Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes

12. Income Taxes

Provisions for income taxes were $1,036,349 and $4,483,960 for the three and nine-month periods ended September 30, 2012, respectively, based on effective tax rates of 38.6 % and 38.1 %. Provisions for income taxes were $1,794,575 and $3,335,576 for the three and nine-month periods ended September 30, 2011, respectively, based on effective tax rates of 37.6% and 37.4%. The increase in the effective tax rates for the periods ended 2012, as compared to the same periods in the previous year, are primarily due to lower tax credits anticipated in the current year, including the federal R&D credit which expired with the 2011 tax year, combined with larger losses experienced by Anika S.r.l. as compared to the same periods in 2011.

In the normal course of business, Anika and its subsidiaries may be periodically examined by various taxing authorities. We file income tax returns in the U.S. federal jurisdiction, in certain U.S. states, and in Italy. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. The 2009 through 2011 tax years remain subject to examination by the IRS and other taxing authorities for U.S. federal and state purposes. The 2009 through 2011 tax years remain subject to examination by the appropriate governmental authorities in Italy.

In connection with the preparation of the financial statements, the Company performed an analysis to ascertain if it was more likely than not that it would be able to utilize, in future periods, the net deferred tax assets associated with its net operating loss carryforward and its investment tax credit carryforward. We have concluded that the positive evidence outweighs the negative evidence and, thus, that those deferred tax assets are realizable on a “more likely than not” basis. As such, we have not recorded a valuation allowance at September 30, 2012 or December 31, 2011, respectively.