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Income Taxes
6 Months Ended
May 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Our income tax benefit totaled $1.2 million for the three months ended May 31, 2013 and $4.5 million for the three months ended May 31, 2012. For the six months ended May 31, 2013, our income tax benefit totaled $1.1 million, compared to $4.1 million for the six months ended May 31, 2012. The income tax benefit for the three months and six months ended May 31, 2013 primarily reflected the resolution of a state tax audit in the second quarter of 2013, which resulted in a refund receivable of $1.4 million. The income tax benefits recognized for the three months and six months ended May 31, 2012 primarily resulted from a $4.1 million state income tax refund received in the second quarter of 2012 in connection with the resolution of a state tax audit. Due to the effects of our deferred tax asset valuation allowance and changes in our unrecognized tax benefits, our effective tax rates for the three months and six months ended May 31, 2013 and May 31, 2012 are not meaningful items as our income tax amounts are not directly correlated to the amount of our pretax losses for those periods.
In accordance with Accounting Standards Codification Topic No. 740, “Income Taxes” (“ASC 740”), we evaluate our deferred tax assets quarterly to determine if adjustments to the valuation allowance are required. ASC 740 requires that companies assess whether a valuation allowance should be established based on the consideration of all available evidence using a “more likely than not” standard with respect to whether deferred tax assets will be realized. The ultimate realization of deferred tax assets depends primarily on the generation of future taxable income during the periods in which the differences become deductible. The value of our deferred tax assets will depend on applicable income tax rates. We increased our deferred tax asset valuation allowance by $.3 million during the three months ended May 31, 2013 and reduced our deferred tax asset valuation allowance by $.4 million during the six months ended May 31, 2013 to account for adjustments to our deferred tax assets associated with the vesting of equity-based awards in those periods. For the three months and six months ended May 31, 2012, we recorded valuation allowances of $9.7 million and $28.0 million, respectively, against the net deferred tax assets generated from the losses for those periods.
We had no net deferred tax assets at May 31, 2013 or November 30, 2012 as we maintained a full valuation allowance against our deferred tax assets. The deferred tax asset valuation allowance decreased to $879.7 million at May 31, 2013 from $880.1 million at November 30, 2012, reflecting the $.4 million valuation allowance adjustment recorded during the six months ended May 31, 2013.
During the three months and six months ended May 31, 2013, our total gross unrecognized tax benefits increased by $.1 million. The total amount of gross unrecognized tax benefits, including interest and penalties, that would affect the effective tax rate was $1.3 million as of May 31, 2013. We anticipate that total unrecognized tax benefits will decrease by an amount ranging from $.4 million to $1.3 million during the twelve months from this reporting date due to various state tax filings associated with the resolution of a federal tax audit.
The benefits of our net operating losses (“NOL”), built-in losses and tax credits would be reduced or potentially eliminated if we experienced an “ownership change” under Internal Revenue Code Section 382 (“Section 382”). Based on our analysis performed as of May 31, 2013, we do not believe we have experienced an ownership change as defined by Section 382, and, therefore, the NOLs, built-in losses and tax credits we have generated should not be subject to a Section 382 limitation as of this reporting date.