INCOME TAX PROVISION

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

INCOME TAX PROVISION

INCOME TAX PROVISION

Applicable income tax (benefit) expense provision is as follows:

	(In thousands)
	2012			2011			2010
Current:
Federal	$	5,446		$	508		$	9
State	137			18			137
	5,583			526			146
Deferred	(5,669		)	(308		)	7,668
Total provision for income taxes	$	(86	)	$	218		$	7,814

Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The Company has not reflected the research and development tax credit in its current year provision for income taxes since the tax credit was enacted in 2013 retroactive to 2012. An entity records the effects of an enacted tax law or rate change on its tax accounts in the period that includes the enactment date. The Company anticipates reflecting the research and development tax credit for 2012 in its provision for 2013. At December 31, 2012 and 2011, the net deferred tax liability was $14,372,000 and $15,480,000 respectively. Deferred tax assets and liabilities, shown as the sum of the appropriate tax effect for each significant type of temporary differences as of December 31, 2012 and 2011, are as follows:

	(In thousands)
	2012 Deferred Tax					2011 Deferred Tax
	Asset		Liability			Asset		Liability
Net operating loss	$	7,231	$	—		$	212	$	—
Accrued compensation	2,783		—			1,108		—
Stock based compensation	2,777
Tenant Improvement allowance	3,097
Other deferred tax assets	861		—			2,201		—
Tax credits	8		—			20		—
Deferred revenue	—		(1,290		)	—		(1,404		)
Prepaid expenses	—		(139		)	—		(187		)
Depreciation	—		(6,138		)	—		(1,958		)
Intangible assets amortization	—		(23,562		)	—		(15,472		)
	$	16,757	$	(31,129	)	$	3,541	$	(19,021	)
Net deferred liability			$	(14,372	)			$	(15,480	)

The Company has recorded a deferred tax asset of $7,231,000 reflecting the benefit of $19,438,000 of federal net operating loss carry-forwards and $28,713,000 of state net operating loss carry-forwards, as well as $8,000 of state tax credits for research and development. Deferred tax assets are set to expire between 2018 and 2032.

Realization is dependent on generating sufficient taxable income prior to expiration of the loss carry-forwards. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized.

The net deferred tax liabilities shown on the balance sheet as of December 31, 2012 and 2011 are as follows:

	(In thousands)
	2012			2011
Deferred taxes – current liability	$	(1,429	)	$	(1,591	)
Deferred taxes – long term liability	(29,700		)	(17,430		)
Deferred taxes – current assets	3,149			1,193
Deferred taxes – long term assets	13,608			2,348
Net Deferred Tax Liability	$	(14,372	)	$	(15,480	)

A reconciliation of the difference between the statutory federal income tax rate and the effective tax rate for the Company for the years ended December 31, 2012, December 31, 2011 and December 31, 2010 is as follows:

	Percent of Pre-tax Income
	2012		2011		2010
Tax expense computed at statutory rate	35.0	%	35.0	%	35.0	%
State income taxes net of federal income tax benefit	(60.8	)%	(12.3	)%	5.0	%
Meals and entertainment – non-deductible	14.4	%	18.6	%	0.2	%
Non-deductible acquisition costs	18.4	%	12.1	%	1.3	%
Provision to return	(2.2	)%	(11.8	)%	—	%
Prior year tax credit	(13.8	)%	(12.6	)%	(0.6	)%
Income tax (benefit) provision	(9.0	)%	29.0	%	40.9	%

One of the Company's operating subsidiaries is not subject to state and local tax because all of its operations take place in a foreign jurisdiction which results in a significant reduction in the Company's anticipated state tax rate. Pursuant to an Exchange of Diplomatic notes between the United States and a foreign jurisdiction, Department of Defense contractors and subcontractors are not subject to tax in the foreign jurisdictions.

Effective, January 1, 2009, we adopted Financial Accounting Standards Board ASC 740 (formerly (“FIN 48”) ASC 740, “Accounting for Uncertainty in Income Taxes,”) which provides a comprehensive model for the recognition, measurement and disclosure in financial statements of uncertain income tax positions that a company has taken or expects to take on a tax return. Under ASC 740, a company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit can be recognized. Additionally, companies are required to accrue interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws.

Under ASC 740 we determined that all of our income tax positions meet the more-likely-than-not recognition threshold and, therefore, required no reserve. In the event of future uncertain tax positions, additional interest and penalty charges associated with tax positions would be classified as income tax expense in the Consolidated Financial Statements.

As of December 31, 2012, the following tax years remained subject to examination by the major tax jurisdictions indicated:

Major Jurisdictions	Open Years
United States	2001 through 2011
California	2001 through 2011
Florida	2009 through 2011
Maryland	2009 through 2011
Massachusetts	2009 through 2011
Virginia	2010 through 2011

The statute of limitations is open for the years 2001 through 2008 only in connection with the net operating loss carry forwards of an acquired subsidiary.