Income Taxes

The Company's loss before provision for income taxes was as follows (in thousands):



	Years Ended December 31,
	2013			2012			2011
United States	$	(41,696	)	$	(30,743	)	$	(17,474	)
Foreign	306			156			1,165
Loss before provision for income taxes	$	(41,390	)	$	(30,587	)	$	(16,309	)

The tax provision for the years ended December 31, 2013, 2012 and 2011 consists primarily of taxes attributable to foreign operations. The components of the provision for income taxes are as follows (in thousands):



	Years Ended December 31,
	2013			2012			2011
Current provision (benefit):
Federal	$	—		$	—		$	3
State	5			7			7
Foreign	(45		)	178			82
Total current provision	(40		)	185			92
Deferred provision (benefit):
Federal	(59		)	(62		)	—
State	(7		)	(7		)	—
Foreign	19			154			149
Total deferred provision	(47		)	85			149
Total provision for (benefit from) income taxes	$	(87	)	$	270		$	241

Reconciliation of the provision for income taxes calculated at the statutory rate to the Company's provision for (benefit from) income taxes is as follows (in thousands):



	Years Ended December 31,
	2013			2012			2011
Tax benefit at federal statutory rate	$	(14,073	)	$	(10,399	)	$	(5,708	)
State taxes	(1,948		)	(1,063		)	(1,421		)
Research and development credits	(195		)	—			(83		)
Foreign operations taxed at different rates	(108		)	7			(252		)
Stock-based compensation	117			312			1,241
Other nondeductible items	(1,272		)	204			650
Change in federal statutory rate	—			1,493			—
Change in valuation allowance	17,392			9,716			5,814
Provision for (benefit from) income taxes	$	(87	)	$	270		$	241

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2013			2012
Deferred tax assets:
Net operating losses	$	67,507		$	54,923
Credits	4,194			3,329
Deferred revenues	1,198			1,297
Stock-based compensation	3,043			4,464
Reserves and accruals	3,626			2,090
Depreciation	2,247			1,746
Intangible assets	4,208			3,556
Unrealized gain/loss	112			166
Other assets	159			141
Total deferred tax assets:	86,294			71,712
Deferred tax liabilities:
Other	—			—
Total deferred tax liabilities:	—			—
Valuation allowance	(86,294		)	(71,692		)
Net deferred tax assets	$	—		$	20

ASC Topic 740 requires that the tax benefit of NOL, temporary differences and credit carryforwards are recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not more likely than not to be realized and, accordingly, has provided a valuation allowance against the Company's deferred tax assets. Accordingly, the net deferred tax assets in all the Company's jurisdictions have been fully reserved by a valuation allowance. The net valuation allowance increased by $14,600,000, $8,600,000 and $5,800,000 during the years ended December 31, 2013, 2012 and 2011, respectively. At such time as it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance will be reduced.

The following table sets forth the Company's federal, state and foreign NOL carryforwards and federal research and development tax credits as of December 31, 2013 (in thousands):



	December 31, 2013
	Amount		Expiration Years
Net operating losses, federal	$	184,818	2022-2033
Net operating losses, state	148,325		2015-2033
Tax credits, federal	5,138		2022-2033
Tax credits, state	5,459		Do not expire
Net operating losses, foreign	15,403		Various
Tax credits, foreign	$	16	Various

Current federal and California tax laws include substantial restrictions on the utilization of NOLs and tax credit carryforwards in the event of an ownership change of a corporation. Accordingly, the Company's ability to utilize NOLs and tax credit carryforwards may be limited as a result of such ownership changes. Such a limitation could result in the expiration of carryforwards before they are utilized.

Income tax expense or benefit from continuing operations is generally determined without regard to other categories of earnings, such as discontinued operations and other comprehensive income. An exception is provided in ASC 740 when there is aggregate income from categories other than continuing operations and a loss from continuing operations in the current year. In this case, the tax benefit allocated to continuing operations is the amount by which the loss from continuing operations reduces the tax expenses recorded with respect to the other categories of earnings, even when a valuation allowance has been established against the deferred tax assets. In instances where a valuation allowance is established against current year losses, income from other sources, including gain from available-for-sale securities recorded as a component of other comprehensive income, is considered when determining whether sufficient future taxable income exists to realize the deferred tax assets. As a result, for the year ended December 31, 2013, the Company recorded a tax expense of $66,000 in other comprehensive income related to the gain on available-for-sale securities, and recorded a corresponding tax benefit of $66,000 in continuing operations.

The Company has not provided for United States federal and state income taxes on all of the non-United States subsidiaries’ undistributed earnings as of December 31, 2013, because such earnings are intended to be indefinitely reinvested. As of December 31, 2013, cumulative unremitted foreign earnings that are considered to be permanently invested outside the United States and on which no United States taxes have been provided were approximately $1,300,000. The residual United States tax liability, if such amounts were remitted, would be nominal.

The Company adopted ASC's Topic 740's provision for accounting for uncertainty in income taxes on January 1, 2007. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):



	December 31,
	2013			2012			2011
Balance at beginning of year	$	7,420		$	6,611		$	6,492
Additions based on tax positions related to current year	1,116			709			470
Additions to tax provision of prior years	6			263			4
Reductions to tax provision of prior years	(78		)	24			(262		)
Lapse of the applicable statute of limitations	(158		)	(187		)	(93		)
Balance at end of year	$	8,306		$	7,420		$	6,611

The Company recognizes interest and penalties as a component of the Company's income tax expense. Total interest and penalties recognized in the consolidated statement of operations was $29,000, $11,000 and $39,000, respectively, in 2013, 2012 and 2011. Total penalties and interest recognized in the balance sheet was $280,000 and $250,000, respectively, in 2013 and 2012. The total unrecognized tax benefits that, if recognized currently, would impact the Company's effective tax rate were $1,000,000 and $1,500,000 as of December 31, 2013 and 2012, respectively. The Company expects $663,000 of unrecognized tax benefits to be recognized within the next 12 months of which $439,000 will impact the Company's effective tax rate. The Company is not subject to examination by United States federal or state tax authorities for years prior to 2002 and foreign tax authorities for years prior to 2007.