(12)	Income Taxes

Components of income (loss) before income taxes in 2012, 2011 and 2010 are as follows:

	Years Ended December 31,
	2012			2011			2010
United States	$	(32,231	)	$	(7,976	)	$	(31,282	)
Foreign		7,502			6,110			6,120
	$	(24,729	)	$	(1,866	)	$	(25,162	)

The provision for income taxes consists of the following in 2012, 2011 and 2010:

	Years Ended December 31,
	2012		2011			2010
Current:
Federal	$	-	$	(4,191	)	$	(111	)
State		482		(287	)		320
Foreign		28		35			201
Total current		510		(4,443	)		410
Deferred:
Federal		925		5,636			(2	)
State		279		425			-
Foreign		2,377		2,047			(14,054	)
Total deferred		3,581		8,108			(14,056	)
Total provision	$	4,091	$	3,665		$	(13,646	)

Actual income taxes varied from the expected income taxes (computed by applying the statutory income tax rate of 35% for the years ended December 31, 2012, 2011 and 2010 to income before income taxes) as a result of the following:

	Years Ended December 31,
	2012			2011			2010

Expected tax benefit	$	(8,655	)	$	(653	)	$	(8,807	)
Total increase (decrease) in income taxes resulting from:
Change in valuation allowance allocated to income tax expense		13,987			10,641			(9,673	)
Research and experimentation credit		-			-			(78	)
Share-based compensation		38			24			83
Acquisition costs		309			(684	)		3,386
State and local income taxes, net of federal income tax benefit		(672	)		(212	)		435
Foreign income tax rate differential		(723	)		(463	)		(212	)
Change in unrecognized tax benefits		167			(4,669	)		241
Other		(360	)		(319	)		979
Actual income tax expense (benefit)	$	4,091		$	3,665		$	(13,646	)

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2012 and 2011 are presented as follows:

	December 31, 2012			December 31, 2011
Deferred tax assets:
Accrued compensation	$	162		$	611
Bad Debt		3,844			854
Depreciation		2,703			2,775
Research and experimentation credit carryforwards		6,951			7,324
Other credit carryforwards		1,566			1,476
Domestic loss carryforwards		115,421			113,459
Foreign loss carryforwards		8,007			9,652
Nonqualified stock options		5,374			3,450
Other		5,576			4,967
Total gross deferred tax assets		149,604			144,568
Less: asset valuation allowance		(121,117	)		(105,743	)
Net deferred tax asset		28,487			38,825
Deferred tax liabilities:
Software development costs and intangible assets		(7,572	)		(8,439	)
Intangibles—customer contracts & tradenames		(8,680	)		(14,223	)
Other		(5,105	)		(5,452	)
Total gross deferred liabilities		(21,357	)		(28,114	)
Net deferred tax asset	$	7,130		$	10,711
Included on balance sheet:
Current assets: deferred income taxes	$	3,135		$	3,393
Non–current asset: deferred income taxes		7,041			9,209
Non–current liabilities: deferred income taxes		(3,046	)		(1,891	)
Net deferred income taxes	$	7,130		$	10,711

At December 31, 2012, we had U.S. federal net operating loss, capital loss, research credit, alternative minimum tax credit, and foreign tax credit carryforwards of $292,370, $3,605, $4,911, $977, and $297, respectively, state net operating loss, capital loss and research credit carryforwards of $172,632, $3,605 and $408, respectively, foreign federal and provincial net operating loss carryforwards of $27,587 and $20,694, respectively, foreign and provincial capital loss carryforwards of $5,657 and $5,657, respectively, and foreign federal and provincial research credit carryforwards of $2,008 and $291, respectively. The U.S. federal net operating loss, research credit and foreign tax credit carryforwards expire in varying amounts beginning in 2015 and continuing through 2032, 2030 and 2018, respectively. The state net operating loss carryforwards expire in varying amounts beginning in 2013, and continuing through 2032 and the credit carryforwards expire in varying amounts beginning 2020 and continuing through 2023. The U.S. federal and state capital loss carryforwards will expire in 2013. The foreign tax credits expire in varying amounts beginning in 2018, and continuing through 2024. The foreign federal and provincial net operating loss carryforwards expire in varying amounts beginning in 2013, and continuing through 2030. Foreign and provincial capital losses may be carried forward indefinitely.

