10.Income Taxes

 

The following table includes the Company’s income before income tax provision, income tax provision and effective tax rate:

 

 

The Company’s effective tax rate in the three months ended September 30, 2014, was higher than the effective tax rate in the three months ended September 30, 2013, primarily due an increase in the U.S. federal tax rate used in the tax provision calculation from 34% to 35%, an increase in various permanent differences and the impact of Research and Development (“R&D”) tax credits generated in Q3 of 2013.

 

The Company’s effective tax rate in the nine months ended Septemeber 30, 2014, was higher than the effective tax rate in the nine months ended September 30, 2013, primarily due to an increase in the U.S. federal tax rate used in the tax provision calculation from 34% to 35%, an increase in various permanent differences and the impact of R&D tax credits generated in Q3 of 2013.

 

The liability for unrecognized tax benefits reported in other non-current liabilities was $2,519 and $2,693 at September 30, 2014 and December 31, 2013, respectively. At September 30, 2014, the amount of unrecognized tax benefits that would benefit the Company’s effective tax rate, if recognized, was $1,798. At this time, the Company estimates it is reasonably possible that the liability for unrecognized tax benefits will decrease by as much as $157 in the next twelve months due to the completion of reviews by tax authorities, the voluntary filing of certain state income tax returns and the expiration of certain statutes of limitations.

 

The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. The Company had accrued interest and penalties of $540 and $636 as of September 30, 2014 and December 31, 2013, respectively.

 

The Company files a consolidated federal income tax return and separate tax returns with various states. Additionally, foreign subsidiaries of the Company file tax returns in foreign jurisdictions. The Company’s tax returns for the calendar years ended December 31, 2013, 2012, 2011 and 2010 remain open to examination by the Internal Revenue Service in their entirety. With respect to state taxing jurisdictions, the Company’s tax returns for the calendar years ended December 31, 2013, 2012, 2011, 2010 and 2009 remain open to examination by various state revenue services.

 

The Company’s Indian subsidiary is currently under examination by the India Tax Authority for the fiscal year ended March 31, 2012, 2011 and 2009. Based on the outcome of examinations of our subsidiary or the result of the expiration of statutes of limitations it is reasonably possible that the related unrecognized tax benefits could change from those recorded in the consolidated balance sheet. It is possible that one or more of these audits may be finalized within the next twelve months.