9. INCOME TAXES

Our total provision/(benefit) from income taxes consists of the following for the years ended December 31, 2016, 2015, and 2014:

(in thousands)	2016		2015		2014

Current income tax provision:
Federal	$	11,717	$	7,264	$	4,034
State		1,321		611		273
Total		13,038		7,875		4,307

Deferred income tax (benefit)/provision:
Federal		(8,387)		(1,468)		2,113
State		(658)		(409)		154
Total		(9,045)		(1,877)		2,267

Change in valuation allowance		134		-		(16,726)
Excess tax benefit from stock-based compensation awards		617		360		784

Total provision/(benefit) for income taxes	$	4,744	$	6,358	$	(9,368)

The difference between our expected income tax provision/(benefit) from applying federal statutory tax rates to the pre-tax income/(loss) and actual income tax provision/(benefit) relates primarily to the effect of the following:

	As of December 31,
	2016			2015			2014

US Federal statutory rate		35.0	%		35.0	%		35.0	%
State taxes, net of Federal benefit		2.1	%		2.1	%		1.0	%
International tax structure impacts		23.3	%		-	%		-	%
Domestic production activities deduction		(14.4)	%		(5.3)	%		-	%
Change in valuation allowance		1.6	%		-	%		(86.5)	%
Stock-based compensation – no windfall tax benefit		5.7	%		1.1	%		4.7	%
Stock-based compensation – windfall tax benefits		-	%		(0.1)	%		(1.2)	%
Change in tax rates and other		1.4	%		(3.5)	%		(1.4)	%
Total income tax provision/(benefit)		54.7	%		29.3	%		(48.4)	%

Deferred income taxes reflect the net tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes. Our deferred income tax assets and liabilities consisted of the following:

(in thousands)	As of December 31,
	2016		2015
Deferred tax assets:
Accruals and advances	$	3,002	$	2,153
Bond hedge		10,921		12,243
Accruals for chargebacks and returns		7,137		2,945
Inventory		1,255		1,271
Intangible asset		6,302		3,631
Net operating loss carryforward		5,095		7,938
Other		1,680		1,149
Total deferred tax assets	$	35,392	$	31,330

Deferred tax liabilities:
Depreciation	$	(857)	$	(700)
Debt discount		(7,664)		(10,029)
Intangible assets		(353)		(3,127)
Other		(16)		(16)
Total deferred tax liabilities	$	(8,890)	$	(13,872)
Valuation allowance		(275)		(142)
Total deferred tax asset, net	$	26,227	$	17,316

As of December 31, 2016, we had Federal net operating loss carryforwards of approximately $13.7 million, which expire beginning in 2018, and which arose as a result of the Merger. The utilization of the net operating loss carryforwards are limited in future years as prescribed by Section 382 of the U.S. Internal Revenue Code; our current annual limitation of the Federal net operating loss is approximately $0.8 million per year.

We are required to establish a valuation allowance for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the projected future taxable income and tax planning strategies in making this assessment. As of December 31, 2016 and 2015, we have provided a valuation allowance against certain state net operating loss carryforwards of $0.3 million and $0.1 million, respectively.

We are subject to income taxes in numerous jurisdictions in the U.S. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. We establish liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of changes to the liability that is considered appropriate. We identified no material uncertain tax positions as of December 31, 2016 and 2015.

We are subject to income tax audits in all jurisdictions for which we file tax returns. Tax audits by their nature are often complex and can require several years to complete. Neither ANI Pharmaceuticals, Inc. nor any of its subsidiaries is currently under audit in any jurisdiction. All of our income tax returns remain subject to examination by tax authorities due to the availability of net operating loss carryforwards.