Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.1.9
Income Taxes
 12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  
Income Taxes
INCOME TAXES
The components of income before income taxes are as follows: 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Domestic
$
14,505

 
$
7,705

 
$
29,400

Foreign
(8,213
)
 
(4,946
)
 
(4,793
)
Income before provision for income taxes
$
6,292

 
$
2,759

 
$
24,607


The components of the (benefit) provision for income taxes are as follows: 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Current:
 

 
 

 
 

   Federal
$
(2,659
)
 
$
10,114

 
$
9,135

   State
1,826

 
3,499

 
733

   Foreign
(814
)
 
371

 
178

 
(1,647
)
 
13,984

 
10,046

Deferred:
 

 
 

 
 

   Federal
(3,263
)
 
(10,315
)
 
(2,586
)
   State
574

 
(2,099
)
 
85

   Foreign
245

 
(1,225
)
 
(1,298
)
 
(2,444
)
 
(13,639
)
 
(3,799
)
 
$
(4,091
)
 
$
345

 
$
6,247


 
The Company’s deferred tax assets and liabilities result primarily from temporary differences between financial reporting and tax recognition of depreciation, reserves, and certain accrued liabilities.
Deferred tax assets and liabilities consist of the following:
 
December 31,
 
2014
 
2013
Deferred tax assets:
 

 
 

Compensation accruals
$
2,774

 
$
3,122

Reserves
3,638

 
3,110

Other accruals
2,893

 
2,344

Net operating losses
7,498

 
1,948

Interest rate swaps
1,715

 
1,073

Energy efficiency
19,116

 
9,524

Deferred revenue
1,769

 
1,624

Gross deferred income tax assets
39,403

 
22,745

Valuation allowance
(3,995
)
 
(1,953
)
Total deferred income tax assets
$
35,408

 
$
20,792

Deferred tax liabilities:
 

 
 

Depreciation
$
(31,326
)
 
$
(23,504
)
Contract refinancing
(437
)
 
(710
)
Canada
(5,659
)
 
(2,047
)
United Kingdom
(396
)
 
(765
)
Acquisition accounting
(159
)
 
(242
)
Total deferred income tax liabilities
(37,977
)
 
(27,268
)
Deferred income tax liabilities, net
$
(2,569
)
 
$
(6,476
)

As of December 31, 2014, the Company included $2,357 of noncurrent deferred tax assets in other assets and $3,156 of current deferred tax liabilities in accrued expenses and other current liabilities in the accompanying consolidated balance sheets. As of December 31, 2013, the Company included $1,643 of noncurrent deferred tax assets in other assets and $2,087 of current deferred tax liabilities in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.
The Company recorded a valuation allowance in the amount of $3,995 and $1,953 as of December 31, 2014 and 2013, respectively, related to the following items: 1) The Company recorded a valuation allowance on a deferred tax asset relating to interest rate swaps in the amount of $1,419 and $1,688 as of December 31, 2014 and 2013, respectively. The deferred tax asset represents a future capital loss which can only be recognized for income tax purposes to the extent of capital gain income. Although the Company anticipates sufficient future taxable income, it is more likely than not that it will not be of the appropriate character to allow for the recognition of the future capital loss. 2) As of December 31, 2014, the Company recorded a valuation allowance on a deferred tax asset relating to a foreign net operating loss in the amount of $2,337. It is more likely than not that the Company will not generate sufficient taxable income at the foreign subsidiary level to utilize the net operating loss. 3) The Company recorded a valuation allowance on a deferred tax asset relating to a state net operating loss of $239 and $265 at one of its subsidiaries as of December 31, 2014 and 2013, respectively. It is more likely than not that the Company will not generate sufficient taxable income at the subsidiary level to utilize the net operating loss.
The provision for income taxes is based on the various rates set by Federal and local authorities and is affected by permanent and temporary differences between financial accounting and tax reporting requirements.
The following is a reconciliation of the effective tax rates:
 
