(8) Income Taxes

Income (loss) before provision for (benefit from) income taxes consists of the following:

	Year Ended June 30,

	2013		2012			2011
	(Dollars in Thousands)
Domestic	$	54,587	$	(14,086	)	$	(50,395	)
Foreign		2,851		(1,066	)		6,675

Income (loss) before provision for (benefit from) income taxes	$	57,438	$	(15,152	)	$	(43,720	)

The provision for (benefit from) income taxes shown in the accompanying consolidated statements of operations is composed of the following:

	Year Ended June 30,

	2013			2012			2011
	(Dollars in Thousands)
Federal—
Current	$	—		$	—		$	—
Deferred		7,867			(3,409	)		(60,004	)
State—
Current		136			191			132
Deferred		693			33			(1,702	)
Foreign—
Current		7,068			3,292			5,446
Deferred		(3,588	)		(1,451	)		2,151

	$	12,176		$	(1,344	)	$	(53,977	)

The provision for (benefit from) income taxes differs from that based on the federal statutory rate due to the following:

	Year Ended June 30,

	2013			2012			2011
	(Dollars in Thousands)
Federal tax provision (benefit) at statutory rate	$	20,103		$	(5,303	)	$	(15,302	)
State income taxes		88			124			86
Subpart F and dividend income		4,456			4,189			1,235
Foreign taxes and rate differences		2,298			1,001			2,218
Stock-based compensation		900			2,968			3,338
Tax credits		(4,816	)		(3,913	)		(4,524	)
Tax contingencies		(168	)		(2,385	)		7,158
Return to provision adjustments		(149	)		442			1,182
Valuation allowance		(1,813	)		1,431			(48,830	)
Benefit from foreign restructuring		(9,266	)		—			—
Other		543			102			(538	)

Provision for (benefit from) income taxes	$	12,176		$	(1,344	)	$	(53,977	)

Deferred tax assets (liabilities) consist of the following at June 30, 2013 and 2012:

	Year Ended June 30,

	2013			2012
	(Dollars in Thousands)
Deferred tax assets:
Federal and state credits	$	4,918		$	4,000
Foreign tax credits		33,310			38,870
Federal and state loss carryforwards		6,221			18,458
Capital loss carryforwards		8,076			—
Foreign loss carryforwards		1,653			2,658
Deferred revenue		4,198			3,682
Restructuring accruals		34			326
Other reserves and accruals		4,834			5,119
Intangible assets		719			1,037
Property, leasehold improvements, and other basis differences		2,829			3,523
Other temporary differences		3,504			5,596

		70,296			83,269
Deferred tax liabilities:
Deferred revenue		(151	)		(714	)
Intangible assets		(1,444	)		(1,558	)
Property, leasehold improvements, and other basis differences		(16	)		(9,583	)
Other temporary differences		(677	)		(683	)

		(2,288	)		(12,538	)
Valuation allowance		(9,943	)		(5,626	)

Net deferred tax assets	$	58,065		$	65,105

In fiscal 2013, we restructured our Canadian affiliate, AspenTech Canada Ltd ("ATC"). The restructuring was considered a deemed liquidation for tax purposes resulting in (i) the elimination of a deferred tax liability of $9.3 million associated with a basis difference and (ii) recognition of a capital loss for tax purposes of $22.2 million.

Our valuation allowance for deferred tax assets was $9.9 million and $5.6 million as of June 30, 2013 and 2012 respectively. The increase in the valuation allowance of $8.1 million over the prior year was due to the recognition of the capital loss on the deemed liquidation of ATC and the assessment that it is "more likely than not" that we will not recognize a benefit from the capital loss. We also decreased the valuation allowance by $1.9 million during the year related net operating losses and other net deferred tax assets related to our entities in the United Kingdom. A valuation allowance has also been retained on certain foreign subsidiary net operating loss carryforwards because it is more likely than not that a benefit will not be realized.

As of June 30, 2013, we have available U.S. federal net operating loss carryforwards of $119.3 million. Of that amount, $104.7 million relate to stock-based compensation tax deductions in excess of book compensation expense (APIC NOLs) that will be credited to additional paid in capital when such deductions reduce taxes payable as determined based on a "with-and-without" approach. APIC NOLs will reduce federal taxes payable if realized in future periods, but NOLs relating to such benefits are not included in the table above. The deferred tax asset related to the net carryforward value of $14.6 million is included in the table above.

In fiscal 2013, we recorded a reduction in the foreign income taxes payable of $0.5 million, with an increase to additional paid in capital, for the benefits of excess stock-based compensation deductions recognized during the period in the United Kingdom.

We have foreign net operating loss carryforwards of $6.6 million which will expire beginning in 2020 and others with no expiration date. The $6.6 million of foreign net operating loss carryforwards includes $0.3 million related to stock-based compensation tax deductions in excess of book compensation expense. We also have federal and state research and development tax credits, and alternative minimum tax (AMT) credit carryforwards. The research and development tax credits expire at various dates from 2019 through 2033, while the AMT credit carryforwards have an unlimited carryforward period.

We have determined that we underwent an ownership change (as defined under section 382 of the Internal Revenue Code of 1986, as amended) during fiscal 2011. As such, the utilization of certain NOLs and tax credits are subject to an annual limitation. The annual limitation is not expected to impact the realizability of the deferred tax assets.

For fiscal 2013, our income tax provision included amounts determined under the provisions of FIN 48, Uncertainty in Income Taxes- an Interpretation of FASB Statement No 109, (currently included as provisions of ASC 740), intended to satisfy additional income tax assessments, including interest and penalties, that could result from any tax return positions for which the likelihood of sustaining the position on audit does not meet a threshold of "more likely than not." Tax liabilities were recorded as a component of our income taxes payable and other non-current liabilities. The ultimate amount of taxes due will not be known until examinations are completed and settled or the audit periods are closed by statutes.

A reconciliation of the reserve for uncertain tax positions is as follows:

	Year Ended June 30,

	2013			2012			2011
	(Dollars in Thousands)
Uncertain tax positions, beginning of year	$	21,906		$	24,835		$	17,730
Gross increases—tax positions in prior period		1,150			2,072			4,599
Gross decreases—tax positions in prior period		—			(1,468	)		(1,025	)
Gross increases—tax positions in current period		—			—			3,333
Gross decreases—lapse of statutes		(1,172	)		(2,954	)		(517	)
Currency translation adjustment		147			(579	)		715

Uncertain tax positions, end of year	$	22,031		$	21,906		$	24,835

At June 30, 2013, the total amount of unrecognized tax benefits is $22.0 million, and of that amount, $18.6 million, if recognized, would reduce the effective tax rate. Our policy is to recognize interest and penalties related to income tax matters as provision for (benefit from) income taxes. At June 30, 2013, we had approximately $1.9 million of accrued interest and $1.1 million of penalties related to uncertain tax positions. We recorded a benefit for interest and penalties of approximately $0.1 million during fiscal 2013. We do not anticipate the total amount of unrecognized tax benefits to significantly change within the next twelve months.

Fiscal years 2007-2012 are subject to audit in the United States and Canada.

Subsidiaries of Aspen Technology in a number of countries outside of the U.S. and Canada are also subject to tax audits. The Company estimates that the effects of such tax audits are not material to these consolidated financial statements.