands):

	June 30, 2011			December 31, 2010
Federal, state and foreign unrecognized tax benefits (“UTBs”)	$	1,445		$	806
Interest		218			144
Federal/State Benefit of Interest		(87	)		(59	)
Total reserve for UTBs	$	1,576		$	891

It is anticipated that any change in the above UTBs will impact the effective tax rate. At June 30, 2011, the 2009 and 2010 years are open and subject to potential examination in one or more jurisdictions. The Company does not anticipate any significant release of UTBs within the next twelve months.

Effective January 1, 2008, the Company was granted an income tax holiday for our manufacturing facility in China. The tax holiday allows for tax-free operations through December 31, 2009, followed by operations at a reduced income tax rate of 12.5% on the profits generated in 2010 through 2012, with a return to the full statutory rate of 25% for periods thereafter. As a result of the tax holiday in China, income tax expense for the three months ended June 30, 2011 and 2010 was reduced by $499,000 and $0.5 million, respectively, and income tax expense for the six months ended June 30, 2011 and 2010 was reduced by $1.4 million and $1.0 million, respectively.

Income taxes are determined using an annual effective tax rate, which generally differs from the United States federal statutory rate, primarily because of state taxes, research and development tax credits and the income tax holiday in China. The Company recognizes deferred tax assets and liabilities for temporary differences between the financial and tax reporting of the Company's assets and liabilities, along with net operating loss and credit carry forwards.