EGOV » Topics » 6. INCOME TAXES

These excerpts taken from the EGOV 10-K filed Mar 13, 2009.

Income taxes

     The Company, along with its wholly owned subsidiaries, files a consolidated federal income tax return. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

     The Company accounts for uncertain tax positions in accordance with FASB Interpretation No. (“FIN”) 48, “

Income taxes

     The Company, along with its wholly owned subsidiaries, files a consolidated federal income tax return. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

     The Company accounts for uncertain tax positions in accordance with FASB Interpretation No. (“FIN”) 48, “

Income taxes


     The Company, along with its wholly
owned subsidiaries, files a consolidated federal income tax return. Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end based on enacted laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amounts expected to be realized.


     The Company accounts for uncertain
tax positions in accordance with FASB Interpretation No. (“FIN”) 48,

Income taxes


     The Company, along with its wholly
owned subsidiaries, files a consolidated federal income tax return. Deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end based on enacted laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amounts expected to be realized.


     The Company accounts for uncertain
tax positions in accordance with FASB Interpretation No. (“FIN”) 48,

These excerpts taken from the EGOV 10-K filed Mar 17, 2008.

Income taxes

     During 2005, certain employees of the Company exercised non-qualified stock options. As a result, the Company received federal income tax deductions, or windfall tax benefits. The tax benefit for the deductions of approximately $1.8 million for 2005 increased deferred tax assets and was credited directly to additional paid-in capital.

     Under the guidance of footnote 82 of paragraph A94 of SFAS No. 123R, the Company is not permitted to recognize a credit to additional paid-in capital for windfall tax benefits unless such windfall tax benefits reduce income taxes payable. Since the Company is not currently paying federal income taxes (with the exception of federal alternative minimum tax), such windfall tax benefits generally increase the Company’s tax net operating loss carryforwards. Following the with-and-without approach for utilization of tax attributes, which results in windfall tax benefits being utilized after utilization of available tax net operating loss carryforwards to offset current year taxable income, the Company did not record an increase to deferred tax assets with an offsetting increase to additional paid-in capital for the windfall tax benefit of approximately $0.6 million and $0.9 million relating to the exercise of non-qualified stock options and vesting of restricted stock awards during the years ended December 31, 2006 and 2007.

     Paragraph 81 of SFAS No. 123R indicates that for purposes of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123R (i.e., the pool of additional paid-in capital, or the “APIC pool”), the Company shall include the net excess tax benefits that would have qualified as such had the entity adopted SFAS No. 123 for recognition purposes. The Company elected to use the alternative transition method described in FASB Staff Position No. FAS 123(R)-3 (the “short cut method”) for calculating the APIC pool upon adoption of SFAS No. 123R, and determined it had no such pool available.

Income taxes


     During 2005,
certain employees of the Company exercised non-qualified stock options. As a
result, the Company received federal income tax deductions, or windfall tax
benefits. The tax benefit for the deductions of approximately $1.8 million for
2005 increased deferred tax assets and was credited directly to additional
paid-in capital.


     Under the
guidance of footnote 82 of paragraph A94 of SFAS No. 123R, the Company is not
permitted to recognize a credit to additional paid-in capital for windfall tax
benefits unless such windfall tax benefits reduce income taxes payable. Since
the Company is not currently paying federal income taxes (with the exception of
federal alternative minimum tax), such windfall tax benefits generally increase
the Company’s tax net operating loss carryforwards. Following the
with-and-without approach for utilization of tax attributes, which results in
windfall tax benefits being utilized after utilization of available tax net
operating loss carryforwards to offset current year taxable income, the Company
did not record an increase to deferred tax assets with an offsetting increase to
additional paid-in capital for the windfall tax benefit of approximately $0.6
million and $0.9 million relating to the exercise of non-qualified stock options
and vesting of restricted stock awards during the years ended December 31, 2006
and 2007.


