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Income Taxes
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6 Months Ended |
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Jun. 30, 2012
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| Income Tax Disclosure [Abstract] | |
| Income Taxes |
Income Taxes
The income tax provision includes a discrete benefit of approximately $2,989,000 related to a reversal of substantially all of our deferred income tax valuation allowance and a discrete benefit of approximately $9,000 related to changes in the effective tax rate on certain deferred taxes.
The evaluation of the recoverability of our deferred tax assets and the need for a valuation allowance requires management to weigh evidence to reach a conclusion that it is more likely than not that all or some of the deferred tax asset will be realized. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. Our conclusion with regard to maintaining or releasing the valuation allowance gives consideration to a variety of factors including but not limited to a three-year cumulative pre-tax income; the extent of current period taxable income and an expectation of sufficient and sustainable future taxable income; and our ability to utilize net operating losses within the carryforward period.
Prior to the three months ended June 30, 2012, we maintained a full valuation allowance against our net deferred tax assets due to our prior history of pre-tax losses and uncertainty about the timing of and our ability to generate taxable income in the future and our assessment that the realization of the net deferred tax assets did not meet the "more likely than not" criteria under ASC 740.
In 2010, we had our first year of pre-tax earnings for financial statement reporting purposes, but continued to generate losses for tax purposes. For the year ended December 31, 2011, we had pre-tax earnings and generated taxable income for the first time. In 2012, we experienced three year cumulative pre-tax income and for the six months ended June 30, 2012, we continued to report pre-tax earnings, validating our projections of pre-tax earnings and taxable income for the full year 2012. This, together with projections of sufficient future taxable income, represents significant positive evidence. As of June 30, 2012, the cumulative positive evidence outweighed the historical negative evidence regarding the likelihood that our deferred tax asset will be realized. As a result, we concluded, that $2,989,000 of the valuation allowance established against deferred tax assets should be released at June 30, 2012. The remaining deferred tax asset valuation allowance as of June 30, 2012 of approximately $119,300 relates to deferred tax assets we expect to realize as a result of pre-tax income anticipated during the third and fourth quarters of 2012 of $111,800 and deferred tax assets of $7,500 that are not likely to be realized due to certain state NOL limitations.
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