NOTE E – INCOME TAXES

We calculate our interim income tax provision in accordance with the accounting guidance for income taxes in interim periods. At the end of each interim period, we make our best estimate of the annual expected effective tax rate and apply that rate to our ordinary year-to-date income or loss.  In addition, we calculate a year-to-date adjustment to increase or decrease our income tax provision to take into account our current expected effective tax rate.  The tax or benefit related to significant, unusual, or extraordinary items that will be separately reported or reported net of their related tax effect are individually computed and recognized in the interim period in which those items occur.

We recorded a provision for income tax expense of $0.1 million for the three months ended June 30, 2015 and an income tax benefit of $0.2 million for the six months ended June 30, 2015. The effective tax rates were 34.3% and 41.0% for the three and six months ended June 30, 2015, respectively. The effective tax rates for the three months and six months ended June 30, 2015 differed from the federal statutory rate applied to income and losses before income taxes primarily as a result of the effect of expenses that are not deductible for income tax purposes and state income taxes, including the tax effect of changes in effective state income tax rates, partially offset by an income tax benefit on disqualifying dispositions of incentive stock options.

For the three and six months ended June 30, 2014, we recorded an income tax benefit of $0.7 million and $0.1 million, respectively, representing effective tax rates of 150.9% and (5.8%), respectively. The difference between our effective tax rates and the federal statutory tax rate resulted primarily from (1) the income tax benefit for the capital loss from the disposal of discontinued operations effective June 30, 2014 and the ability to offset capital gains in the current tax year and to carry back for capital gains in prior tax years, (2) the portion of transaction costs incurred in the Omnilink merger that were not deductible for income taxes and (3) state income taxes, including the tax effect of changes in effective state income tax rates resulting from the Omnilink merger.

  
We continue to maintain a valuation allowance for deferred tax assets related to certain state and foreign net operating losses, and federal loss carryforwards for which we have determined it is more likely than not expiration will occur before utilization. We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2011 through 2014 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from years in which net operating losses have arisen are still open for examination by the tax authorities.