Income Taxes

The components of the Company’s income (loss) before income taxes are as follows:



	Year Ended December 31,
	2015		2014			2013
	(amounts in thousands)
United States	$	3,565	$	(33,574	)	$	(11,216	)
Foreign	595		2,256			1,177
	$	4,160	$	(31,318	)	$	(10,039	)

The components of the Company’s income tax (benefit) expense are as follows:



	Year Ended December 31,
	2015			2014			2013
	(amounts in thousands)
Continuing operations:
Current
Federal	$	551		$	—		$	—
State	(21		)	811			540
Foreign	220			262			416
Total	750			1,073			956

Deferred
Federal	(1,819		)	(1,320		)	37,822
State	8			68			5,134
Foreign	267			395			299
Total	(1,544		)	(857		)	43,255
Total income tax (benefit) expense for continuing operations	$	(794	)	$	216		$	44,211

The total income tax (benefit) provision is summarized as follows:
Continuing operations	$	(794	)	$	216		$	44,211
Discontinued operations	—			—			2,122
	$	(794	)	$	216		$	46,333

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets and liabilities are as follows:



	December 31,
	2015			2014
	(amounts in thousands)
Deferred Tax Assets:
Accrued other and prepaid expenses	$	2,973		$	2,823
Allowance for doubtful accounts	1,278			589
Intangible Assets	11,365			13,716
Net operating loss carryforwards	22,662			38,144
Derivative interest	10,144			6,370
Accrued professional liability	2,536			—
Accrued workers’ compensation	3,061			1,356
Share-based compensation	891			959
Depreciation	—			105
Credit carryforwards	797			—
Other	595			822
Gross deferred tax assets	56,302			64,884
Valuation allowance	(55,336		)	(63,616		)
	966			1,268
Deferred Tax Liabilities:
Depreciation	(123		)	—
Accrued professional liability	—			(92		)
Indefinite intangibles	(18,714		)	(19,683		)
Tax on unrepatriated earnings	(604		)	(336		)
Other	—			(1,176		)
	(19,441		)	(21,287		)
Net deferred taxes	$	(18,475	)	$	(20,019	)

The Company determines the need for a valuation allowance under Income Taxes topic of the FASB ASC by assessing the probability of realizing deferred tax assets, taking into consideration all available positive and negative evidence, including historical operating results, expectations of future taxable income, carryforward periods available to the Company for tax reporting purposes, the evaluation of various income tax planning strategies, and other relevant factors. The Company maintains a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized based on consideration of all available evidence. Adjustments to the deferred tax valuation allowances are made to earnings in the period when such assessments are made. Significant judgment is required in making this assessment and to the extent future expectations change, the Company would have to assess the recoverability of its deferred tax assets at that time. The Company's cumulative loss position was significant negative evidence in assessing the need for a valuation allowance. As of December 31, 2013, the Company determined that it could not sustain a conclusion that it was more likely than not that it would realize any of its deferred tax assets resulting from recent losses, the difficulty of forecasting future taxable income, and other factors. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support its reversal. To be considered a source of future taxable income to support realizability of a deferred tax asset, a taxable temporary difference must reverse in a period such that it would result in the realization of the deferred tax asset. Taxable temporary differences related to

indefinite-lived intangibles, such as goodwill, are by their nature not predicted to reverse and therefore not considered a source of future taxable income in accordance with ASC 740. The Company had $18.7 million and $19.7 million of deferred tax

liabilities relating to indefinite-lived intangible assets that it was not able to offset against deferred tax assets as of December 31, 2015 and 2014, respectively. As of December 31, 2015 and 2014, the Company recorded valuation allowances of $55.3 million and $63.6 million, respectively.

The Company believes it is necessary to see further positive evidence, such as sustained achievement of cumulative profits, before these valuation allowances can be released. If such positive evidence develops, the Company may release all or a portion of the remaining valuation allowances as early as the second half of 2016. The Company will continue to assess the realizability of its deferred tax assets.

