10. Income Taxes

Loss before provision for income taxes on the accompanying statements of operations and comprehensive loss included the following components (in thousands):

	Years Ended June 30,
	2017			2016			2015
Domestic	$	(35,227	)	$	(32,710	)	$	(46,178	)
Foreign		6,686			9,542			8,388

Total worldwide	$	(28,541	)	$	(23,168	)	$	(37,790	)

The provision for income taxes consisted of the following (in thousands):

	Years Ended June 30,
	2017			2016			2015
Current:
Federal	$	—		$	—		$	—
State		14			17			33
Foreign		1,292			2,723			1,722

Total current	$	1,306		$	2,740		$	1,755
Deferred:
Federal		—			—			—
State		—			—			—
Foreign		(268	)		(404	)		664

Total deferred		(268	)		(404	)		664

Total provision for income taxes	$	1,038		$	2,336		$	2,419

Income tax payable was $1.2 million, $2.3 million and $0.4 million at June 30, 2017, 2016 and 2015, respectively. A reconciliation of income taxes at the statutory federal income tax rate to the provision for income taxes included in the accompanying consolidated statements of operations and comprehensive loss is as follows (in thousands):

	Years Ended June 30,
	2017			2016			2015
U.S. federal taxes (benefit):
At federal statutory rate	$	(9,988	)	$	(8,108	)	$	(13,226	)
State tax, net of federal benefit		14			17			33
Share-based compensation expense		802			701			579
Debt extinguishment		—			338			—
Other non-deductible permanent items		771			877			779
Change in valuation allowance		11,070			10,370			14,744
Credits		(359	)		(795	)		(79	)
Other		83			20			—
Foreign taxes		(1,355	)		(1,084	)		(411	)

Total	$	1,038		$	2,336		$	2,419

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's net deferred tax assets were as follows (in thousands):

	June 30,
	2017			2016
Deferred tax assets:
Federal and state net operating losses	$	122,465		$	117,524
Accrued expenses and reserves		8,374			6,392
Deferred revenue		5,095			4,853
Credits		18,862			18,168
Share-based compensation expense		5,460			6,323
Capitalized research and development		7,441			5,882
Unicap		2,456			2,666
Fixed assets/intangibles		2,451			(961	)
Other		1,334			859

Total deferred tax assets		173,938			161,706
Deferred tax liabilities:
Debt discount		(494	)		(1,805	)
Section 481 adjustment		(768	)		(1,140	)

Total deferred tax liabilities		(1,262	)		(2,945	)
Valuation allowance		(171,733	)		(158,264	)

Net deferred tax assets	$	943		$	497

The Company has not provided for U.S. income taxes on undistributed earnings of its foreign subsidiaries because it intends to permanently re-invest these earnings outside the U.S. The cumulative amount of such undistributed earnings upon which no U.S. income taxes have been provided as of June 30, 2017 was $26.5 million. It is not practicable to determine the income tax liability that might be incurred if these earnings were to be repatriated to the U.S.

As of June 30, 2017, the Company had approximately $329.8 million and $154.5 million in federal and state net operating loss carryforwards, respectively. The federal and state carryforwards expire in varying amounts beginning in 2019 for federal and 2018 for state purposes. Such net operating loss carryforwards include excess tax benefits from employee stock option exercises which, in accordance with guidance for income tax accounting, have not been recorded within the Company's deferred tax asset balances. The Company will record approximately $0.9 million as a credit to additional paid-in capital as and when such excess benefits are ultimately realized.

In addition, as of June 30, 2017, the Company had federal and state research and development tax credits of approximately $18.6 million and $18.7 million, respectively. The federal research credits will begin to expire in 2019, the California research credits have no expiration date, and the other state research credits began to expire in 2018.

Under the Internal Revenue Code ("IRC") Sections 382 and 383, annual use of our net operating loss and research tax credit carryforwards to offset taxable income may be limited based on cumulative changes in ownership. An analysis of the impact of this provision through March 31, 2016 has been performed and it was determined that, although ownership changes had occurred, the carryovers should be available for utilization by the Company before they expire, provided we generate sufficient future taxable income. There were no equity financings in the current fiscal year that would result in an ownership change under Section 382. The Company will continue to monitor the changes in equity that would affect the tax attributes as reported.

Based on the available objective evidence and history of losses, the Company has established a 100% valuation allowance against the combined domestic net deferred tax assets of Accuray and TomoTherapy because of uncertainty surrounding the realization of such deferred tax assets.

The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands):

	Years Ended June 30,
	2017			2016			2015
Balance at beginning of year	$	16,643		$	17,023		$	17,169
Tax positions related to current year:
Additions		1,190			1,811			726
Tax positions related to prior years:
Additions		299			449			29
Reductions		(2,313	)		(2,640	)		(901	)

Balance at end of year	$	15,819		$	16,643		$	17,023

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company's tax positions in respect to legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business. The reduction in prior year's tax positions primarily relates to lapses of applicable statutes of limitations. The Company anticipates that except for $0.1 million in uncertain tax positions that may be reduced related to the lapse of various statutes of limitation and completion of tax examinations there will be no material changes in uncertain tax positions in the next 12 months. As of June 30, 2017, the amount of gross unrecognized tax benefits was $15.8 million of which $11.9 million would affect the Company's effective tax rate if realized.

The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2017 and 2016, the Company had approximately $0.2 million and $0.5 million, respectively, of accrued interest and penalties related to uncertain tax positions.

The Company files income tax returns in the United States federal, various states and foreign jurisdictions. Due to tax attributes being carried forward and utilized during open years, the statute of limitations remains open for the U.S. federal jurisdiction and domestic states for tax years from 1999 and forward. In the foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these jurisdictions vary from jurisdiction to jurisdiction and range from 4 to 10 years. The material foreign jurisdictions are France, Switzerland, and Japan, whose tax years remain open from 2013, 2008, and 2010, respectively.

The Company is also subject to periodic examination of its income tax returns by the Internal Revenue Service (IRS) and other tax authorities, and in some cases the Company has received additional tax assessments which have not been significant. During fiscal year 2017, the Company received tax assessments from the Swiss Vaud Canton tax administration for the 2013, 2015 and 2016 tax periods. The Swiss total assessment of $0.1 million was settled in 2017.