16. Income Taxes

Our income tax provisions (benefits) for the years ended December 31 were:

	2014			2013			2012
Current:
Federal	$	(2	)	$	32		$	(82	)
Foreign		154			300			—
State		51			228			47
Total current		203			560			(35	)

Deferred:
Federal		4,043			12,953			(14,107	)
Foreign		—			(87	)		—
State		(717	)		3,165			(1,349	)
Total deferred		3,326			16,031			(15,456	)
Total provision (benefit) for income taxes	$	3,529		$	16,591		$	(15,491	)

Deferred tax assets and liabilities at December 31 were:

	2014			2013
Deferred tax assets:
Net operating loss carryforwards	$	4,874		$	6,416
Research and development tax credit carryforwards		9,329			8,790
Stock-based compensation expense		6,263			6,153
Deferred revenue		8,551			7,040
Reserves and accrued expenses		2,113			1,745
Alternative minimum tax credit		2,250			2,091
Goodwill and intangibles		3,905			110
Deferred compensation		157			372
Deferred financing fees		433			482
Other		1,346			1,197
Total deferred tax assets		39,221			34,396

Deferred tax liabilities:
Capitalized software development costs		(3,999	)		(2,103	)
Cash to accrual adjustment		(132	)		—
Depreciation and amortization		(3,751	)		(2,009	)
Total deferred tax liabilities		(7,882	)		(4,112	)
Net deferred tax asset before valuation allowance		31,339			30,284
Valuation allowance for deferred tax assets		(34,895	)		(30,284	)
Net deferred tax liability	$	(3,556	)	$	—

We account for income taxes using the asset and liability approach. Deferred tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Net deferred tax assets are recorded when it is more likely than not that the tax benefits will be realized. In accordance with ASC 740, in 2013 we determined that recent losses were significant evidence of the need for a $30,284 valuation allowance on our deferred tax assets and that near-term full realization of these assets was not more likely than not. In 2014, we determined that a $34,895 valuation allowance was needed. For 2014, a valuation allowance is needed against all deferred tax assets except those state deferred tax assets of affiliates that file separate state tax returns. There is a net deferred tax liability because of tax deductible goodwill from asset acquisitions which cannot be assumed to reverse and offset deductible temporary differences and thus cannot be considered a source of future taxable income for valuation allowance purposes. However, as noted below, our deferred tax assets have expiry dates many years into the future, and we expect to be able to use these assets to offset prospective tax liabilities.

At December 31, 2014, we had $8,271 of U.S. federal net operating loss carryforwards reflected in deferred tax assets plus $4,282 of net operating loss carryforwards from excess tax benefits related to stock-based compensation which will be recognized as an increase to additional paid in capital, when the benefit is realized through a reduction of income taxes payable. Of the total $12,553 loss carryforwards, $3,228 is the remaining net operating loss carryforwards acquired with Xypoint in 2001, usable at the rate of $1,401 per year, and which will begin to expire in 2021 if unused at that time. The remaining $9,325 of U.S. federal net operating loss carryforwards which were generated in 2007 and 2013 will begin to expire in 2027 and 2033.The timing and manner in which we may utilize net operating loss carryforwards and tax credits in future tax years will be limited by the amounts and timing of future taxable income and by the application of the ownership change rules under Section 382 of the Internal Revenue Code.

We have state net operating loss carryforwards available which expire through 2027, utilization of which will be limited in a manner similar to the federal net operating loss carryforwards. At December 31, 2014, we had federal alternative minimum tax credit carryforwards of $2,250, which are available to offset future regular federal taxes. Federal research and development credits of approximately $8,115 will begin to expire in 2019.

Reconciliations of the reported income tax provision to the amount that would result by applying the 35% U.S. federal statutory rate to the income for the years ended December 31 follow:

	2014					2013					2012
Income tax expense (benefit) at statutory rate	$	629		35.0	%	$	(14,702	)	35.0	%	$	(39,718	)	35.0	%
Goodwill impairment charge		—		—			1,758		(4.2	%)		30,136		(26.6	%)
Change in valuation allowance		4,886		271.7	%		30,284		(72.1	%)		—		—
Nondeductible stock-based compensation expense		1,039		57.8	%		1,258		(3.0	%)		1,849		(1.6	%)
Research and development tax credit		(496	)	(27.6	%)		(639	)	1.5	%		(858	)	0.8	%
Worthless stock deduction		—		—			—		—			(1,646	)	1.5	%
State income tax benefit		(322	)	(17.9	%)		(692	)	1.7	%		(1,156	)	1.0	%
Original issue discount amortization		(241	)	(13.4	%)		(2,993	)	7.1	%		(1,678	)	1.5	%
Other		(1,966	)	(109.4	%)		2,317		(5.5	%)		(2,420	)	2.1	%
Income tax provision (benefit)	$	3,529		196.2	%	$	16,591		(39.5	%)	$	(15,491	)	13.7	%

We do not currently anticipate that the total amounts of unrecognized tax benefits will significantly increase within the next 12 months. We record the estimated value of uncertain tax positions by adjusting the value of certain tax assets.

The following table summarizes the 2014 and 2013 activity related to the unrecognized tax benefits (excluding interest, penalties and related tax carryforwards):


Balance at December 31, 2012	$	3,446
Increases related to prior year tax positions		1,040
Increases related to current year tax positions		294
Balance at December 31, 2013		4,780
Increases related to prior year tax positions	52
Decreases related to prior year tax positions		(415	)
Increases related to current year tax positions	165
Balance at December 31, 2014	$	4,582

If the Company’s positions are sustained by the taxing authority in favor of the Company, $4,582 (excluding interest and penalties) of uncertain tax positions would favorably impact the effective tax rate. Our policy is to classify any interest and penalties accrued on any unrecognized tax positions as a component of the provision for income taxes. There were no interest or penalties recognized in the Consolidated Statements of Operations for the year ended December 31, 2014.

We file income tax returns in the U.S. and various state and foreign jurisdictions. As of December 31, 2014, open tax years in the federal and some state jurisdictions date back to 1998, due to the taxing authorities’ ability to adjust operating loss and credit carryforwards.