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Income Taxes
9 Months Ended
Sep. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes — We file a consolidated U.S. Federal income tax return and income tax returns in state, local and foreign jurisdictions (Canada and Australia) as required.
At September 30, 2013, we had total deferred income tax assets of $152.3 million and a valuation allowance of $118.7 million resulting in an estimated recoverable amount of deferred income tax assets of $33.6 million. This reflected a change from the December 31, 2012 balance of deferred income tax assets of $163.9 million and a valuation allowance of $118.7 million resulting in an estimated recoverable amount of $45.2 million. The change reflects the expected usage of the deferred income tax assets based on estimated 2013 taxable income.
At both September 30, 2013 and December 31, 2012, the balance of the valuation allowance was $118.7 million, respectively, which did not include any valuation allowance for foreign operations.
We consider both positive and negative evidence when evaluating the recoverability of our deferred income tax assets. The assessment is required to determine whether based on all available evidence, it is more likely than not (i.e., greater than a 50% probability) whether all or some portion of the deferred income tax assets will be realized in the future. During the fourth quarter of each year, we prepare a multi-year forecast of taxable income for our operations. The wireless operations have experienced a continuing decline in revenues and taxable income as subscribers switch to other communication solutions. The software operations have been impacted by the economic uncertainty of the past several years which has impacted customer purchase and implementation decisions. The forecasts of taxable income are not sufficient to result in the full realization of our deferred income tax assets.
The anticipated effective income tax rate is expected to continue to differ from the Federal statutory rate of 35% primarily due to the effect of state income taxes, the effect of changes to the deferred income tax asset valuation allowance, permanent differences between book and taxable income and certain discrete items.
As of January 1, 2013, we had approximately $389.1 million of Federal net operating losses (“NOLs”) available to offset future taxable income. The IRC Section 382 limited NOLs as of January 1, 2013 totaled $56.5 million which may be used at a rate of $6.1 million per year. The 2012 NOL utilized was $41.3 million, which is net of the Internal Revenue Code Section 382 (“IRC Section 382”) limitation.