Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

ICG, ICG Commerce, InvestorForce and GovDelivery file a consolidated federal income tax return. For the nine months ended September 30, 2011, the effective tax rate was -5.8%, excluding discrete items. This differs from the statutory rate of 35%, primarily due to the valuation allowance that is maintained on certain deferred tax assets. In the three months ended September 30, 2011, ICG recorded a net deferred tax benefit of $1.6 million, primarily due to a tax loss related to a former equity method company that was dissolved in the period. In the nine months ended September 30, 2011, ICG recorded net deferred tax benefit of $0.1 million on discrete items primarily due to interest received on the federal tax refund ICG received during 2011 and the offsetting effect of equity method companies that were disposed of or dissolved during the nine-month period. ICG recorded a tax benefit of $1.2 million for the nine months ended September 30, 2010. This benefit was attributable to $0.7 million of interest related to a portion of the tax receivable that was paid by the Internal Revenue Service (IRS) during the nine months ended September 30, 2010, as well as a provision to return adjustment of $0.5 million to reflect the actual net operation loss carryback related to the 2009 tax year. As discussed in Note 4, "Consolidated Core Companies," in July 2010, ICG acquired an additional equity interest in ICG Commerce. As a result of this acquisition, ICG Commerce now joins ICG's consolidated federal income tax return. One effect of this transaction was to reduce the amount of Section 382 limited net operating losses available to ICG Commerce by $2.6 million in that period. For the 2010 period during which ICG Commerce did not join in the consolidated federal income tax return with ICG, ICG Commerce recorded income tax expense of $2.9 million and $4.3 million, respectively, representing an effective tax rate of 49.7%. This rate differed from the federal rate of 35% due to foreign and state taxes offset by the increased valuation allowance due to the aforementioned reduction in available net operating losses.

As a result of a change in ownership of ICG under Internal Revenue Code Section 382 that occurred in 2004, ICG's net operating loss carryforwards and capital loss carryforwards are subject to an annual limitation. The annual limitation on the utilization of these carryforwards is approximately $14.5 million per year. This annual limitation can be carried forward if it is not used in a particular year. The amount available for 2011 is $14.5 million and the total amount available through 2023, when the losses subject to this limitation expire, is $188.8 million.

As a result of a change in ownership of ICG Commerce under Internal Revenue Code Section 382 that occurred in 2003, ICG Commerce's net operating loss carryforwards are subject to an annual limitation. The annual limitation ICG Commerce has on the utilization of its net operating losses is $3.1 million per year. The amount available in 2011 is $34.3 million and the total amount available through 2022, when the losses subject to this limitation expire, is $68.8 million.

Additionally, ICG has $32.3 million of net operating loss carryforwards that are not subject to the Section 382 annual limitation. These net operating losses expire between 2026 and 2029.

A valuation allowance has been provided for the portion of ICG's net deferred tax assets that ICG believes, after evaluating all positive and negative evidence, both historical and prospective, is more likely than not to not be realized.

As of December 31, 2010, ICG was entitled to an income tax refund of $6.3 million, which was received during the nine months ended September 30, 2011. Interest related to this refund in the amount of $0.2 million was received during the nine months ended September 30, 2011 and is included in the line item "Income tax (expense) benefit" in ICG's Consolidated Statements of Operations in the relevant period.