9.	Income Taxes

Net operating losses – U.S.

The Company generated net operating losses in the U.S. (“NOLs”) during periods prior to September 30, 2014. The following table summarizes the activity for NOLs for the nine months ended September 30, 2014:


December 31, 2013	$	(140,959	)
U.S. GAAP pretax income		59,142
Income tax differences:
Temporary		627
Permanent		(20,507	)

September 30, 2014	$	(101,697	)

During the first quarter of 2014, management determined that although realization is not assured, it believed that it is more likely than not that its gross deferred tax asset would be realized. Therefore, it released the valuation allowance previously recorded resulting in an income tax benefit of $13,725 on the Company’s Consolidated Statements of Operations and Comprehensive Income in the three months ended March 31, 2014 and a corresponding deferred tax asset on the Company’s Consolidated Balance Sheet at March 31, 2014.

At September 30, 2014 and December 31, 2013, $98,210 and $111,635 of the NOLs were generated from stock-based compensation amounts recognized for tax purposes at the time options are exercised (at the intrinsic value) or restricted stock is vested (at fair value of the share price) in excess of amounts previously expensed at the date of grant for U.S. GAAP purposes. These amounts cannot be recognized as a deferred tax asset under U.S. GAAP. In addition, $3,487 of the NOLs are deemed worthless. Therefore, at September 30, 2014, the Company has no recognized deferred tax assets related to these NOLs.

During the three and nine months ended September 30, 2014, the Company recognized tax expense of $9,634 and $5,440. During the nine months ended September 30, 2014, the Company utilized $5,472 of its deferred tax asset and the Company recorded a credit to additional paid-in capital of $13,649 for the amount of NOLs from stock-based compensation utilized to reduce taxes payable during the period.

The Company completed a state tax study which resulted in a reduction of its current baseline operating tax rate in the U.S. from 45% to approximately 38%. The Company reduced the carrying value of its deferred tax asset which had previously been recorded using the higher rate.

A summary of the components of the gross and tax affected deferred tax asset as of September 30, 2014 is as follows:


Stock-based compensation	$	15,689
Deferred rent liability		5,703
Other		111

Total gross deferred tax asset		21,503
Income tax rate		38.38	%

Tax affected	$	8,253

Net operating losses – Non-U.S.

During the nine months ended September 30, 2014, the Company’s foreign subsidiaries generated $2,318 of NOLs. At September 30, 2014, a deferred tax asset related to these NOLs has been fully offset by a valuation allowance of $487.