Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of Income before Income Tax, Domestic and Foreign

Income before income taxes included the following components for the years ended December 31 (in thousands):



	2016			2015			2014
United States	$	38,414		$	42,761		$	32,751
Foreign	(6,917		)	(7,400		)	(440		)
Total	$	31,497		$	35,361		$	32,311

Components of Deferred Income Tax Assets and Liabilities

Significant components of the Company’s deferred income tax assets and liabilities are as follows at December 31 (in thousands):



	2016			2015
Deferred income tax assets:
Net operating loss carryforward	$	2,405		$	649
Deferred revenue	11,537			6,762
Deferred compensation	1,695			1,252
Inventory reserve	1,126			956
Non-qualified and non-employee stock option expense	4,410			3,393
Capitalized research and development	1,991			3,348
Research and development tax credit carryforward	2,722			2,386
Reserves, accruals, and other	1,239			1,067
Total deferred income tax assets	27,125			19,813
Deferred income tax liabilities:
Depreciation	(2,364		)	(2,228		)
Amortization	(1,473		)	(1,979		)
Other	(294		)	(187		)
Total deferred income tax liabilities	(4,131		)	(4,394		)
Net deferred income tax assets before valuation allowance	22,994			15,419
Valuation allowance	(3,479		)	(1,700		)
Net deferred income tax assets	$	19,515		$	13,719

Significant Components of the Provision for Income Taxes

Significant components of the provision for income taxes are as follows for the years ended December 31 (in thousands)



	2016			2015			2014
Current:
Federal	$	16,346		$	13,594		$	7,793
State	1,534			996			800
Foreign	1,050			—			—
Total current	18,930			14,590			8,593
Deferred:
Federal	(4,145		)	288			2,656
State	(977		)	984			942
Foreign	(45		)	(278		)	—
Total deferred	(5,167		)	994			3,598
Tax provision recorded as an increase (decrease) in liability for unrecorded tax benefits	437			(156		)	202
Provision for income taxes	$	14,200		$	15,428		$	12,393

Reconciliation of the Company's Effective Income Tax Rate to the Federal Statutory Rate

A reconciliation of the Company’s effective income tax rate to the federal statutory rate follows for the years ended December 31 (in thousands):



	2016			2015			2014
Federal income tax at the statutory rate	$	11,024		$	12,347		$	11,236
State income taxes, net of federal benefit	889			1,061			1,433
Difference between statutory and foreign tax rates ⁽ⁱ⁾	1,521			2,442			—
Permanent differences ⁽ⁱⁱ⁾	(457		)	(205		)	98
Research and development	(1,928		)	(1,050		)	(452		)
Return to provision adjustment	327			(67		)	28
Change in liability for unrecognized tax benefits	700			(156		)	202
Incentive stock option benefit	(77		)	(144		)	(616		)
Change in valuation allowance	1,779			1,200			500
Tax effects of intercompany transactions	630			—			—
Other	(208		)	—			(36		)
Provision for income taxes	$	14,200		$	15,428		$	12,393
Effective tax rate	45.1		%	43.6		%	38.4		%


⁽ⁱ⁾	The difference between statutory and foreign tax rates of $1.5 million was largely driven by losses incurred in a foreign entity for which no tax benefit will be realized, partially reduced by a tax benefit for foreign entities for which the statutory tax rate is lower than the U.S. statutory tax rate.


⁽ⁱⁱ⁾	Permanent differences include certain expenses that are not deductible for tax purposes including lobbying fees as well as favorable items including the domestic production activities deduction.

Roll Forward of Liability for Unrecognized Tax Benefits Exclusive of Accrued Interest

The following table presents a roll forward of the Company's liability for unrecognized tax benefits, exclusive of accrued interest, as of December 31 (in thousands):



	2016		2015			2014
Balance, beginning of period	$	3,396	$	3,325		$	3,110
Decrease in previous year tax positions	—		(389		)	—
Increase in current year tax positions	448		270			121
Decrease due to lapse of statute of limitations	—		(14		)	—
Increase related to adjustment of previous estimates of activity	206		204			94
Balance, end of period	$	4,050	$	3,396		$	3,325