Management has an obligation to review, at least annually, the components of our deferred tax assets. This review is to ascertain that, based upon the information available at the time of the preparation of financial statements, it is more likely than not, that we expect to utilize these future deductions and credits. In the event that management determines that it is more likely than not these future deductions, or credits, will not be utilized, a valuation allowance is recorded, reducing the deferred tax asset to the amount expected to be realized.

Management's analysis for 2012 resulted in a valuation allowance of $121,117 at December 31, 2012. Based on both quantitative and qualitative factors, we record a valuation allowance for all jurisdictions except Canada. In 2010, we reversed $14,054 in valuation allowance related to almost all of the deferred tax assets of our Canadian operations. We considered the effect of U.S. Internal Revenue Code (Code) Section 382 on our ability to utilize existing U.S. net operating loss and tax credit carryforwards. Section 382 imposes limits on the amount of tax attributes that can be utilized where there has been an ownership change as defined under the Code. Almost all of our U.S. and state net operating loss, capital loss and credit carryforwards are subject to future limitation. The future limitation is in addition to any past limitations applicable to the net operating loss and credit carryforwards of previously acquired businesses. While application of Section 382 is complex, we currently estimate deferred tax assets of $24,946 related to U.S. net operating loss, capital loss and research tax credit carryforwards may be unrealizable due to Section 382 limitations. We have recorded a full valuation reserve for these deferred tax assets.

The net increase in the valuation allowance in 2012, 2011, and 2010 was $15,374, $4,358, and $31,830, respectively. The 2012 increase was primarily attributable to valuation allowances established in connection with current year net operating losses and other deferred tax assets.

There exist potential tax benefits for us associated with stock-based compensation. At December 31, 2012 and 2011, we had $1,638 and $1,514, respectively, of excess tax benefits related to vesting of restricted stock awards, nonqualified stock option exercises and disqualifying dispositions of employee incentive stock options. The income tax benefit related to excess tax benefits of stock-based compensation will be credited to paid-in-capital, when recognized, by reducing taxes payable.

The total amount of unrecognized tax benefits as of December 31, 2012, 2011 and 2010 was $2,109, $1,862, and $6,703, respectively. We recognize interest and penalties in the provision for income taxes. Total accrued interest and penalties as of December 31, 2012 were $162 and $102, respectively. Total accrued interest and penalties as of December 31, 2011 were $142 and $54, respectively. Total interest included in tax expense in 2012, 2011 and 2010 were $19, $(111), and $40, respectively. Total penalties included in tax expense in 2012, 2011 and 2010 were $ 48, $(3), and $1, respectively.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits in 2012, 2011 and 2010:

	December 31, 2012		December 31, 2011			December 31, 2010
Balance at January 1	$	1,862	$	6,703		$	6,506
Gross increases - tax positions in current year		55		-			19
Gross increases - tax positions in prior year		192		-			178
Gross decreases - tax positions in prior year		-		(12	)		-
Decreases due to statute expirations		-		(4,829	)		-
Balance at December 31	$	2,109	$	1,862		$	6,703

The total amount of unrecognized tax benefits at December 31, 2012 and December 31, 2011 that, if recognized, would affect the effective tax rate is $1,948 and $1,785, respectively. We do not expect a significant change in unrecognized tax benefits within the next twelve months.

We file income tax returns in the U.S., various states and foreign jurisdictions. During the year we completed a taxing authority examination of our 2008 and 2009 Canadian tax return without significant adjustment. We are not currently under examination in the U.S. federal taxing jurisdictions for which years ending after 2008 remain subject to examination. Years prior to 2009 remain subject to examination to the extent net operating loss and tax credit carryforwards have been utilized after 2008, or remain subject to carryforward.

We indefinitely reinvest any undistributed profits of our non-U.S. subsidiaries. Through year-end our non-U.S. subsidiaries have cumulative deficits.