Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

12. Income Taxes

We account for income taxes using the liability method in accordance with ASC 740 Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

There is no provision or benefit for federal or state income taxes for the years ended December 31, 2011, 2010 or 2009 other than a federal tax refund of $95 we received in 2010 from new legislation permitting the carryback of net operating losses (NOLs) to 2005 as well as permitting the suspension of limitations on alternative minimum tax NOL utilization. We have completed a calculation through March 31, 2011, under Internal Revenue Code Section 382, the results of which indicate that past ownership changes will limit utilization of NOLs in the future. Ownership changes subsequent to March 31, 2011, may further limit the future utilization of net operating loss and tax credit carry-forwards as defined by the federal and state tax codes.

Deferred tax assets as of December 31, 2011 and 2010, consisted of the following:

	2011			2010
Depreciation and amortization	$	6,865		$	6,881
R&E tax credit carry-forwards		11,966			11,543
NYS investment tax credit carry-forwards		1,088			1,076
AMT credit carry-forwards		211			211
Net operating loss carry-forwards		85,110			95,848
Capitalized research and development expenditures		43,113			35,818
Stock compensation		13,789			13,942
Other items		3,600			2,776
		165,742			168,095
Valuation allowance		(165,742	)		(168,095	)
	$	-		$	-

We do not recognize deferred tax assets considering our history of taxable losses and the uncertainty regarding our ability to generate sufficient taxable income in the future to utilize these deferred tax assets. For the year ended December 31, 2011, we had income for tax purposes and such amount was offset completely by our available net operating loss carry-forwards. For the year ended December 31, 2010, we incurred net losses for tax purposes. We recognized a full tax valuation against deferred taxes at December 31, 2011 and 2010.

The following is a reconciliation of income taxes computed at the Federal statutory income tax rate to the actual effective income tax provision during 2011, 2010 and 2009:

	2011	2010	2009
U.S. Federal statutory rate	35.0%	(34.0)%	(34.0)%
State income taxes, net of Federal benefit	8.0	(5.1)	(4.6)
Research and experimental tax credit	(4.1)	(1.7)	(4.0)
Change in valuation allowance	(22.6)	38.2	40.4
Effect of federal tax rate bracket change on valuation allowance	(34.8)	-	-
Equity compensation	17.0	2.3	6.3
Investment tax credit	(0.1)	0.1	(3.8)
Other	1.6	0.1	(0.3)
Income tax provision (benefit)	0.0%	(0.1)%	0.0%

As of December 31, 2011, we had available, for tax return purposes, unused NOLs of approximately $228.8 million, which will expire in various years from 2021 to 2030, $18.2 million of which were generated from deductions that, when realized, will reduce taxes payable and will increase paid-in-capital and are not reflected in our deferred tax assets above. Additionally, $11.4 million of the valuation allowance relates to NOLs attributable to excess tax deductions for equity compensation. When realized this will also be reflected as an increase to paid-in-capital.

We have reviewed our nexus in various tax jurisdictions and our tax positions related to all open tax years for events that could change the status of our ASC 740 Income Taxes liability, if any, or require an additional liability to be recorded. Such events may be the resolution of issues raised by a taxing authority, expiration of the statute of limitations for a prior open tax year or new transactions for which a tax position may be deemed to be uncertain. During the years ended December 31, 2011, 2010 and 2009, we had no unrecognized tax benefits resulting from tax positions during a prior or current period, settlements with taxing authorities or the expiration of the applicable statute of limitations. At December 31, 2011, there were no amounts of unrecognized tax benefits that, if recognized, would affect the effective tax rate and there were no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months from the respective date. As of December 31, 2011, we are subject to federal and state income tax in the United States. Open tax years relate to years in which unused net operating losses were generated or, if used, for which the statute of limitation for examination by taxing authorities has not expired. Our open tax years extend back to 1995, with the exception of 1997, during which we reported net income. No amounts of interest or penalties were recognized in our Consolidated Statements of Operations or Consolidated Balance Sheets as of and for the years ended December 31, 2011, 2010 and 2009.

Our research and experimental (R&E) tax credit carry-forwards of approximately $12.0 million at December 31, 2011 expire in various years from 2012 to 2031. During the year ended December 31, 2011, research and experimental tax credit carry-forwards of approximately $81 expired.