|12 Months Ended|
Dec. 31, 2015
|Income Tax Disclosure [Abstract]|
The provision for income taxes consists of the following (in thousands):
Significant components of the Company’s deferred tax assets, net consisted of the following (in thousands):
As of December 31, 2015 and 2014, the Company had state and Canadian net operating and capital losses (“NOLs”) of approximately $5.7 million and $3.5 million, respectively, which will begin to expire in 2019. Certain limitations may be placed on NOLs as a result of “changes in control” as defined in Section 382 of the Internal Revenue Code. In the event a change in control occurs, it will have the effect of limiting the annual usage of the carryforwards in future years. Additional changes in control in future periods could result in further limitations of the Company’s ability to offset taxable income. In addition, the utilization of these NOLs may be subject to certain limitations under state and foreign laws.
A valuation allowance is required when it is more-likely-than not that all or a portion of a deferred tax asset will not be realized. Realization of deferred tax asset is dependent upon taxable income in prior carryback years, estimates of future taxable income, tax planning strategies and reversals of existing taxable temporary differences. Management determined that as of December 31, 2015 and 2014, $1.3 million and $728,000, respectively, of the deferred tax assets related to state and Canadian losses do not satisfy the recognition criteria and therefore have recorded a valuation allowance for this amount. The valuation allowance for deferred tax assets was increased by $583,000, $442,000 and $86,000 during 2015, 2014 and 2013, respectively, and are primarily related to the Company’s Canadian operations.
The provision for income taxes differs from the amount computed by applying the statutory federal corporate income tax rate of 35% to income before provision for income taxes and consisted of the following (in thousands):
During the year ended December 31, 2015 and 2014, the Company recorded $10.1 million and $6.9 million, respectively, as a reduction to income tax payable, primarily in connection with the settlement of DSUs/RSUs/RSAs and IPO transaction costs, of which, $6.2 million and $5.2 million, respectively, was credited directly to additional paid-in capital in the accompanying consolidated balance sheets.
As of December 31, 2015 and 2014, the Company has no liabilities for unrecognized tax benefits and any related interest or penalties in the consolidated statements of net and comprehensive income.
The Company is subject to tax in various jurisdictions and, as a matter or ordinary course, the Company is subject to income tax examinations by the federal, state and foreign taxing authorities for the tax years 2010 to 2015. The Company is not currently under income tax examination by any taxing authorities.
The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as it is operating at a loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the cumulative translation adjustments.
Prior to the IPO, the Company was part of a consolidated federal income tax return and various combined and consolidated state tax returns that were filed by its former parent. The Company had a tax-sharing agreement whereby the Company provided for income taxes in its consolidated statements of net and comprehensive income using an effective tax rate of 43.5%. In addition, all deferred tax assets and liabilities were recorded by its former parent. As part of the Spin-Off, the Company’s tax sharing agreement with its former parent was terminated effective October 31, 2013. As a result the tax provision for the period November 1, 2013 through December 31, 2013 is calculated under the asset and liability method. Prior to November 1, 2013, all deferred tax assets and liabilities were recorded by MMC. On October 31, 2013, all deferred tax assets and liabilities allocable to the Company aggregating $26.6 million previously recorded by MMC were transferred to the Company. See Note 9 – “Stockholders’ Equity” for additional information.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/presentationRef