Income Taxes

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



	Year Ended December 31,
	2016		2015		2014
	(amounts in thousands)
United States	$	3,309	$	3,565	$	(33,574	)
Foreign	1,236		595		2,256
Income (loss) before income taxes	$	4,545	$	4,160	$	(31,318	)

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



	Year Ended December 31,
	2016			2015			2014
	(amounts in thousands)
Current:
Federal	$	227		$	551		$	—
State	587			(21		)	811
Foreign	322			220			262
Total	1,136			750			1,073

Deferred:
Federal	(4,114		)	(1,819		)	(1,320		)
State	(866		)	8			68
Foreign	(342		)	267			395
Total	(5,322		)	(1,544		)	(857		)
Total income tax (benefit) expense	$	(4,186	)	$	(794	)	$	216

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,
	2016			2015
	(amounts in thousands)
Deferred Tax Assets:
Accrued other and prepaid expenses	$	3,494		$	2,973
Allowance for doubtful accounts	704			1,278
Intangible Assets	10,725			11,365
Net operating loss carryforwards	17,228			22,662
Derivative interest	7,940			10,144
Accrued professional liability	2,632			2,536
Accrued workers’ compensation	3,439			3,061
Share-based compensation	—			891
Credit carryforwards	1,055			797
Other	584			595
Gross deferred tax assets	47,801			56,302
Valuation allowance	(46,454		)	(55,336		)
	1,347			966
Deferred Tax Liabilities:
Depreciation	(70		)	(123		)
Indefinite intangibles	(13,971		)	(18,714		)
Tax on unrepatriated earnings	(263		)	(604		)
Share-based compensation	(197		)	—
	(14,501		)	(19,441		)
Net deferred taxes	$	(13,154	)	$	(18,475	)

The Company's cumulative loss position was significant negative evidence in assessing the need for a valuation allowance on its deferred tax assets. 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. Due to the historical losses from the Company's operations, it has recorded a full valuation allowance on its deferred tax assets. 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 the Income Taxes Topic of the FASB ASC. The Company had $14.0 million and $18.7 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, 2016 and 2015, respectively. As of December 31, 2016 and 2015, the Company recorded valuation allowances of $46.5 million and $55.3 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, but at this point in time cannot determine in which period they would reverse. The Company will continue to assess the realizability of its deferred tax assets.

As of December 31, 2016 and 2015, respectively, the Company had approximately $53.2 million and $65.2 million of federal, state, and foreign net operating loss carryforwards. The federal carryforwards expire between 2031 and 2034. The state carryforwards expire between 2016 and 2034. 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, 2016 and 2015, 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,
	2016			2015			2014
	(amounts in thousands)
Tax at U.S. statutory rate	$	1,591		$	1,456		$	(10,961	)
State taxes, net of federal benefit	344			611			219
Noncontrolling interest	(260		)	—			—
Non-deductible meals and entertainment	1,546			1,510			1,425
Foreign tax expense	(5		)	(6		)	44
Valuation allowances	(8,379		)	(5,078		)	12,038
Uncertain tax positions	1,090			917			(996		)
Audit settlements	—			(624		)	—
Other	(113		)	420			(1,553		)
Total income tax (benefit) expense	$	(4,186	)	$	(794	)	$	216

The tax years of 2004, 2005, and 2008 through 2015 remain open to examination by certain taxing jurisdictions to which the Company is subject to tax, other than certain states in which the statute of limitations has been extended.

During 2016, the Company accrued $0.2 million of India tax on earnings of approximately $0.5 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.

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



	2016		2015
	(amounts in thousands)
Balance at January 1	$	4,071	$	3,777
Additions based on tax positions related to the current year	1,054		861
Additions based on tax positions related to prior years	55		62
Reductions based on settlements of tax positions related to prior years	—		(624		)
Other	—		(5		)
Balance at December 31	$	5,180	$	4,071

Short-term unrecognized tax benefits are included in other current liabilities on the consolidated balance sheets and were approximately $0.1 million as of December 31, 2016 and 2015. Long-term unrecognized tax benefits are included in other long-term liabilities on the consolidated balance sheets and were approximately $0.9 million and $0.8 million as of December 31, 2016 and 2015, respectively. See Note 7 - Balance Sheet Details. As of December 31, 2016 and 2015, the Company had unrecognized tax benefits, which would affect the effective tax rate if recognized, of approximately $4.9 million and $3.8 million, respectively. During 2016, the Company had gross increases of $1.1 million to its current year unrecognized tax benefits, related to federal and state tax positions.

The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. During the year ended December 31, 2016, the Company recognized interest and penalties of $0.1 million. During the years ended December 31, 2015 and 2014, the Company recognized a reduction on interest and penalties of $0.2 million. The Company had accrued approximately $0.5 million and $0.4 million for the payment of interest and penalties at December 31, 2016 and 2015, respectively.