. INCOME TAXES

The Company has

not

provided for any foreign withholding tax for any undistributed earnings for its foreign subsidiaries as of

December 31, 2019

. The Company intends to permanently reinvest the foreign earnings outside of the U.S.

	Year Ended December 31,
	2019			2018
	(In thousands)
U.S.
Current	$	(107	)	$	(84	)
Deferred		(4,534	)		(4,171	)
Foreign
Current		312			347
Withholding		2,385			2,165
Deferred		2			—
Total income tax benefit	$	(1,942	)	$	(1,743	)

During the years ended

December 31, 2019

and

2018

, loss before taxes from U.S. operations was (

$8.7

) million and (

$11.1

) million, respectively, and income before taxes from foreign operations was

$1.3

million and

$1.6

million, respectively.

The income tax benefit differs from the amount estimated by applying the statutory federal income tax rate (

21%

for

2019

and

2018

) for the following reasons (in thousands):

	Year Ended December 31,
	2019			2018
Federal statutory tax provision	$	(1,546	)	$	(1,986	)
State tax provision		(85	)		(133	)
Stock compensation expense		234			768
Tax credits		(2,974	)		(2,682	)
Foreign tax, net		2,430			2,104
Other		(1	)		186
Total income tax benefit	$	(1,942	)	$	(1,743	)

As of

December 31, 2019

, the Company had Federal and California net operating loss carry-forwards (“NOLs”) of approximately

$18.0

million and

$6.3

million, respectively. Some of the Federal NOLs, acquired as part of Syntricity acquisition, will expire at the end of

2020

and onwards, and the California NOLs begin expiring in

2028

onwards.

As of

December 31, 2019

, the Company had federal and state research and experimental and other tax credit (“R&D credits”) carry-forwards of approximately

$14.3

million and

$18.9

million, respectively. The federal credits begin to expire after

2025,

while the California credits have

expiration. The extent to which the federal and state credit carry forwards can be used to offset future tax liabilities, respectively,

may

be limited, depending on the extent of ownership changes within any

three

-year period as provided in the Tax Reform Act of

1986

and the California Conformity Act of

1987.

The Company assesses its deferred tax assets for recoverability on a regular basis, and where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more likely than

not,

be realized in the future. As of

December 31, 2019

and

2018

, the Company believes that most of its deferred tax assets are “more-likely-than

not”

to be realized with the exception of California R&D tax credits that have

not

met the “more-likely-than

not”

realization threshold criteria because on an annual basis and pursuant to current law, the Company generates more California credits than California tax. As a result, at

December 31, 2019

and

2018

, the excess credits of

$10.4

million and

$9.7

million, respectively continued to be subject to a full valuation allowance. In addition, the Company had approximately

$0.1

million of California NOL carryforward from its acquisition of Syntricity. The Company evaluated positive and negative evidence and concluded that it was more likely than

not

that the California NOL would

not

be fully realizable. As a result of management’s evaluation, the Company recorded full valuation allowance against its deferred tax assets related to its California NOL. The Company will continue to review its deferred tax assets in accordance with the applicable accounting standards. Net deferred tax assets balance as of

December 31, 2019

and

2018

was

$22.9

million and

$18.3

million, respectively.

The components of the net deferred tax assets are comprised of (in thousands):

	December 31,
	2019			2018
Deferred tax assets
Net operating loss carry forward	$	4,596		$	2,720
Research and development and other credit carry forward		18,944			17,750
Foreign tax credit carry forward		6,443			3,994
Accruals deductible in different periods		1,968			2,198
Leases		1,850			—
Intangible assets		741			1,081
Stock-based compensation		1,271			1,109
Total deferred tax assets		35,813			28,852
Less: valuation allowance		(10,486	)		(9,808	)
Deferred tax assets, net of valuation allowance	$	25,327		$	19,044

Deferred tax liabilities
Property and equipment, net		(611	)		(710	)
Operating lease right-of-use assets		(1,850	)		—
Deferred tax liabilities	$	(2,461	)	$	(710	)

Net deferred tax assets	$	22,866		$	18,334

In accordance with the accounting standard relating to accounting for uncertain tax positions, the Company classifies its liabilities for income tax exposures as long-term. The Company includes interest and penalties related to unrecognized tax benefits within the Company’s income tax provision. As of

December 31, 2019

and

2018

, the Company had accrued interest and penalties related to unrecognized tax benefits of

$0.8

million. In the years ended

December 31, 2019

and

2018

, the Company recognized charges for (reversal of) interest and penalties related to unrecognized tax benefits of (

$1,000

) and

$84,000,

respectively, in the Consolidated Statements Comprehensive Loss.

The Company’s total amount of unrecognized tax benefits, excluding interest and penalties, as of

December 31, 2019

was

$13.6

million, of which

$7.9

million, if recognized, would impact the Company’s effective tax rate. As of

December 31, 2019

, the Company has recorded unrecognized tax benefits of

$2.9

million, including interest and penalties of

$0.8

million, as long-term income taxes payable in its Consolidated Balance Sheet. The remaining

$11.5

million has been recorded net of our deferred tax assets, of which

$5.8

million is subject to a full valuation allowance. The Company does

not

expect the change in unrecognized tax benefits over the next

twelve

months to materially impact its results of operations and financial position.

The Company conducts business globally and, as a result, files numerous consolidated and separate income tax returns in the U.S. federal, various state and foreign jurisdictions. Because the Company used some of the tax attributes carried forward from previous years to tax years that are still open for audit, the federal and California statute of limitations remains open for all tax years since

1999

and

2002,

respectively. The Company is

not

subject to income tax examinations in any other of its major foreign subsidiaries’ jurisdictions.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	Amount
Gross unrecognized tax benefits, January 1, 2018	$	12,889
Increases in tax positions for current year		664
Increases in tax positions for prior years		—
Lapse in statute of limitations		(261	)
Gross unrecognized tax benefits, December 31, 2018		13,292
Increases in tax positions for current year		667
Increases in tax positions for prior years		1
Lapse in statute of limitations		(345	)
Gross unrecognized tax benefits, December 31, 2019	$	13,615

We do

not

provide deferred taxes on undistributed earnings of our foreign subsidiaries as we intend to indefinitely reinvest those earnings.

Valuation allowance for deferred tax assets is summarized (in thousands):

	Balance at Beginning of Period		Charged to Costs and Expenses		Deductions/ Write-offs of Accounts		Balance at End of Period
Valuation allowance for deferred tax assets
2019	$	9,808	$	678	$	—	$	10,486
2018	$	9,126	$	682	$	—	$	9,808