Income Tax (Tables)

12 Months Ended

Dec. 31, 2012

Components of Income Tax Expense (Benefit)

The components of income tax (benefit) expense consisted of the following:


	Successor									Predecessor
(Dollar amounts in thousands)	Year ended December 31, 2012			Year ended December 31, 2011			Three months ended December 31, 2010			Nine months ended September 30, 2010

Continuing operations
Current tax provision (benefit)	$	5,656		$	(7,144	)	$	1,200		$	20,211
Deferred tax (benefit) expense		(93,402	)		(25,910	)		(1,380	)		2,806

Income tax (benefit) expense from continuing operations	$	(87,746	)	$	(33,054	)	$	(180	)	$	23,017


Discontinued operations
Current tax provision	$	—		$	—		$	—		$	840
Deferred tax benefit		—			—			—			(23	)

Income tax expense from discontinued operations	$	—		$	—		$	—		$	817

Segregation Income Tax Expense (Benefit) Based on Location of Operations

The following table presents the segregation of income tax (benefit) expense based on location of operations:


	Successor									Predecessor
(Dollar amounts in thousands)	Year ended December 31, 2012			Year ended December 31, 2011			Three months ended December 31, 2010			Nine months ended September 30, 2010

Continuing operations
Current tax provision (benefit)
Puerto Rico	$	3,407		$	(9,521	)	$	98		$	19,316
United States		622			385			399			640
Foreign countries		1,627			1,992			703			255

Total current tax provision (benefit) from continuing operations	$	5,656		$	(7,144	)	$	1,200		$	20,211


Deferred tax (benefit) expense
Puerto Rico	$	(92,656	)	$	(25,306	)	$	(1,220	)	$	2,806
United States		(38	)		—			—			—
Foreign countries		(708	)		(604	)		(160	)		—

Total deferred tax (benefit) expense from continuing operations	$	(93,402	)	$	(25,910	)	$	(1,380	)	$	2,806


Discontinued operations
Current tax provision
Foreign countries	$	—		$	—		$	—		$	840

Deferred tax benefit
Foreign countries		—			—			—			(23	)

Total income tax expense from discontinued operations	$	—		$	—		$	—		$	817

Components of Deferred Tax Assets and Liabilities

The following table presents the components of the Company’s deferred tax assets and liabilities:


	December 31,
(Dollar amounts in thousands)	2012			2011

Deferred tax assets
Allowance for doubtful accounts	$	143		$	540
Unfavorable contract liability		—			211
Other temporary assets		57			909

Total gross deferred tax assets		200			1,660


Deferred tax liabilities (“DTL”)
Deferred compensation	$	—		$	2,915
Difference between the assigned values and the tax basis of assets and liabilities recognized in purchase		7,563			90,766
Debt issue cost		—			8,513
Other temporary liabilities		58			218

Total gross deferred tax liabilities		7,621			102,412

Deferred tax liability, net	$	(7,421	)	$	(100,752	)

Reconciliation of Unrecognized Tax Benefits, Including Accrued Interest

The reconciliation of unrecognized tax benefits, including accrued interest, was as follows:


(Dollar amounts in thousands)

Balance as of December 31, 2010	$	1,222
Accrued estimated interest		281

Balance as of December 31, 2011		1,503
Foreign currency translation adjustment		7
Reversal of tax uncertainties reserve		(707	)
Accrued estimated interest		25

Balance as of December 31, 2012	$	828

Income Tax Expense (benefit) Differs from Computed Income Tax at Statutory Rates

The income tax (benefit) expense differs from the amount computed by applying the Puerto Rico statutory income tax rate to the income before income taxes as a result of the following:


	Successor									Predecessor
(Dollar amounts in thousands)	Year ended December 31, 2012			Year ended December 31, 2011			Three months ended December 31, 2010			Nine months ended September 30, 2010

Computed income tax at statutory rates	$	5,423		$	(1,515	)	$	(73	)	$	24,646
Benefit of net tax-exempt interest income		(13	)		(23	)		(52	)		(79	)
Benefit of net tax-exempt dividend income		—			(620	)		—			—
Non taxable loss on settlement of derivative asset		—			420			—			—
Tax expense (benefit) due to a change in estimate		320			(2,416	)		1,174			—
Adjustment to DTL due to changes in enacted tax rate and tax grant		(68,423	)		(27,629	)		—			—
Differences in tax rates due to multiple jurisdictions		358			285			206			1,002
Effect of income subject to capital gain tax rate		—			—			—			(574	)
Effect of income subject to tax-exemption grant		(536	)		(1,737	)		(455	)		(2,479	)
Derecognition of deferred tax liability due to the Conversion		(22,500	)		—			—			—
Income tax benefit pass-through to parent company		(1,931	)		—			—			—
Fair value adjustment of indemnification assets		340			(288	)		—			—
Reversal of tax uncertainties reserve		(707	)		—			—			—
Tax expense CONTADO dividend		—			81			—			—
Tax uncertainties reserve		—			250			—			—
Credit pursuant to Act 171		—			—			(1,122	)		—
Other		(77	)		138			142			501

Income tax (benefit) expense	$	(87,746	)	$	(33,054	)	$	(180	)	$	23,017

EVERTEC Group, LLC 10-K