Note 10—Income Taxes

The following table summarizes the activity relating to the Company’s unrecognized tax benefits during the three months ended March 31, 2015 (in thousands):

	Total

Balance at December 31, 2014	$	16,387
Gross increases related to current period tax positions	154
Balance at March 31, 2015	$	16,541

At March 31, 2015 and December 31, 2014, Advent had gross unrecognized tax benefits of $16.5 million and $16.4 million, respectively. During the three months ended March 31, 2015, the Company increased the amount of unrecognized tax benefits by approximately $0.2 million related primarily to state research credits. If recognized, the total unrecognized tax benefits would decrease Advent’s tax provision and increase net income by approximately $13.6 million. The impact on net income reflects the liabilities for unrecognized tax benefits, net of the federal tax benefit of state income tax items. The Company’s liabilities for unrecognized tax benefits relate primarily to federal research credits, state research credits and enterprise zone tax credits and various state net operating losses.

The effective tax rate was approximately 45% and 36% for the first quarter of 2015 and 2014, respectively. The increase in the effective tax rate for the first quarter of 2015 compared to the same quarter last year was primarily due to the correction of an error in the first quarter of 2015 and the suspension of the federal research credit as of March 31, 2015. The Company recorded a correction of an error of $0.9 million in income tax expense related to the calculation of New York City and State income tax provision in prior periods. The Company assessed the impact of this error on previously reported financial statements, as well as for interim and annual financial statements for fiscal 2015, and concluded that the adjustment is not material, either individually or in the aggregate to either the previously reported or to the current interim or annual consolidated financial statements. On that basis, the Company recorded the adjustment in its results for the first quarter of 2015.

Advent is subject to taxation in the U.S. and various states and jurisdictions outside the U.S. Advent is currently undergoing a State of California franchise tax examination for the 2006 and 2007 tax years and a state of New York corporate income tax examination for the 2011, 2012, and 2013 tax years. At March 31, 2015, Advent was not under examination in any other significant income tax jurisdiction and at the present time does not anticipate the total amount of its unrecognized tax benefits will significantly change over the next 12 months. The material jurisdictions that are subject to examination by tax authorities include federal for tax years after 2010 and California for tax years after 2005.

As of March 31, 2015, Advent made no provision for a cumulative total of $27.9 million of undistributed earnings for certain non-U.S. subsidiaries, which are deemed to be permanently reinvested.