     Paragraph 81
of SFAS No. 123R indicates that for purposes of calculating the pool of excess
tax benefits available to absorb tax deficiencies recognized subsequent to the
adoption of SFAS No. 123R (i.e., the pool of additional paid-in capital, or the
“APIC pool”), the Company shall include the net excess tax benefits that would
have qualified as such had the entity adopted SFAS No. 123 for recognition
purposes. The Company elected to use the alternative transition method described
in FASB Staff Position No. FAS 123(R)-3 (the “short cut method”) for calculating
the APIC pool upon adoption of SFAS No. 123R, and determined it had no such pool
available.


This excerpt taken from the EGOV 10-Q filed Nov 7, 2007.

Income taxes

 

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.”  FIN 48 provides a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on its income tax returns. FIN 48 defines the threshold for recognizing a tax return position in the financial statements as “more likely than not” that the position is sustainable, based on its technical merits. FIN 48 also provides guidance on the measurement, classification and disclosure of tax return positions in a company’s financial statements. The Company adopted the provisions of FIN 48 on

 

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January 1, 2007, with the cumulative effect recorded as an adjustment to the opening balance of accumulated deficit. See Note 4 for additional discussion of the Company’s adoption of FIN 48.

 

The Company’s consolidated balance sheet as of December 31, 2006 reflects a revision of approximately $4.6 million of net deferred tax assets from noncurrent to current for the amount of tax net operating loss carryforwards the Company expects to utilize in 2007. A proportionate amount of the Company’s deferred tax asset valuation allowance was also allocated between current and noncurrent deferred tax assets.

 

This excerpt taken from the EGOV 10-Q filed Aug 6, 2007.

Income taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.”  FIN 48 provides a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on its income tax returns.  FIN 48 defines the threshold for recognizing a tax return position in the financial statements as “more likely than not” that the position is sustainable, based on its technical merits.  FIN 48 also provides guidance on the measurement, classification and disclosure of tax return positions in a company’s

7




financial statements.  The Company adopted the provisions of FIN 48 on January 1, 2007, with the cumulative effect recorded as an adjustment to the opening balance of accumulated deficit.  See Note 4 for additional discussion of the Company’s adoption of FIN 48.

The Company’s consolidated balance sheet as of December 31, 2006 reflects a revision of approximately $4.6 million of net deferred tax assets from noncurrent to current for the amount of tax net operating loss carryforwards the Company expects to utilize in 2007.  A proportionate amount of the Company’s deferred tax asset valuation allowance was also allocated between current and noncurrent deferred tax assets.

This excerpt taken from the EGOV 10-Q filed May 7, 2007.

Income taxes

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109.”  FIN 48 provides a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on its income tax returns.  FIN 48 defines the threshold for recognizing a tax return position in the financial statements as “more likely than not” that the position is sustainable, based on its technical merits.  FIN 48 also provides guidance on the measurement, classification and disclosure of tax return positions in a company’s financial statements.  The Company adopted the provisions of FIN 48 on January 1, 2007, with the cumulative effect recorded as an adjustment to the opening balance of accumulated deficit.  See Note 4 for additional discussion of the Company’s adoption of FIN 48.

This excerpt taken from the EGOV 10-K filed Mar 15, 2007.

Income taxes

     During 2004 and 2005, certain employees of the Company exercised non-qualified stock options. As a result, the Company received federal income tax deductions, or windfall tax benefits. The tax benefit for the deductions of approximately $0.7 million for 2004 and $1.8 million for 2005 increased deferred tax assets and was credited directly to additional paid-in capital.

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     Under the guidance of footnote 82 of paragraph A94 of SFAS No. 123R, the Company is not permitted to recognize a credit to additional paid-in capital for windfall tax benefits unless such windfall tax benefits reduce income taxes payable. Since the Company is not currently paying federal income taxes (with the exception of federal alternative minimum tax), such windfall tax benefits generally increase the Company’s tax net operating loss carryforwards. Following the with-and-without approach for utilization of tax attributes, which results in windfall tax benefits being utilized after utilization of available tax net operating loss carryforwards to offset current year taxable income, the Company did not record an increase to deferred tax assets with an offsetting increase to additional paid-in capital for the windfall tax benefit of approximately $0.6 million relating to the exercise of non-qualified stock options during the year ended December 31, 2006.

