Income Taxes (Restated)
|6 Months Ended|
Jun. 30, 2017
|Income Taxes (Restated) [Abstract]|
|Income Taxes (Restated)||
Note 7 - Income Taxes (Restated)
The Company recorded an income tax expense of $107.0 thousand and income tax expense of $9.0 thousand for the three months ended June 30, 2017 and 2016. The Company recorded an income tax benefit of $226.0 thousand and income tax expense of $19.0 thousand for the six months ended June 30, 2017 and 2016. Our effective tax rate was 5.2% and 0.9% for the three months ended June 30, 2017 and 2016, and (16.0)% and 1.2% for the six months ended June 30, 2017 and 2016. Our effective tax rates differed from the U.S. statutory corporate tax rate of 35.0% primarily because of the mix of pre-tax income or loss earned in certain jurisdictions and the change in our valuation allowance.
During the three months ended December 31, 2016, we determined that valuation allowances against U.S. and U.K. (Rich Dad Education Limited only) deferred taxes were no longer required. Release of these valuation allowances resulted in a $2.4 million tax benefit, partially offset by tax on current period book income and other permanent and timing differences resulting in an income tax benefit. Release of the valuation allowances decreased our effective tax rate by 83.1%.
We record a valuation allowance when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. As of June 30, 2017 and December 31, 2016, valuation allowances of $4.0 million and $4.5 million, have been provided against net operating loss carryforwards and other deferred tax assets. We decreased our valuation allowance by $0.5 million and $1.1 million for the six months ended June 30, 2017 and 2016.
As of June 30, 2017 and December 31, 2016, we had total unrecognized tax benefits of $1.7 million, related to foreign and domestic tax positions. Of this amount, the Company estimates that $0.5 million, of the unrecognized tax benefits, if recognized, would impact the effective tax rate. A substantial portion of our liability for uncertain tax benefits is recorded as a reduction of net operating losses and tax credit carryforwards.
During the six months ended June 30, 2017 and 2016, we had no material changes in uncertain tax positions. We record interest and penalties related to unrecognized tax benefits within the provision for income taxes. We believe that no current tax positions that have resulted in unrecognized tax benefits will significantly increase or decrease within one year. We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions.
The Company was notified by the Internal Revenue Service that its federal income tax returns for the years 2013-2015 were selected for examination. The Company believes its provision for income taxes is adequate; however any assessment would affect the Company’s results of operations and possibly its cash flows.
We were also notified by the Canadian Revenue Agency that our 2014-2016 goods and services tax (GST) and harmonized sales tax (HST) returns are being audited.
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