Income Taxes

The provision for income taxes consists of the following (in thousands):



	Year Ended December 31,			Six Months Ended December 31,				Fiscal Year Ended June 30,
	2012			2011		2010		2011		2010
						(Unaudited)
Current provision:
Federal	$	187		$	325	$	111	$	62	$	—
State	200			396		449		988		2
Foreign	1,787			329		93		286		278
	2,174			1,050		653		1,336		280
Deferred provision:
Federal	(55		)	22		—		—		—
State	(5		)	3		—		—		—
Foreign	(746		)	—		—		—		—
	(806		)	25		—		—		—
Provision for income taxes	$	1,368		$	1,075	$	653	$	1,336	$	280

The components of income (loss) from continuing operations before income taxes by United States and foreign jurisdictions were as follows (in thousands):



	Year Ended December 31,			Six Months Ended December 31,					Fiscal Year Ended June 30,
	2012			2011			2010		2011		2010
							(Unaudited)
United States	$	(7,903	)	$	(1,375	)	$	5,368	$	10,585	$	(29,602	)
Foreign	(28,077		)	(4,234		)	88		581		177
Total	$	(35,980	)	$	(5,609	)	$	5,456	$	11,166	$	(29,425	)

The effective income tax rate differs from the federal statutory income tax rate applied to the income (loss) before provision for income taxes due to the following (in thousands):



	Year Ended December 31,			Six Months Ended December 31,						Fiscal Year Ended June 30,
	2012			2011			2010			2011			2010
							(Unaudited)
Tax computed at the federal statutory rate	$	(12,234	)	$	(1,907	)	$	1,857		$	3,799		$	(10,005	)
State taxes, net of federal benefit	329			82			122			250			(359		)
Tax rate differential for international subsidiaries⁽¹⁾	10,743			1,589			(23		)	(47		)	(13		)
Stock-based compensation	3,926			978			244			727			149
Tax credits	(1,056		)	(378		)	(150		)	(409		)	(282		)
Tax contingencies	452			178			74			171			265
Permanent differences	532			244			120			305			411
Change in state rate	(68		)	8			295			662			(1,170		)
Other	(697		)	146			379			344			117
Valuation allowance	(559		)	135			(2,265		)	(4,466		)	11,167
Provision for income taxes	$	1,368		$	1,075		$	653		$	1,336		$	280


(1)	The change in the impact of the tax rate differential for international jurisdictions is primarily attributable to a change in the mix of income/loss from the United States to international jurisdictions with different income tax rates compared to the United States.

Significant components of our deferred tax assets as of December 31, 2012 and 2011 are shown below (in thousands). A valuation allowance has been recognized to offset our deferred tax assets, as necessary, by the amount of any tax benefits that, based on evidence, are not expected to be realized.



	December 31,
	2012			2011
Deferred tax assets:
Net operating losses	$	2,647		$	4,182
Deferred revenue	2,421			8,434
Accrued expenses	1,357			700
Deferred rent	322			201
Credit carryforwards	2,342			1,357
Incentive from lessor	46			1,023
Facility exit obligation	1,102			—
Depreciation	304			—
Stock-based compensation	7,474			1,333
Other	1,017			1,130
Total deferred tax assets	19,032			18,360
Less valuation allowance	(13,270		)	(13,829		)
	5,762			4,531
Deferred tax liabilities:
Depreciation	(5,016		)	(4,531		)
Net deferred tax assets	$	746		$	—

As of December 31, 2012, we had U.S. federal net operating losses and federal tax credit carryforwards of approximately $30.0 million and $0.9 million, respectively. The federal net operating loss carryforwards and federal tax credits will begin to expire in 2024 if not utilized. In addition, we had state net operating losses and state tax credit carryforwards of approximately $42.0 million and $1.0 million, respectively. The state net operating loss and tax credit carryforwards will begin to expire in 2018 if not utilized. Utilization of our net operating loss and credit carryforwards may be subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carry forwards before utilization.

Approximately $27.9 million of federal net operating losses and $8.6 million of state net operating losses relate to stock-based compensation deductions in excess of book expense, the tax effect of which would be to credit additional paid-in capital, if realized.

We have maintained a valuation allowance against our U.S. deferred tax assets as of December 31, 2012. Due to a loss over recent years and based on all available evidence, we have determined that it is more likely than not that net deferred tax assets in the U.S. will not be realized with the exception of $0.7 million related to foreign deferred tax assets. The valuation allowance decreased $0.6 million for the year ended December 31, 2012, increased $0.1 million and decreased $2.2 million for the six months ended December 31, 2011 and 2010 (unaudited), respectively, and decreased $4.5 million and increased $11.2 million for fiscal 2011 and 2010, respectively.

We have not recorded a provision for deferred U.S. tax expense that could result from the remittance of foreign undistributed earnings since we intend to reinvest the earnings of these foreign subsidiaries indefinitely.

Our share of the undistributed earnings of foreign corporations not included in our consolidated federal income tax returns that could be subject to additional U.S. income tax if remitted was approximately $0.3 million and $0.8 million as of December 31, 2012 and 2011, respectively. The determination of the amount of unrecognized U.S federal deferred income tax liability for undistributed earnings is not practicable.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in thousands):



	Year Ended December 31,			Six Months Ended December 31,				Fiscal Year Ended June 30,
	2012			2011		2010		2011		2010
						(Unaudited)
Beginning balance	$	710		$	519	$	374	$	374	$	185
Gross increases - tax positions in prior period	827			—		—		—		—
Gross decreases - tax positions in prior period	(65		)	—		—		—		—
Gross increases - tax positions in current period	264			191		73		145		189
Lapse of statute of limitations	(11		)	—		—		—		—
Ending balance	$	1,725		$	710	$	447	$	519	$	374

As of December 31, 2012, we had gross unrecognized tax benefits of approximately $1.7 million, of which $0.9 million would impact the effective tax rate, if recognized. We recognize potential accrued interest and penalties related to unrecognized tax benefits as income tax expense. Accrued interest and penalties included in our liability related to unrecognized tax benefits at December 31, 2012 and 2011 were $0.4 million and $0.3 million, respectively. The amount of unrecognized tax benefits could be reduced upon expiration of the applicable statutes of limitations. The potential reduction in unrecognized tax benefits during the next twelve months is not expected to be material. Interest and penalties accrued on these uncertain tax positions will be released upon the expiration of the statutes of limitations and these amounts are also not material.

We are subject to taxation in the United States and various state and foreign jurisdictions. As of December 31, 2012, our tax years 2005 to 2012 remain subject to examination in most jurisdictions.