Income Taxes
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Dec. 31, 2012
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Income Taxes |
14. Income Taxes
Income
Tax Expense
The
components of the Company’s income before income taxes and
our provision for (benefit from) income taxes consist of the
following:
Deferred Tax Assets and Liabilities
Significant
components of the Company’s deferred tax assets and
liabilities consist of the following:
Tax Rate
The
reconciliation between the U.S. federal statutory rate and our
effective rate is summarized as follows:
As
of December 31, 2012, the Company had net operating losses
(“NOL”) for federal income tax purposes in Italy of
$9,144,154 with no expiration date. For Massachusetts state income
tax purposes, the Company also had an investment tax credit
carry-forward of $298,769 expiring through 2021.
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 NOL carry-forward and
its investment tax credit carry-forward. We have concluded that the
positive evidence outweighs the negative evidence and, thus, that
those deferred tax assets not otherwise subject to a valuation
allowance are realizable on a “more likely than not”
basis. As such, we have not recorded a valuation allowance at
December 31, 2012, and 2011, respectively.
Accounting for Uncertainty in Income Taxes
A
reconciliation of the beginning and ending amount of our
unrecognized tax benefits is summarized as follows:
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 2012 tax years remain subject to examination by the IRS and
other taxing authorities for U.S. federal and state tax purposes.
The 2009 through 2012 tax years remain subject to examination by
the appropriate governmental authorities for Italy.
We do not anticipate experiencing any significant increases or
decreases in our unrecognized tax benefits within the twelve months
following December 31, 2012.
We
incurred expenses related to stock-based compensation in 2012, 2011
and 2010 of $1,151,199, $1,190,697, and $1,102,617, respectively.
Accounting for the tax effects of certain stock-based awards
requires that we establish a deferred tax asset as the compensation
expense is recognized for financial reporting prior to recognizing
the related tax deduction upon exercise of the awards. The tax
benefit recognized in the consolidated statement of operations
related to stock-based compensation totaled $285,068, $219,626, and
$244,746 in 2012, 2011 and 2010, respectively.
Upon
the settlement of the certain stock-based awards (i.e., exercise,
vesting, forfeiture or cancellation), the actual tax deduction is
compared with the cumulative financial reporting compensation cost
and any excess tax deduction related to these awards is considered
a windfall tax benefit, and is tracked in a "windfall tax benefit
pool" to offset any future tax deduction shortfalls and will be
recorded as increases to additional paid-in capital in the period
when the tax deduction reduces income taxes payable. We follow the
with-and-without approach for the direct effects of
windfall/shortfall items and to determine the timing of the
recognition of any related benefits. We recorded a net windfall of
approximately $452,000 and $274,000 in 2012 and 2011, respectively
and a net shortfall of approximately $21,000 in 2010.
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