(8)	Income Taxes

Loss before provision for income taxes consists of the following (dollars in thousands):


	Year Ended June 30,
	2012			2011			2010
Domestic	$	(14,086	)	$	(50,395	)	$	(96,937	)
Foreign		(1,066	)		6,675			(3,971	)
Loss before provision for taxes	$	(15,152	)	$	(43,720	)	$	(100,908	)

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


	Year Ended June 30,
	2012			2011			2010
Federal -
Current	$	-		$	-		$	2,586
Deferred		(3,409	)		(60,004	)		(2,490	)
State -
Current		191			132			170
Deferred		33			(1,702	)		-
Foreign -
Current		3,292			5,446			5,907
Deferred		(1,451	)		2,151			364
	$	(1,344	)	$	(53,977	)	$	6,537

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


	Year Ended June 30,
	2012			2011			2010
Federal tax (benefit) provision at statutory rate	$	(5,303	)	$	(15,302	)	$	(35,318	)
State income taxes		124			86			-
Subpart F and dividend income		4,189			1,235			458
Foreign taxes and rate differences		1,001			2,218			6,445
Stock-based compensation		2,968			3,338			1,987
Tax credits		(3,913	)		(4,524	)		-
Tax contingencies		(2,385	)		7,158			170
Return to provision adjustments		442			1,182			-
Valuation allowance		1,431			(48,830	)		32,772
Other		102			(538	)		23
(Benefit from) Provision for income taxes	$	(1,344	)	$	(53,977	)	$	6,537

In fiscal 2012, our benefit from income taxes included the impact of the reversal of tax contingencies determined under the provisions of FIN 48, Accounting for Uncertain Tax Positions (currently included as provisions of ASC Topic 740).

In fiscal 2011, based on our evaluation of the realizability of our U.S. federal net operating loss carryforwards (NOLs), foreign tax credits, and R&D credits, we recognized a benefit from income taxes due to a significant reduction of our valuation allowance of $48.8 million. Also during fiscal 2011 we established tax contingencies of $7.2 million determined under FIN 48. These contingencies included penalties and interest, which were recorded as a component of our income tax expense.

Included in the fiscal 2010 provision for income taxes is an increase in the valuation allowance of $32.8 million. In July 2009, the Company introduced its aspenONE subscription model, resulting in a significant decrease in revenue and the incurrence of a significant loss in fiscal 2010 for both financial reporting and tax purposes. Given these factors, as of June 30, 2010, the Company concluded that it should maintain its valuation allowance.

We do not provide for deferred taxes on unremitted earnings of foreign subsidiaries since we intend to indefinitely reinvest either currently or sometime in the foreseeable future. Unrecognized provisions for taxes on undistributed earnings of foreign subsidiaries, which are considered indefinitely reinvested, are not material to our consolidated financial position or results of operations.

Deferred tax assets (liabilities) consist of the following at June 30, 2012 and 2011 (in thousands):


	Year Ended June 30,
	2012			2011
Deferred tax assets:
Federal and state credits	$	4,000		$	7,881
Foreign tax credits		38,870			33,805
Federal and state loss carryforwards		18,458			18,734
Foreign loss carryforwards		2,658			3,328
Revenue		3,682			2,123
Restructuring accruals		326			1,517
Other reserves and accruals		5,119			6,002
Intangible assets		1,037			1,398
Property and leasehold improvements		3,523			4,238
Other temporary differences		5,596			5,783
		83,269			84,809
Deferred tax liabilities:
Revenue		(714	)		(475	)
Intangible assets		(1,558	)		(1,602	)
Property, leasehold improvements, and other basis differences		(9,583	)		(9,612	)
Other temporary differences		(683	)		(743	)
		(12,538	)		(12,432	)
Valuation allowance		(5,626	)		(8,045	)
Net deferred tax assets	$	65,105		$	64,332

As of June 30, 2012 we maintain a valuation allowance in the U.S. primarily for certain R&D credits that are anticipated to expire unused. We also maintain a valuation allowance on certain foreign subsidiary NOL carryforwards because it is more likely than not that a benefit will not be realized.

As of June 30, 2012, we have available federal and state net operating loss (NOLs) carryforwards of $110.8 million. Of that amount, $64.2 million relate to stock-based compensation tax deductions in excess of book compensation expense (APIC NOLs) which will be credited to additional paid- in-capital when such deductions reduce taxes payable as determined on a “with-and-without” basis. Accordingly, these APIC NOLs will reduce federal taxes payable if realized in future periods, but NOLs related to such benefits are not included in the table above. The deferred tax asset related to the net carryforward value of $46.6 million is included in the table above.

As of June 30, 2012, we have foreign net operating loss carryforwards of $10.9 million which expire at various dates beginning in 2020 and others with no expiration date. We also have state research and development credits, and alternative minimum tax (AMT) credit carryforwards. The state research and development credits expire at various dates from 2013 through 2032, while the AMT credit carryforwards have unlimited carryforward periods.

We have determined that during fiscal 2011 we underwent an ownership change (as defined under Section 382 of the Internal Revenue Code of 1986, as amended). 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.

In accordance with the provisions of FIN 48, we establish reserves for uncertain tax positions 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.” The tax provision included penalties and interest, which were recorded as a component of income tax expense. Tax liabilities under FIN 48 were recorded as a component of our other non-current liabilities. The actual amount of taxes due will not be known until examinations are completed, settled, or the audit periods are closed by statute.

A reconciliation of the reserve for uncertain tax positions is as follows (in thousands):

	Year Ended June 30,
	2012			2011			2010

Uncertain tax positions, beginning of year	$	24,835		$	17,730		$	19,238
Gross increases - tax positions in prior period		2,072			4,599			111
Gross decreases - tax positions in prior period		(1,468	)		(1,025	)		(958	)
Gross increases - tax positions in current period		-			3,333			2,114
Gross decreases - payments		-			-			(332	)
Gross decreases - lapse of statutes		(2,954	)		(517	)		(2,354	)
Currency translation adjustment		(579	)		715			(89	)
Uncertain tax positions, end of year	$	21,906		$	24,835		$	17,730

At June 30, 2012, the total amount of unrecognized tax benefits is $21.9 million, and of that amount, $18.1 million, if recognized, would reduce the effective tax rate. We do not anticipate the total amount of unrecognized tax benefits to significantly change within the next twelve months.

At June 30, 2012, we had approximately $1.9 million of accrued interest and $1.3 million of penalties related to uncertain tax positions. We recorded approximately $0.3 million benefit for interest and penalties during fiscal 2012.

Fiscal years 2004-2012 are open to audit in the United States and Canada.

Subsidiaries of the Company 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.