Year Ended December 31,
 
2014
 
2013
 
2012
Income before income tax
$
6,292

 
$
2,759

 
$
24,607

Federal statutory tax expense
$
2,202

 
$
966

 
$
8,612

State income taxes, net of Federal benefit
666

 
201

 
818

Net state impact of deferred rate change
264

 
(69
)
 
—

Non deductible expenses
(213
)
 
2,008

 
2,612

Stock-based compensation expense
415

 
373

 
337

Energy efficiency preferences
(9,517
)
 
(3,280
)
 
(7,033
)
Foreign items and rate differential
719

 
349

 
557

Valuation allowance
1,408

 
(276
)
 
 
Miscellaneous
(35
)
 
73

 
344

 
$
(4,091
)
 
$
345

 
$
6,247

Effective tax rate:
 
 
 

 
 

Federal statutory rate expense
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of Federal benefit
10.6
 %
 
7.3
 %
 
3.3
 %
Net state impact of deferred rate change
4.2
 %
 
(2.5
)%
 
—
 %
Non deductible expenses
(3.4
)%
 
72.8
 %
 
10.6
 %
Stock-based compensation expense
6.6
 %
 
13.5
 %
 
1.4
 %
Energy efficiency preferences
(151.3
)%
 
(118.9
)%
 
(28.6
)%
Foreign items and rate differential
11.4
 %
 
12.6
 %
 
2.3
 %
Valuation allowance
22.4
 %
 
(10.0
)%
 
—
 %
Miscellaneous
(0.6
)%
 
2.6
 %
 
1.4
 %
 
(65.1
)%
 
12.4
 %
 
25.4
 %
 
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
 
Year Ended December 31,
 
2014
 
2013
Balance, beginning of year
$
9,200

 
$
4,900

Additions for prior year tax positions
1,700

 
4,300

Settlements paid to tax authorities
—

 
—

Reductions of prior year tax positions
(7,200
)
 
—

Balance, end of year
$
3,700

 
$
9,200


 At December 31, 2014 and 2013, the Company had approximately $3,700 and $9,200, respectively, of total gross unrecognized tax benefits. The current year increase in unrecognized tax benefits relates primarily to identification of non deductible expenses. The current year decrease in unrecognized tax benefits relates primarily to items resolved as part of the IRS audit and amounts related to years already audited. The Company believes that it is reasonably possible that a decrease of up to $3,100 in unrecognized tax benefits related to Federal and state exposures may be necessary within the next twelve months.
Of the total gross unrecognized tax benefits as of December 31, 2014 and 2013, $2,500 and $5,500, respectively, (both net of the Federal benefit on state amounts) represent the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.
At December 31, 2014 the Company had state net operating loss carryforwards of approximately $8,000, which will expire from 2014 through 2031. The tax effected portion of the state net operating loss relating to excess stock option deductions is approximately $6. Any tax benefit resulting from excess stock option deductions is recorded as an adjustment to additional paid in capital when realized. At December 31, 2014 the Company had Canadian net operating loss carryforwards of approximately $25,600, which will expire from 2014 through 2024.
The Company does not accrue U.S. tax for foreign earnings that it considers to be permanently reinvested outside the United States. Consequently, the Company has not provided any U.S. tax on the unremitted earnings of its foreign subsidiaries. As of December 31, 2014, the amount of earnings for which no repatriation tax has been provided was estimated to be $10,300. It is not practicable to estimate the amount of additional tax that might be payable on those earnings if repatriated.
At December 31, 2014 the company had a Federal tax credit carryforward of approximately $15,200 which will expire at various times through 2034. The portion of the Federal tax credit relating to excess stock option deductions is approximately $4,200, the tax benefit of which will be recorded as an adjustment to additional paid in capital when realized.
The tax years 2007 through 2014 remain open to examination by major taxing jurisdictions. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for Federal and state income taxes. The (decrease) increase included in tax expense for the years end December 31, 2014, 2013 and 2012 were $(200), $(100) and $300, respectively.