Note 19. Income Taxes

Loss before income taxes is as follows:

	Years ended December 31,
	2015		2014			2013
	(in thousands)
United States	$	12,708	$	(11,987	)	$	(18,998	)
Foreign		2,497		1,820			2,894

Loss before income taxes	$	15,205	$	(10,167	)	$	(16,104	)

Provision for income taxes is as follows:

	Years ended December 31,
	2015			2014		2013
	(in thousands)
Current:
United States
Federal	$	—		$	—	$	—
State		(33	)		59		84
Foreign		374			780		641

Total current		341			839		725

Deferred:
Foreign		186			260		315

Total deferred		186			260		315

Income tax provision	$	527		$	1,099	$	1,040

Reconciliations of income taxes at the United States Federal statutory rate to the effective income tax rate are as follows:

	Years ended December 31,
	2015			2014			2013
	(in thousands)
Income tax benefit at the United States statutory rate	$	5,322		$	(3,558	)	$	(5,636	)
State income taxes		(22	)		38			55
Unrecognized tax benefits		(174	)		184			(293	)
Effect of change in valuation allowance		(5,676	)		(6,835	)		5,975
Foreign income tax rate differentials		600			259			(1,244	)
Unremitted earnings of foreign subsidiaries		(102	)		(758	)		961
Stock options		379			686			450
Deemed distribution from foreign subsidiaries		—			607			316
Discrete items, net		(540	)		9,143			—
Other, net		740			1,333			456

Income tax provision	$	527		$	1,099		$	1,040

Significant components of current and long-term deferred income taxes are as follows:

	As of December 31,
	2015						2014
	Current			Long Term			Current			Long Term
	(in thousands)
Federal net operating loss carryforwards	$	—		$	101,479		$	—		$	105,119
State net operating loss carryforwards		—			1,636			—			2,210
Foreign net operating loss carryforwards		—			810			—			1,280
Federal tax credit carryforwards		—			16,343			—			16,669
State tax credit carryforwards		—			3,964			—			5,293
Unremitted earnings of foreign subsidiaries		—			(8,632	)		—			(8,800	)
Intangible assets		—			286			—			383
Property, plant and equipment		—			9,331			—			4,548
Accrued compensation		1,082			—			65			—
Inventories		2,541			—			9,808			—
Stock compensation		—			6,001			—			5,198
Warranty		1,214			—			486			—
Other		1,237			(3,945	)		1,620			(2,328	)

Deferred taxes, gross		6,074			127,273			11,979			129,572

Valuation allowance		(6,335	)		(125,928	)		(10,975	)		(128,982	)

Deferred taxes, net	$	(261	)	$	1,345		$	1,004		$	590

At December 31, 2015, the Company had $124.2 million of deferred tax assets worldwide relating to net operating loss carryforwards, tax credit carryforwards and other temporary differences, which are available to reduce income taxes in future years. A valuation allowance must be established when it is "more likely than not" that all or a portion of deferred tax assets will not be realized. A review of all available positive and negative evidence needs to be considered, including a company's performance, the market environment in which the company operates, length of carryback and carryforward periods, existing sales backlog, and projections of future operating results. Where there are cumulative losses in recent years there is a strong presumption that a valuation allowance is needed. This presumption can be overcome in very limited circumstances.

The Company maintains a 100% domestic valuation allowance reducing the carrying value of the deferred tax assets in the United States to zero. The Company will continue to maintain a full valuation allowance for those tax assets until sustainable future levels of profitability are evident. Changes in the valuation allowance in 2015 and 2014 were attributable to changes in the composition of temporary differences and changes in net operating loss carryforwards. The remaining net deferred tax asset on the consolidated balance sheet represents the balances related to the activities of the foreign subsidiaries.

At December 31, 2015, the Company has federal and state net operating loss carryforwards of $327.1 million and foreign net operating loss carryforwards of $3.4 million, expiring principally between 2016 and 2034.

The Company has research and development and other tax credit carryforwards of $16.7 million at December 31, 2015 that can be used to reduce future federal and state income tax liabilities. These tax credit carryforwards expire principally between 2016 and 2028. In addition, the Company has foreign tax credit carryforwards of $3.6 million at December 31, 2015 that are available to reduce future U.S. income tax liabilities subject to certain limitations. These foreign tax credit carryforwards expire in 2016.

It is Company policy to provide taxes for the total anticipated tax impact of the undistributed earnings of our wholly-owned foreign subsidiaries, as such earnings are not expected to be reinvested indefinitely. The Company anticipates that U.S. tax resulting from remitting such earnings will be off-set by net operating loss or credit carryforwards to the extent available. In addition, the Company does not anticipate incurring a foreign withholding tax on remitting such earnings since it does not intend to remit the earnings as dividends.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company and most foreign subsidiaries are subject to income tax examinations by tax authorities for all years dating back to 2005. The Company's policy is to recognize interest related to unrecognized tax benefits as interest expense and penalties as operating expenses. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter.

At December 31, 2015, the Company had unrecognized tax benefits related to uncertain tax positions of approximately $7.7 million, of which approximately $5.5 million reduced the Company's deferred tax assets and the offsetting valuation allowance and $2.1 million was recorded in other long-term liabilities. The Company does not expect any significant changes in unrecognized tax benefits in 2016. The Company recognized $0.2 million in interest and penalty expense related to unrecognized tax benefits for each of the years-ended December 31, 2015, 2014 and 2013, respectively.

See Note 3 above relating to the potential effect associated with the taxable gain on the sale of the Company's corporate headquarters.

A reconciliation of the beginning and ending balance of unrecognized tax benefits are as follows:

	2015			2014
	(in thousands)
Balance at beginning of year	$	7,960		$	7,645
(Decrease) increase in unrecognized tax benefits as a result of tax positions taken during a prior period		(78	)		92
Decreases in unrecognized tax benefits related to settlements with tax authorities		(211	)		—
Increases in unrecognized tax benefits as a result of tax positions taken during the current period		—			223

Balance at end of year	$	7,671		$	7,960

Recorded as other long-term liability	$	2,142		$	2,328
Recorded as a decrease in deferred tax assets and offsetting valuation allowance		5,529			5,632

	$	7,671		$	7,960