Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes
3 Months Ended
Mar. 31, 2014
Income Taxes

6. Income taxes

The Company operates in multiple states. The statute of limitations has expired for all tax years prior to 2010 for federal and 2009 to 2010 for various state tax purposes. However, the net operating loss generated on the federal and state tax returns in prior years may be subject to adjustments by the federal and state tax authorities. The Company does not expect any material changes to unrecognized tax benefits in the in next 12 months, and has not incurred any tax related penalties or interest.


Income tax expense was $577, an effective tax rate of 39.4% for the three months ended March 31, 2014 compared to $31, an effective tax rate of 4.1% as of March 31, 2013. The variation in the tax rate year over year was primarily driven by the change in the Company’s deferred tax asset valuation allowance. As of March 31, 2013, the Company maintained a full valuation allowance against its federal and state deferred tax assets which significantly reduced the Company’s effective tax rate. In December of 2013, the Company evaluated its facts and circumstances and concluded that it was appropriate to release $22,909 of the valuation allowance which created a one-time tax benefit of $21,587 for the year ended December 31, 2013. Refer to the Company’s 2013 10-K filing for additional information regarding the deferred tax asset valuation allowance. Variations in the tax rate year-over-year was also due to an increase in permanent tax differences related to employee stock option expense.  


The Company accounts for uncertainties in income tax in accordance with ASC 740-10—Accounting for Uncertainty in Income Taxes. ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Accounting Standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.