NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The provision for (benefit from) income taxes differs from that based on the federal statutory rate due to the following (in thousands): (1)The Company recorded a $14.5 million deferred tax liability associated with the acquisition of Hyprotech. The tax credits and net operating loss carryforwards expire at various dates from 2004 through 2024. The Tax Reform Act of 1986 contains provisions that may limit the net operating loss and tax credit carryforwards available to be used in any given year in the event of significant changes in ownership, as defined. Due to the uncertainty surrounding the realization and timing of these tax attributes, the Company has recorded a valuation allowance of approximately $27.0 million and $76.2 million as of June 30, 2002 and 2003, respectively. 62 June 30 2002 2003 Deferred tax assets: Revenue related $ (8,106) $ 248 US Income tax credits 20,470 19,028 US operating losses carryforward 23,403 20,942 Restructuring items 6,040 27,056 Nondeductible reserves and accruals 8,429 12,839 Intangible assets (4,736) 2,140 Other temporary differences (45) 10,756 45,455 93,009 Valuation allowance (26,950) (76,249) 18,505 16,760 Deferred tax liabilities: (1) Revenue related (21,534) (8,584) Nondeductible reserves and accruals (1,226) (4,983) Intangible assets 4,563 — Other temporary differences 3,194 — Foreign losses carryforward — 309 (15,003) (13,258) $ 3,502 $ 3,502 Years Ended June 30 2001 2002 Benefit Provision 2003 Federal tax at statutory rate $(9,896) $(25,419) $(54,683) State income tax, net of federal tax benefit (828) 94 — Tax effect resulting from foreign goodwill impairment — — 17,129 Tax effect resulting from foreign activities 1,572 8,438 6,108 Tax credits generated (2,871) (3,660) (522) Permanent differences, net 630 (234) 48 Acquisition costs 239 — — Valuation allowance 2,422 23,185 31,920 Provision for (benefit from) income taxes $(8,732) $ 2,404 $ — The approximate tax effect of each type of temporary difference and carry forward is as follows (in thousands)