Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

Note 9: Income Taxes

The amount of current and deferred income tax (benefit) / expense included in the financial statements for the years ended December 31 was as follows:

	2012			2011
Current Tax (Benefit) / Expense	$	-		$	-
Deferred Tax (Benefit) / Expense		(1,559,000	)		(616,000	)
Total Income Tax (Benefit) / Expense	$	(1,559,000	)	$	(616,000	)

The following table provides reconciliation between the statutory income tax rate and the Company’s effective tax rate for the years ended December 31:

	2012			2011
Tax (benefit) / expense at statutory rate		34.0	%		34.0	%
Stock-based compensation		-111.2	%		7.2	%
Amortization of goodwill		50.6	%		-1.8	%
Meals and entertainment		-20.5	%		1.4	%
Increase / (decrease) in valuation allowance		4691.1	%		-106.5	%
Net tax expense		4644.0	%		-65.7	%

Onvia’s deferred tax asset consists of the following as of December 31:

	2012			2011
Deferred Tax Assets
Net operating loss carryforward	$	24,631,963		$	24,900,758
Accrued expenses not currently deductible		1,176,721			1,160,472
Depreciation different for tax purposes		1,054,235			1,008,598
Deferred Tax Asset Total		26,862,919			27,069,828
Deferred Tax Liability
Prepaid expenses		(182,139	)		(154,534	)
Depreciation different for tax purposes		(1,880,736	)		(2,099,452	)
Deferred Tax Liabilities Total		(2,062,875	)		(2,253,986	)
Net deferred tax asset before valuation allowance		24,800,044			24,815,842
Valuation allowance		(22,625,044	)		(24,199,842	)
Net deferred tax asset after valuation allowance	$	2,175,000		$	616,000

The deferred tax asset has been reduced by a valuation allowance that reduces the amount of our deferred tax asset to a level that is more-than-likely-than-not to be recognized.  In determining the amount of the valuation allowance we consider whether it is more likely that some portion or all of the deferred tax assets will not be realized.  The Company weighed each piece of evidence in a qualitative and quantitative analysis and based upon its judgment determined that the weight of the positive evidence was sufficient to conclude that the Company will more-than-likely-than-not realize a portion of its U.S. deferred tax assets.

Accordingly, the Company released a valuation allowance on these deferred tax assets as of December 31, 2012, in the amount of $1.6 million and reflected this income tax benefit in the results from continuing operations.  The financial projections supporting the Company’s conclusion to release a portion of its valuation allowance contain significant assumptions and estimates of future operations.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences are expected to be deductible.  Onvia considers the scheduled reversal of deferred tax liabilities, projected future taxable income and projections for future taxable income over the periods in which the deferred tax assets are expected to be deductible.

As of December 31, 2012 and 2011 Onvia had available U.S. federal net operating losses in the amount of $72,446,952 and 73,237,522 which expire at various times from 2022 through 2031.

The following is a summary of the changes in our net operating losses available for utilization in future years.

Net operating loss available at December 31, 2011	$	73,237,522
2012 utilization		(790,570	)
Net operating loss available at December 31, 2012	$	72,446,952

Onvia files an income tax return in the United States.  We are no longer subject to federal income tax examination for years before 2009.  Onvia also has available NOLs generated in tax years 2001 to 2010 that, if used, could be subject to examination by taxing authorities.