9. Income Taxes

        The components of income (loss) before income taxes were as follows (in thousands):

        Components of the provision for income taxes were as follows (in thousands):

        Components of net deferred tax liabilities were as follows (in thousands):

        Reconciliation to consolidated balance sheet (in thousands):

        Income tax expense differs from the amounts that would result from applying the federal statutory rate to our income (loss) before income taxes as follows (dollars in thousands):

        As of December 31, 2012, we had NOL carryforwards with a tax-effected carrying value of approximately $32.3 million and $4.9 million for federal and state purposes, respectively. Our federal NOLs will expire on various dates ranging from 2013 to 2031. Utilization of these carryforwards will be limited on an annual basis as a result of previous business combinations pursuant to Section 382 of the Internal Revenue Code. Expected future limitations are as follows (in thousands, amounts shown are not tax effected):

        We provide a valuation allowance for deferred tax assets when we do not have sufficient positive evidence to conclude that it is more likely than not that some portion, or all, of our deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon future taxable income during the periods in which those temporary differences become deductible. In assessing the need for a valuation allowance for our deferred tax assets, we considered all available positive and negative evidence, including our ability to carry back operating losses to prior periods, the reversal of deferred tax liabilities, tax planning strategies and projected future taxable income. We also gave specific consideration to the goodwill impairment charges recorded during the third and fourth quarters of 2012. (see Note 5). Given the significance of the goodwill impairment charges which cause our three year cumulative results of operations to be a loss, we do not believe we have sufficient positive evidence to conclude that future realization of all of our federal net deferred tax assets is more likely than not. As such, we established a valuation allowance of approximately $27.2 million at December 31, 2012. We will reassess the valuation allowance quarterly, and if future events or sufficient evidence exists to suggest such amounts are more likely than not to be realized, a tax benefit will be recorded to adjust the valuation allowance.

        We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than not sustain the position following an audit. For tax positions meeting the more-likely-than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. During 2012, we recognized a liability for uncertain tax positions in the amount of $3.6 million related to state and Israeli income tax positions. Interest and penalties related to uncertain tax positions are recognized in income tax expense. For the year ended December 31, 2012, we recognized $0.4 million of interest or penalties related to uncertain tax positions in our financial statements.

        The change in unrecognized tax benefits for the years ended December 31, 2012, 2011, and 2010 were as follows (in thousands):

        The majority of our unrecognized tax benefit, if recognized, would affect our overall effective tax rate.

        We are subject to U.S. federal income tax, income tax from multiple foreign jurisdictions including Israel and the United Kingdom, and income taxes of multiple state jurisdictions. U.S. federal, state and local income tax returns for 2009 through 2011 remain open to examination. Israeli and United Kingdom income tax returns remain open to examination for 2007 through 2011, and 2006 through 2011, respectively. We do not provide deferred taxes on the undistributed earnings of our non-U.S. subsidiaries in situations where our intention is to reinvest such earnings indefinitely. Furthermore, both our U.S. and non-U.S. subsidiaries have significant net assets, liquidity, and other financial resources available to meet their operational and capital investment requirements.

        As of December 31, 2012, the aggregate undistributed earnings of our non-U.S. subsidiaries subject to indefinite reinvestment totaled $2.4 million. Should we make a distribution in the form of dividends or otherwise, we may be subject to additional income taxes. Excluding our operations in Canada, the unrecognized deferred tax liability related to the undistributed earnings of our non-U.S. subsidiaries is estimated to be $0.1 million as of December 31, 2012. This assumes we are able to recognize the benefits of a foreign tax credit upon remittance of the foreign earnings and does not contemplate the effect of those earnings on the valuation allowance.