Note 12 - Income Taxes

6 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Text Block]

(12)         Income Taxes

In preparing its financial statements, the Company estimates income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities.

As of December 31, 2011, the Company had $2.4 million in estimated federal net operating losses (“NOLs”) to offset against future federal taxable income. These NOLs are subject to the change in control provisions in Section 382 of the Internal Revenue Code (“IRC Section 382”) and expire in 2030. As of December 31, 2011, the Company had estimated alternative minimum tax (“AMT”) credit carryforwards of $355,000 and $2.1 million in estimated foreign tax credits related to income taxes payable at certain of our business units located in the U.K., which may be used to offset future federal tax liabilities.

Additionally, the Company currently has significant deferred tax assets and other deductible temporary differences including basis differences between intangible assets. The Company does not provide a valuation allowance against its deferred tax assets as the Company believes that it is more likely than not that all of the deferred tax assets will be realized based on available evidence including scheduled reversal of deferred tax liabilities, projected future taxable income and other tax planning considerations.

The Company applies the provisions of ASC 740 as it relates to uncertain tax positions. This interpretation prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. ASC 740 states that a tax benefit from an uncertain tax position may be recognized only if it is “more likely than not” that the position is sustainable, based on its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement with a taxing authority having full knowledge of all relevant information.

As of December 31, 2011, the liability related to unrecognized tax benefits was $308,000. The Company recorded an additional liability for unrecognized tax benefits in the six months ended June 30, 2012 of $9,000 related to acquired liabilities for unrecognized tax benefits and interest and penalties on prior year tax positions.  The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.

The following table summarizes the activity related to the unrecognized tax benefits for the period ended June 30, 2012 (in thousands):

Balance at January 1, 2012	$	308
Increase to prior year tax positions		9
Increase to current year tax positions		—
Expiration of the statute of limitations for the assessment of taxes		—
Decrease related to settlements		—
Balance at June 30, 2012	$	317

The Company is no longer subject to U.S. federal income or state tax return examinations by tax authorities for tax years before 2007 and 2006, respectively, which periods relate to certain acquired businesses. The Internal Revenue Service (“IRS”) commenced an examination of the Company’s U.S. income tax returns for 2009 during the second quarter of 2011 and in January 2012, the Company received a closure letter from the IRS stating that no adjustments were identified. The Company operates in multiple taxing jurisdictions and faces audits from various tax authorities. The Company remains subject to examination until the statute of limitations expires for the respective tax jurisdiction. The Company does not anticipate that the amount of the unrecognized benefit will significantly increase or decrease within the next twelve months.

Undistributed earnings of the Company’s foreign subsidiaries are considered indefinitely reinvested and, accordingly, no provision for U.S. federal income taxes has been recorded. Deferred taxes are provided for earnings outside the United States when those earnings are not considered indefinitely reinvested.