     Paragraph 81 of SFAS No. 123R indicates that for purposes of calculating the pool of excess tax benefits available to absorb tax deficiencies recognized subsequent to the adoption of SFAS No. 123R (i.e., the pool of additional paid-in capital, or the “APIC pool”), the Company shall include the net excess tax benefits that would have qualified as such had the entity adopted SFAS No. 123 for recognition purposes. The Company elected to use the alternative transition method described in FASB Staff Position No. FAS 123(R)-3 (the “short cut method”) for calculating the APIC pool upon adoption of SFAS No. 123R, and determined it had no such pool available.

This excerpt taken from the EGOV 10-Q filed Nov 6, 2006.

6. INCOME TAXES

The Company’s income tax provision for the nine-month period ended September 30, 2006 includes the establishment of a valuation allowance totaling approximately $101,000 for a state income tax loss carryforward that the Company may be unable to fully utilize.  Prospectively, the Company expects its effective tax rate to be between 40 and 42%.

This excerpt taken from the EGOV 10-Q filed Aug 7, 2006.

6. INCOME TAXES

The Company’s income tax provision for the six-month period ended June 30, 2006 includes the establishment of a valuation allowance totaling approximately $101,000 for a state income tax loss carryforward that the Company may be unable to fully utilize.  Prospectively, the Company expects its effective tax rate to be between 40% and 42%.

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This excerpt taken from the EGOV 10-Q filed May 9, 2006.

6. INCOME TAXES

                The Company’s effective tax rate was approximately 43% for the three-month period ended March 31, 2006 compared to 34% for the three-month period ended March 31, 2005.  The Company’s income tax provision in the current quarter was higher than the amount customarily expected due primarily to the establishment of a valuation allowance totaling approximately $101,000 for a state income tax loss carryforward that the Company may be unable to fully utilize.  Prospectively, the Company expects its effective tax rate to be between 40% and 42%.

 

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This excerpt taken from the EGOV 10-K filed Mar 16, 2006.

9. INCOME TAXES

     The provision for income taxes consists of the following:


     Significant components of the Company’s deferred tax assets and liabilities were as follows at December 31:


     For federal income tax purposes, the Company had available at December 31, 2005, total net operating loss (“NOL”) carryforwards of approximately $55.2 million that will expire in 2020 ($17.8 million), 2021 ($27.1 million) and 2022 ($10.3 million). The Company believes it is more likely than not it will generate sufficient taxable income from future operations to fully utilize the NOL carryforwards prior to expiration. The amount of the deferred tax asset considered realizable relating to these NOL’s could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced.

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     In 2003, the Company completed an internal reorganization and legal entity restructuring plan to simplify its corporate structure, standardize business development and contracting practices, increase internal operating efficiencies through reduced administrative costs, and concentrate all companies under one subsidiary, NICUSA. Most operating subsidiaries were converted to single member limited liability companies (LLCs) directly owned by NICUSA. Management believes the restructuring will be treated as tax-free reorganizations or liquidations. As a result of the restructuring, certain NOL carryforwards relating to the Company’s NIC Conquest business that were generated prior to the date the Company acquired 100% ownership of NIC Conquest can now be utilized by NICUSA. Consequently, the Company released a deferred tax asset valuation allowance relating to NIC Conquest totaling $3,214,026 in 2003.

     In 2003, management identified certain deferred tax assets pertaining to section 197 intangible asset amortization that the Company had not recognized since the acquisition of NIC Conquest in January 2000. Accordingly, the Company recognized an additional deferred tax asset totaling $1,483,386. The Company also identified certain estimated state NOL carryforwards that it had previously recognized that it might be unable to use. Based on a review of applicable state tax statutes, the Company concluded that there is substantial doubt it would be able to realize the full amount of certain estimated NOL carryforwards in states where the Company cannot file a consolidated income tax return. As a result, in the fourth quarter of 2003, the Company reduced its net deferred tax asset by $483,386.

