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Income Taxes
3 Months Ended
Mar. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The income tax provision for the three months ended March 31, 2013, as a percentage of income before taxes was 4.3%. The income tax provision for this period included a $1.4 million benefit for 2012 research tax credits as a tax law was enacted on January 2, 2013 to retroactively reinstate the federal research and development tax credit to January 1, 2012. The income tax provision for the three months ended March 31, 2012 , as a percentage of income before taxes, was 33.5% . The tax provision for the prior period excluded the benefits from the federal research and development credit which expired on December 31, 2011 and had not been reinstated as of March 31, 2012.

As of March 31, 2013, the gross liability for uncertain tax positions was $12.1 million (including interest and penalties) and the net liability, reduced for the federal effects of potential state tax exposures, was $8.8 million. If these uncertain tax positions are sustained upon tax authority audit, or otherwise become certain, the net $8.8 million would favorably affect the Company’s tax provision in such future periods. Included in the $8.8 million is $5.3 million which has not yet reduced income tax payments, and therefore, has been netted against non-current deferred tax assets. The remaining $3.5 million liability consisted of $3.3 million included in long-term income taxes payable and $270,000 net against short-term income taxes receivable. The Company does not anticipate a significant change to the $3.3 million long-term uncertain income tax positions within the next 12 months.



The Company continues to recognize interest and penalties related to income tax matters as part of the income tax provision. As of March 31, 2013 and December 31, 2012, the Company had $394,000 and $354,000, respectively, accrued for interest and none accrued for penalties in both periods. These accruals are included as a component of long-term income taxes payable.
The Company is required to file U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar years 2009 and forward. Significant state tax jurisdictions include California, Massachusetts and Texas, and generally, the Company is subject to routine examination for years 2006 and forward in these jurisdictions. In addition, any research and development credit carryforwards that were generated in prior years and utilized in these years may also be subject to examination by respective state taxing authorities. Generally, the Company is subject to routine examination for years 2005 and forward in various immaterial foreign tax jurisdictions in which it operates.
Deferred tax assets and liabilities result primarily from temporary differences between book and tax bases of assets and liabilities and state research and development credit carryforwards. The Company had net current deferred tax assets of $19.9 million and net long-term deferred tax liabilities of $428,000 as of March 31, 2013. The Company must regularly assess the likelihood that future taxable income levels will be sufficient to ultimately realize the tax benefits of these deferred tax assets. The Company currently believes that future taxable income levels will be sufficient to realize the tax benefits of these deferred tax assets and has not established a valuation allowance except for a valuation allowance of $7.9 million maintained against deferred assets as of March 31, 2013 due to California tax law changes in 2012 which require mandatory single sales factor apportionment in California for most multi-state taxpayers for tax years beginning on or after January 1, 2013. Should the Company determine that future realization of these tax benefits is not likely, additional valuation allowance would be established which would increase the Company’s tax provision in the period of such determination.