Note 5 - Income Taxes

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

5. INCOME TAXES

Income tax provision decreased $2.6 million for the six months ended June 30, 2016, to $2.5 million as compared to an income tax provision of $5.1 million for the six months ended June 30, 2015. The Company’s effective tax rate was 37.1% and 38.7% for the six months ended June 30, 2016, and June 30, 2015, respectively.  The Company’s effective tax rate decreased in the six months ended June 30, 2016, as compared to the same period in 2015, primarily due to the permanent reinstatement of the U.S. federal research tax credit. On December 18, 2015, the President of the United States signed into law the Protecting Americans from Tax Hikes Act of 2015 which permanently reinstated the research tax credit retroactive to January 1, 2015. As a result of the new legislation, the Company recognized a benefit in the first two quarters of 2016 and no benefit in the same period in 2015.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of June 30, 2016, was $11.3 million, of which $6.7 million, if recognized, would decrease the Company’s effective tax rate. The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of December 31, 2015, was $11.0 million, of which $6.5 million, if recognized, would affect the Company's effective tax rate. As of June 30, 2016, the Company has recorded unrecognized tax benefits of $2.6 million, including interest and penalties, as long-term taxes payable in its condensed consolidated balance sheet. The remaining $9.2 million has been recorded net of our deferred tax assets, of which $4.6 million is subject to a full valuation allowance. 

The valuation allowance was approximately $6.4 million and $6.2 million as of June 30, 2016 and December 31, 2015, respectively, which was related to California R&D tax credits and California net operating losses related to our acquisition of Syntricity that we currently do not believe are more likely than not to be ultimately realized.

The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S. federal, various state and foreign jurisdictions. Because the Company used some of the tax attributes carried forward from previous years to tax years that are still open, statutes of limitation remain open for all tax years to the extent of the attributes carried forward into tax year 2002 for federal and California tax purposes. The State of New York is currently conducting an audit of the Company’s 2012 to 2014 income tax returns. The Company is not subject to income tax examinations in any other of its major foreign subsidiaries’ jurisdictions.