     At December 31, 2004 and 2005, the Company’s total deferred tax asset valuation allowance was $4,341,138. Of this amount, $3,792,358 related to capital losses realized on certain of the Company’s previous equity method investments, and $548,780 related to an expected capital loss on the Company’s investment in a European joint venture. At present, there is substantial doubt about the Company’s ability to generate capital gains in the future. During 2003 and 2004, the Company increased the valuation allowance relating to these investments by $2,495,875 and $48,588, respectively.

     The following table reconciles the effective income tax rate indicated by the consolidated statements of income and the statutory federal income tax rate:


This excerpt taken from the EGOV 10-Q filed Nov 9, 2005.

4. INCOME TAXES

 

In 2005 and 2004, certain employees and directors of the Company exercised non-qualified stock options.  As a result, the Company received federal income tax deductions.  The tax benefit for the deductions of approximately $390,000 and $460,000 for the three-month periods ended September 30, 2005 and 2004, respectively, and approximately $1,070,000 and $631,000 for the nine-month periods ended September 30, 2005 and 2004, respectively, were credited directly to additional paid-in capital.

 

In October 2004, the American Jobs Creation Act of 2004 was enacted into law.  The new law contains provisions that could positively affect the Company if it qualifies for the special deductions provided for under the

 

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law. These provisions provide for, among other things, a special deduction from U.S. taxable income equal to a stipulated percentage of qualified income from domestic production activities (as defined) beginning in 2005.  This provision is complex and subject to numerous limitations.  The Company is still studying the new law, including the technical provisions related to the complex provision noted above.  The effect on the Company of the new law, if any, has not yet been determined, in part because the Company has not definitively determined whether its operations qualify for the special deduction. If the Company determines it qualifies for the special deduction, the tax benefit of such special deduction would be recognized in the period earned.

 

This excerpt taken from the EGOV 10-Q filed Aug 5, 2005.

4. INCOME TAXES

 

In 2005 and 2004, certain employees and directors of the Company exercised non-qualified stock options.  As a result, the Company received federal income tax deductions.  The tax benefit for the deductions of approximately $371,000 and $73,000 for the three-month periods ended June 30, 2005 and 2004, respectively, and approximately $680,000 and $171,000 for the six-month periods ended June 30, 2005 and 2004, respectively, were credited directly to additional paid-in capital.

 

In October 2004, the American Jobs Creation Act of 2004 was enacted into law.  The new law contains provisions that could impact the Company. These provisions provide for, among other things, a special deduction from U.S. taxable income equal to a stipulated percentage of qualified income from domestic production activities (as defined) beginning in 2005.  This provision is complex and subject to numerous limitations.  The Company is still studying the new law, including the technical provisions related to the complex provision noted above.  The effect on the Company of the new law, if any, has not yet been determined, in part because the Company has not definitively determined whether its operations qualify for the special deduction. If the Company determines it qualifies for the special deduction, the tax benefit of such special deduction would be recognized in the period earned.

 

This excerpt taken from the EGOV 10-Q filed May 10, 2005.

4.  INCOME TAXES

 

In October 2004, the American Jobs Creation Act of 2004 was enacted into law.  The new law contains provisions that could impact the Company. These provisions provide for, among other things, a special deduction from U.S. taxable income equal to a stipulated percentage of qualified income from domestic production activities (as defined) beginning in 2005.  This provision is complex and subject to numerous limitations.  The Company is still studying the new law, including the technical provisions related to the complex provision noted above.  The effect on the Company of the new law, if any, has not yet been determined, in part because the Company has not definitively determined whether its operations qualify for the special deduction. If the Company determines it qualifies for the special deduction, the tax benefit of such special deduction would be recognized in the period earned.

 

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This excerpt taken from the EGOV 10-K filed Mar 16, 2005.

Income taxes

The Company, along with its wholly owned subsidiaries, files a consolidated federal income tax return. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

This excerpt taken from the EGOV 10-K filed Mar 4, 2005.

Income taxes

The Company, along with its wholly owned subsidiaries, files a consolidated federal income tax return. Deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each year-end based on enacted laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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