Income Taxes

3 Months Ended

Mar. 31, 2013

Income Taxes

12. Income Taxes

Income tax expense was $1,903,864 and $1,099,738 for the three months ended March 31, 2013 and 2012, respectively. The effective tax rates were 38.3% and 36.5% for the three months ended March 31, 2013 and 2012, respectively. The increase in the effective tax rate is primarily due to the applicability of a higher federal rate bracket in the current quarter combined with increases in the non-deductibility of certain expenses.

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 purposes. The 2009 through 2012 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 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 March 31, 2013 or December 31, 2012, respectively.