As of December 31, 2015 and 2014, respectively, the Company had approximately $65.2 million and $97.5 million of federal, state, and foreign net operating loss carryforwards. The federal carryforwards expire between 2030 and 2033. The state carryforwards expire between 2015 and 2033. The majority of the foreign carryforwards are in a jurisdiction with no expiration. A valuation allowance for the net operating losses has been recorded at December 31, 2015 and 2014, to reduce the Company’s deferred tax asset to an amount that is more likely than not to be realized. In the first quarter of 2014, the Company recorded a non-cash adjustment of $1.7 million primarily related to an overstatement of the valuation allowance established as of December 31, 2013. The out-of-period adjustment also decreased the net loss by the same amount or $0.06 per diluted share for the three months ended March 31, 2014 and the year ended December 31, 2014. Management concluded that the adjustment was not material to its prior period financial statements.

The reconciliation of income tax computed at the U. S. federal statutory rate to income tax (benefit) expense is as follows:



	Year Ended December 31,
	2015			2014			2013
	(amounts in thousands)
Tax at U.S. statutory rate	$	1,456		$	(10,961	)	$	(3,514	)
State taxes, net of federal benefit	611			219			(190		)
Non-deductible meals and entertainment	1,510			1,425			450
Foreign tax expense	(6		)	44			554
Valuation allowances	(5,078		)	12,038			48,556
Uncertain tax positions	917			(996		)	(257		)
Deferred tax write-offs	—			—			221
Audit settlements	(624		)	—			160
Tax on unrepatriated earnings	—			—			(1,465		)
Tax true ups and other	420			(1,553		)	(304		)
Total income tax (benefit) expense for continuing operations	$	(794	)	$	216		$	44,211

The tax years of 2004, 2005, and 2008 through 2014 remain open to examination by the major taxing jurisdictions to which the Company is subject, with the exception of certain states in which the statute of limitations has been extended.

The sale of the Company’s clinical trial services unit located outside the U.S. in the UK during 2013 resulted in write-offs of the investment in those subsidiaries and offset the amount of U.S. taxes that would need to be accrued on the India earnings to zero. During 2015, the Company accrued $0.2 million of India tax on earnings of approximately $0.6 million. India withholding taxes on a dividend of India earnings are not affected by the calculation of U.S. taxes due and continue to be accrued.

The Company recognizes in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is approximately as follows:



	2015			2014
	(amounts in thousands)
Balance at January 1	$	3,777		$	4,986
Additions based on tax positions related to the current year	861			709
Additions based on tax positions related to prior years	62			91
Reductions based on settlements of tax positions related to prior years	(624		)	(344		)
Reductions for tax positions as a result of a lapse of the applicable statute of limitations	—			(1,578		)
Other	(5		)	(87		)
Balance at December 31	$	4,071		$	3,777

Short-term unrecognized tax benefits are included in other current liabilities on the consolidated balance sheets and were approximately $0.1 million and $0.6 million as of December 31, 2015 and 2014, respectively. Long-term unrecognized tax benefits are included in other long-term liabilities on the consolidated balance sheets and were approximately $0.8 million and $0.9 million as of December 31, 2015 and 2014, respectively. See Note 7 - Balance Sheet Details. As of December 31, 2015 and 2014, the Company had unrecognized tax benefits, which would affect the effective tax rate if recognized, of approximately $3.8 million and $3.3 million, respectively. During 2015, the Company had gross increases of $0.9 million to its current year unrecognized tax benefits, related to federal and state tax issues. In addition, the Company had gross decreases of $0.4 million to its unrecognized tax benefits related to settlement refunds and the closure of open tax years.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the years ended December 31, 2015 and 2014, the Company recognized a reduction on interest and penalties of $0.2 million. During the year ended December 31, 2013, the Company recognized interest and penalties of $0.1 million. The Company had accrued approximately $0.4 million and $0.8 million for the payment of interest and penalties at December 31, 2015 and 2014, respectively.