Income Taxes (Notes)

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

As of December 31, 2012, we had federal and state income tax net operating loss carry forwards of $95.2 million and $30.1 million, respectively. Federal loss carry forwards of approximately $2.4 million expired in 2012. The remaining loss carry forwards will begin to expire in 2018, unless previously utilized. State loss carry forwards of approximately $3.1 million expired in 2012 and approximately $0.5 million is set to expire in 2013, unless previously utilized. We also have federal and California research and other credit carry forwards of approximately $1.6 million and $2.1 million, as of December 31, 2012, respectively. Approximately $0.2 million of federal credits expired in 2012. The remaining federal credits will begin to expire in 2018. The California research credits have no expiration. Pursuant to Internal Revenue Code Sections 382 and 383, use of our net operating loss and credit carry forwards may be limited because of a cumulative change in ownership greater than 50% which may have occurred or which may occur in the future. A valuation allowance has been recognized to offset the deferred tax assets, as realization of such assets has not met the “more likely than not” threshold required under the authoritative guidance of accounting for income taxes.

Our net deferred tax assets consisted of the following (in thousands):

	As of December 31,
	2012			2011
Deferred tax assets:
Net operating loss carry forwards	$	34,588		$	34,518
Research and development and other credits	1,836			1,878
Reserves	1,531			1,282
Intangibles	1,908			2,206
Other, net	1,509			1,392
Total deferred tax assets	41,372			41,276
Deferred tax liabilities—depreciation	(441		)	(391		)
Valuation allowance for deferred tax assets	(40,931		)	(40,885		)
Net deferred tax assets	$	—		$	—

The income tax benefit for the year ended December 31, 2012 and the income tax expense for years ended December 31, 2011 and 2010, is less than $0.1 million, respectively, and is included as a component of other income (expense) in the consolidated statements of comprehensive loss.

Differences between the provision for income taxes and income taxes at the statutory federal income tax rate are as follows:

	Years Ended December 31,
	2012		2011		2010
Income tax benefit at statutory federal rate	(35.0	)%	(35.0	)%	(35.0	)%
State income tax benefit, net of federal benefit	(2.9	)%	(2.7	)%	(2.5	)%
Permanent differences, tax credits and other	3.0	%	(2.0	)%	0.7	%
Change in effective state tax rates	2.4	%	10.3	%	—	%
Expiration of net operating loss carryovers	32.4	%	9.4	%	—	%
Stock compensation expense	—	%	(0.9	)%	12.3	%
Reserve for uncertain tax positions and other reserves	(2.4	)%	3.1	%	0.9	%
Change in valuation allowance	1.0	%	20.3	%	24.6	%
Provision (benefit) for income taxes	(1.5	)%	2.5	%	1.0	%

The following table summarizes the activity related to our unrecognized tax benefits (in thousands):

	December 31,
	2012			2011			2010
Balance at beginning of year	$	1,621		$	1,617		$	1,563
Increases related to prior year tax positions	25			30			50
Increases related to current year tax positions	81			42			24
Expiration of the statute of limitations for the assessment of taxes	(252		)	(48		)	(28		)
Change in valuation allowances	64			(20		)	8
Balance at end of year	$	1,539		$	1,621		$	1,617

Included in the unrecognized tax benefits of $1.5 million at December 31, 2012 was $1.2 million of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance. We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

We file income tax returns in the U.S. and in various state jurisdictions with varying statutes of limitations. We are no longer subject to income tax examination by tax authorities for years prior to 2007; however, our net operating loss carryforward and research credit carryforwards arising prior to that year are subject to adjustment. Our policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There were no accrued interest and penalties as of December 31, 2012 and 2011 and no interest and penalties were recognized during the years ended December 31, 2012, 2011 and 2010.

The American Taxpayer Relief Act of 2012, which reinstated the United States federal research and development tax credit retroactively from January 1, 2012 through December 31, 2013, was not enacted into law until the first quarter of 2013. Therefore, the expected tax benefit resulting from such reinstatement for 2012 will not be reflected in our estimated annual effective tax rate until 2013.