Income Taxes

9 Months Ended

Dec. 31, 2011

Income Taxes

Income Taxes

7.Income Taxes

The following table sets forth our provision for income taxes, along with the corresponding effective tax rates:

	Three Months Ended						Nine Months Ended
	December 31,						December 31,
	2011			2010			2011			2010
	(In thousands, except percentages)
Benefit (provision) for income taxes	$	263		$	836		$	(715	)	$	(187	)
Effective tax rate	(74.1		)%	(10.6		)%	44.8		%	3.4		%

Our effective tax rates in the three and nine months ended December 31, 2011 were favorably impacted by benefits from certain research and development credits that we claimed for the current and prior fiscal years, as well as from the recognition of approximately $271,000 of previously unrecognized tax benefits during the current quarter due to the expiration of certain federal and state statutes in various jurisdictions. Additionally, during the nine months ended December 31, 2011, the above favorable impacts partially offset the unfavorable impact that originated in the prior quarter from the recording of a valuation allowance against certain of our state net operating losses (“NOLs”). As a result of newly issued guidance from a state tax authority concerning the applicable carryforward period for NOLs, we recorded a valuation allowance of $734,000 against certain of our state NOLs. This resulted in additional income tax expense, net of a federal benefit, of $484,000 for the nine months ended December 31, 2011.

As of March 31, 2011 (our prior fiscal year-end), we did not have any valuation allowance recorded against our deferred tax assets. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized.

During the three and nine months ended December 31, 2010, our effective tax rates were impacted unfavorably by a portion of the charge recorded for the impairment of goodwill, amounting to $2.3 million, for which there is no corresponding tax basis. This unfavorable impact was partially offset by the impact of the recognition of approximately $238,000 during the three months ended December 31, 2010 of previously unrecognized tax benefits due to the expiration of certain federal and state statutes in various jurisdictions.

On an interim basis, we estimate what our anticipated annual effective tax rate will be, while also separately considering applicable discrete and other non-recurring items, and record a quarterly income tax provision in accordance with the anticipated annual rate. As the fiscal year progresses, we refine our estimates based on actual events and financial results during the year. This process can result in significant changes to our expected effective tax rate. When this occurs, we adjust our income tax provision during the quarter in which our estimates are refined so that the year-to-date provision reflects the expected annual effective tax rate. These changes, along with adjustments to our deferred taxes, among others, may create fluctuations in our overall effective tax rate from quarter to quarter.