|12 Months Ended|
Dec. 31, 2016
|Income Taxes [Abstract]|
The Company’s pre-tax loss for the years ended December 31, 2016 and 2015 consisted of the following:
The provision for (benefit from) income taxes for the years ended December 31, 2016 and 2015 was as follows:
The Company’s income taxes were calculated on the basis of $55 of foreign net income.
The Company’s effective tax rate for the years ended December 31, 2016 and 2015 differed from the U.S. federal statutory rate as follows:
The Company has not provided for United States federal income and foreign withholding taxes on any undistributed earnings from non-United States operations because such earnings are intended to be reinvested indefinitely outside of the United States. If these earnings were distributed, foreign tax credits may become available under current law to reduce or eliminate the resulting United States income tax liability. As of December 31, 2016, there was $919 in cumulative foreign earnings upon which United States income taxes had not been provided.
The tax effects of temporary differences and carryforwards that gave rise to significant portions of the deferred tax assets and liabilities were as follows:
As of December 31, 2016 and 2015, the Company had federal net operating loss carryforwards (“NOL’s”) of approximately $11,428 and $65,246, respectively, and state NOL’s of approximately $35,534 and $60,910, respectively, that will be available to reduce future taxable income, if any. These NOL’s begin to expire in 2025. In addition, as of December 31, 2016 and 2015, the Company had federal tax credit carryforwards of $3 and $690, respectively, available to reduce future taxes. These credits begin to expire in 2022. As of December 31, 2016, the Company also had a foreign net operating loss carryforward of $397, which will expire in 2025.
Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, provide for annual limitations on the utilization of net operating loss, capital loss and credit carryforwards if the Company were to undergo an ownership change, as defined in Section 382 of the Code. In general, an ownership change occurs whenever the percentage of the shares of a corporation owned, directly or indirectly, by 5-percent shareholders, as defined in Section 382 of the Code, increases by more than 50 percentage points over the lowest percentage of the shares of such corporation owned, directly or indirectly, by such 5-percent shareholders at any time over the preceding three years. In the event such ownership change occurs, the annual limitation may result in the expiration of net operating losses capital losses and credits prior to full utilization.
Following its Initial Public Offering (IPO), the Company conducted an analysis of whether an ownership change had occurred. The Company takes these limitations into account in determining its available NOL’s.
The Company has not completed a study to assess whether another ownership change has occurred or whether there have been multiple ownership changes since the Company’s IPO. However, in 2016, as a result of the issuance of common shares upon debt conversions, the Company believes an ownership change under Sec. 382 may have occurred. As a result of this ownership change certain of the Company’s net operating loss, capital loss and credit carryforwards will expire prior to full utilization. The Company has reduced its carryforwards by those amounts in the disclosures herein.
The Company performs an analysis each year to determine whether the expected future income will more likely than not be sufficient to realize the deferred tax assets. The Company's recent operating results and projections of future income weighed heavily in the Company's overall assessment. Prior to 2012, there were no provisions (or benefits) for income taxes because the Company had sustained cumulative losses since the commencement of operations.
The Company’s continuing practice is to recognize interest and/or penalties related to income tax matters as a component of income tax expense. As of December 31, 2016 and 2015, there was no accrued interest and penalties related to uncertain tax positions.
The Company is subject to U.S. federal income taxes and to income taxes in various states in the United States. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Due to the Company's net operating loss carryforwards all years remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. In addition, all of the net operating loss and credit carryforwards that may be used in future years are still subject to adjustment. The Internal Revenue Service (IRS) has completed its examination of the Company’s 2013 Corporation Income tax Return. The Company has agreed to certain adjustments proposed by the IRS and is appealing others. Separately, the IRS has questioned the Company’s classification of certain individuals as independent contractors rather than employees. The Company estimates its potential liability to be $125 but the liability, if any, upon final disposition of these matters is uncertain.
During the first quarter of 2015, in conjunction with the accounting associated with the acquisition of IPC, as described in Note 5, Acquisitions and Disposals of Subsidiaries, the Company recorded a net deferred tax liability related to the book and tax basis difference of the intangibles acquired. The net deferred tax liability served as reversible temporary difference that will give rise to future taxable income and, accordingly, would serve as a source of income that permits the recognition of certain existing deferred tax assets of the Company. During the first quarter of 2015, management determined that it is more likely than not that a portion of its valuation allowance was no longer required due to the deferred tax liabilities recorded resulting from these acquisitions. As a result of the release of the valuation allowance, the Company recorded a tax benefit of $1,560 in the consolidated statement of operations for the year ended December 31, 2015 offset by certain current taxes and deferred taxes of $215, resulting in a net tax benefit of $1,345.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef