12. Income taxes

The income tax expense (benefit) by jurisdiction consists of the following for the years ended December 31:

	2015		2014		2013
U.S. federal:
Current	$	27	$	6	$	(402	)
Deferred		319		328		1,158

Total U.S. federal	$	346	$	334	$	756


U.S. state and local:
Current	$	134	$	226	$	248
Deferred		1		140		457

Total U.S. state and local	$	135	$	366	$	705

Income taxes differ from the amounts computed by applying the U.S. federal income tax rate to pretax income before income taxes as a result of the following for the years ended December 31:

	2015			2014			2013
Federal statutory rate		34.0	%		34.0	%		34.0	%
State and local		4.1			4.6			(5.7	)
Foreign rate differential		(0.5	)		(0.7	)		(3.2	)
Stock options		(1.5	)		(0.5	)		(0.7	)
Non-controlling interests		0.5			1.9			15.2
Valuation allowance		(39.0	)		(45.1	)		(128.5	)
Transaction costs		—			—			(6.7	)
Purchase price adjustments		—			—			6.6
Revaluation of deferred tax assets		—			—			2.8
Uncertain tax positions		(0.1	)		(0.1	)		(2.9	)
Return to provision		—			0.6			9.3
Other		0.3			1.4			1.1

Income taxes		(2.2	)%		(3.9	)%		(78.7	)%

We have a foreign subsidiary in the United Kingdom, which has generated losses since inception resulting in a $1,528 deferred tax asset with a corresponding valuation allowance as of December 31, 2015. We also have a majority owned foreign subsidiary in Brazil, which has generated losses since inception resulting in a $476 deferred tax assets with a corresponding valuation allowance as of December 31, 2015. Foreign loss before income taxes was $1,381, $1,251, and $559 for 2015, 2014, and 2013, respectively.

Deferred income tax reflects the tax effects of temporary differences that gave rise to significant portions of our deferred tax assets and liabilities and consisted of the following for the years ended December 31, 2015 and 2014, respectively:

	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	16,895		$	10,115
Outside basis differences for U.S. partnerships		6,190			3,710
Stock options		3,882			3,348
Deferred revenue		376			648
Deferred compensation		301			144
State taxes		67			45
Other		1,312			1,341
Valuation allowance		(19,548	)		(12,470	)

Net deferred tax assets		9,475			6,881
Deferred tax liabilities:
Intangible assets		(6,268	)		(6,855	)
Property and equipment		(6,172	)		(2,671	)

Net deferred tax liabilities		(12,440	)		(9,526	)

Net deferred taxes	$	(2,965	)	$	(2,645	)

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2015 and 2014, we had federal net operating loss carryforwards of approximately $55,278 and $35,555, respectively, state net operating loss carryforwards of approximately $68,614 and $55,457, respectively, and foreign net operating loss carryforwards of $9,042 and $7,661, respectively. The federal net operating loss carryforwards will begin to expire in 2025, and our foreign net operating loss carryforwards have an indefinite life. Our state net operating loss carryforwards are principally related to California net operating losses and will begin to expire in 2016. Our ability to utilize certain of our net operating loss carryforwards may be limited in the event that a change in ownership, as defined in the Internal Revenue Code, occurs in the future.

The following table sets forth the changes in the valuation allowance, for all periods presented:

	Valuation Allowance
Balance, December 31, 2012	$	1,669
Additions charged to operations		2,432
Decrease credited to operations		—

Balance, December 31, 2013		4,101
Additions charged to operations		8,369
Decrease credited to operations		—

Balance, December 31, 2014		12,470
Additions charged to operations		7,078
Decrease credited to operations		—

Balance, December 31, 2015	$	19,548

During the year ended December 31, 2013, we recorded a $2,432 increase in our valuation allowance on our federal deferred tax assets, primarily due to changes in our expectations regarding our ability to realize these deferred tax assets. This resulted from a determination that it was more likely than not that certain federal net deferred tax assets would not be realized. We won some significant new contracts for the build out of broadband and IPTV networks for troops stationed on military bases that require us to make investments and incur losses in advance of experiencing any direct benefit from them including generation of revenues.

In reaching the determination of the valuation allowance, we have evaluated all significant available positive and negative evidence including, but not limited to, our three year cumulative results, trends in our business, expected future results and the character, amount and expiration periods of our net deferred tax assets. The underlying assumptions we used in forecasting future income required significant judgment and took into account our recent performance.

During 2013 we realized excess windfall tax benefits of approximately $55 from stock option exercises. These benefits decreased income taxes payable and were recorded as an increase to additional paid-in capital in the accompanying consolidated balance sheets. In accordance with the reporting requirements under ASC 718, we did not include excess windfall tax benefits resulting from stock option exercises as components of our gross deferred tax assets and corresponding valuation allowance disclosures, as tax attributes related to those windfall tax benefits should not be recognized until they result in a reduction of taxes payable. The tax effected amount of gross unrealized net operating loss carryforwards excluded under ASC 718 was approximately $6,933 at December 31, 2015. When realized, those excess windfall tax benefits are credited to additional paid-in capital.

We recognized interest and penalties related to income tax matters in income taxes which were not material during the years ended December 31, 2015, 2014, and 2013.

We identify, evaluate and measure all uncertain tax positions taken or to be taken on tax returns and record liabilities for the amount of these positions that may not be sustained, or may only partially be sustained, upon examination by the relevant taxing authorities. Although we believe that our estimates and judgments were reasonable, actual results may differ from these estimates. Some or all of these judgments are subject to review by the taxing authorities. As of December 31, 2015 and 2014, we had $363 and $459 in uncertain tax positions, respectively, $84 and $106, respectively, of which is a reduction to deferred tax assets, which is presented net of uncertain tax positions, in the accompanying consolidated balance sheets. We accrue interest and penalties related to unrecognized tax benefits as a component of income taxes. As of December 31, 2015 and 2014, we have accrued $50 and $67 for related interest, net of federal income tax benefits, and penalties recorded in income tax expense on our consolidated statements of operations, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate at December 31, 2015 was $229.

A reconciliation of our unrecognized tax benefits, excluding interest and penalties, is as follows:

	Uncertain Tax Positions
Balance, December 31, 2013	$	392
Additions for current period tax positions		—

Balance, December 31, 2014		392
Additions for current period tax positions		—
Effective settlement during the current period		(79	)

Balance, December 31, 2015	$	313

Our annual income taxes and the determination of the resulting deferred tax assets and liabilities involve a significant amount of judgment. Our judgments, assumptions and estimates relative to current income taxes take into account current tax laws, their interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. We operate within federal, state and international taxing jurisdictions and are subject to audit in these jurisdictions. These audits can involve complex issues which may require an extended period of time to resolve. We are subject to taxation in the United States and in various states. Our tax years 2012 and forward are subject to examination by the IRS and our tax years 2011 and forward are subject to examination by material state jurisdictions. However, due to prior year loss carryovers, the IRS and state tax authorities may examine any tax years for which the carryovers are used to offset future taxable income.