12. Income Taxes

The income tax provision for the years ended December 31, 2013, 2012 and 2011 consisted of the following:


	Years Ended December 31,
	2013			2012			2011
Current:
Federal	$	(2,373	)	$	3,265		$	5,094
State		34			516			1,747
Foreign		128			171			188

Total current		(2,211	)		3,952			7,029
Deferred:
Federal		1,700			(172	)		(1,025	)
State		(157	)		258			(349	)
Foreign		11			147			—

Total deferred		1,554			233			(1,374	)

	$	(657	)	$	4,185		$	5,655

The income tax provision for the years ended December 31, 2013, 2012 and 2011 differs from the amounts computed by applying the statutory federal income tax rate to the consolidated (loss) income before income taxes as follows:


	Years Ended December 31,
	2013			2012			2011
(Benefit) provision computed at statutory rate	$	(848	)	$	2,873		$	3,620
Increase (reduction) resulting from:
Difference in rates for foreign jurisdictions		(65	)		—			—
Tax exempt interest income		(6	)		(23	)		(15	)
Stock-based compensation		271			526			992
Other non-deductible expenses		116			151			169
Non-deductible officers compensation		113			—			—
State income tax provision		(228	)		391			596
Valuation allowance		100			231			149
True-up of prior year returns		(154	)		—			—
Penalties and interest		15			—			—
Other		29			36			144

(Benefit from) provision for income taxes	$	(657	)	$	4,185		$	5,655

Significant components of the Company’s net deferred tax assets and liabilities are as follows:


	As of December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	1,434		$	953
Capital losses		46			—
Deferred revenue		917			525
Accruals and allowances		602			475
Intangible asset amortization		84			660
Stock-based compensation		5,835			6,988
Deferred rent expense		1,202			1,300

Gross deferred tax assets		10,120			10,901
Less valuation allowance		(1,158	)		(1,058	)

Total deferred tax assets		8,962			9,843
Deferred tax liabilities:
Intangible asset amortization		(734	)		(701	)
Depreciation		(2,545	)		(1,525	)

Total deferred tax liabilities		(3,279	)		(2,226	)

Net deferred tax assets	$	5,683		$	7,617

As reported:
Current deferred tax assets	$	555		$	862

Non-current deferred tax assets	$	5,873		$	7,457

Non-current deferred tax liabilities	$	(745	)	$	(702	)

In evaluating the ability to realize the net deferred tax asset, the Company considers all available evidence, both positive and negative, including past operating results, the existence of cumulative losses in the most recent fiscal years, tax planning strategies that are prudent and feasible, and forecasts of future taxable income. In considering sources of future taxable income, the Company makes certain assumptions and judgments which are based on the plans and estimates used to manage the underlying business of the Company. Changes in the Company’s assumptions and estimates may materially impact income tax expense for the period. The valuation allowance of $1,158 and $1,058 at December 31, 2013 and 2012, respectively, relates to foreign net operating losses (“NOL’s”) and state NOL’s acquired from KnowledgeStorm that the Company determined were not more likely than not to be realized based on projections of future taxable income in California, Georgia, China and Hong Kong. The valuation allowance increased by $100, $231 and $149 during the years ended December 31, 2013, 2012 and 2011, respectively. To the extent realization of the deferred tax assets for foreign and the state net operating losses becomes more likely than not, recognition of these acquired tax benefits would reduce income tax expense.

The Company expects to generate a federal net operating loss for the 2013 tax year. The Company intends to carry the NOL back to the prior year to generate a tax refund of $2.3 million.

The Company considers the excess of its financial reporting over its tax basis in its investment in foreign subsidiaries essentially permanent in duration and as such has not recognized a deferred tax liability related to this difference.

The amount of unrecognized tax benefits at December 31, 2013 was approximately $0.7 million. The amount of unrecognized tax benefits that impact the effective tax rate, if recognized, is approximately $0.5 million.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2013 and 2012 is as follows:


	2013		2012
Balance at beginning of year	$	642	$	628
Gross increases related to positions taken in prior periods		15		14

Balance at end of year	$	657	$	642

In March 2010, the Company received a letter from the Department of Revenue of the Commonwealth of Massachusetts (the “MA DOR”) requesting documentation demonstrating that TechTarget Securities Corporation (“TSC”), a wholly-owned subsidiary of the Company, has been classified by the MA DOR as a Massachusetts security corporation. Based on subsequent correspondence with the MA DOR, the Company determined that it was more likely than not that the MA DOR would require an adjustment to correct TSC’s tax filings such that it will be treated as a Massachusetts business corporation for the applicable years. The tax benefit available to a Massachusetts security corporation is a lower income tax rate. For the year ended December 31, 2010, the Company recorded a tax reserve for approximately $0.4 million for the potential state income tax liability arising from the difference between the income tax rates applicable to security corporations and business corporations in Massachusetts. On August 17, 2011, the Company filed Applications for Abatement with the MA DOR. On January 6, 2012, the Company filed Petitions under Formal Procedure with the Massachusetts Appellate Tax Board. The trial date has been rescheduled for April 22, 2014. The Company intends to continue to dispute the assessment and believes it has meritorious defenses which it intends to vigorously assert.

The Company recognized interest and penalties totaling $15 on its uncertain tax positions in income tax expense in 2013. Tax years 2010 through 2013 are subject to examination by the federal and state taxing authorities.

The Company recently finalized the IRS audit related to the 2009 and 2010 federal tax returns without any adjustments. The State of New York audit for the 2008 through 2010 returns was closed during the period. The State of New York assessed $3 for state income tax liability related to this audit.

As of December 31, 2013, the Company had state NOL carryforwards of approximately $25.9 million, which may be used to offset future taxable income. The NOL carryforwards expire at various dates through 2034. The Company has foreign NOL carryforwards of $0.9 million, which may be used to offset future taxable income in foreign jurisdictions until they expire, through 2018.