INCOME TAXES

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 12 – INCOME TAXES

Total income tax expense was $3.5 million and $3.1 million for the three months ended March 31, 2016 and 2015, respectively. The principal components of our income taxes for the three months ended March 31, 2016 and 2015 are the following (in thousands):

	Three Months Ended
	March 31,
	2016			2015
Income before income taxes	$	4,234		$	4,410
Income tax expense		3,500			3,102
Effective income tax rate		82.66	%		70.34	%

The Company primarily operates in the U.S. and Israel, and the Company’s Israeli operations are subject to a statutory income tax rate of 25.0% that is lower than the Company’s U.S. federal income tax rate which is 35% as of March 31, 2016.

For the three months ended March 31, 2016, the Company recorded income tax expense of $3.5 million, which is higher than the expected tax provision of $1.5 million, using the statutory rate of 35%, due, in part, to the net impact of a decrease in the Israeli corporate tax rate from 26.5% to 25.0% which was effective in January 2016. The decrease in the rate resulted in the Company needing to reduce its Israeli deferred tax assets, primarily net operating loss carryforwards, which resulted in deferred tax expense and a reduction in the value of related deferred tax assets of $1.4 million. Additionally, the effective tax rate was impacted by increases to uncertain tax positions of $0.7 million, a decrease to deferred tax assets associated with expired stock options of $0.2 million, partially offset by other various discrete items of ($0.2) million. The discrete items noted above were partially offset by the lower jurisdictional tax rate charged on the operating income of the Company’s Israeli operations.