Income Taxes

Our loss before provision for income taxes was as follows (in thousands):



	Years Ended December 31,
	2016			2015			2014
United States	$	(8,174	)	$	(7,641	)	$	(20,980	)
Foreign	(424		)	(278		)	1,653
Loss before provision for income taxes	$	(8,598	)	$	(7,919	)	$	(19,327	)

The tax provision for the years ended December 31, 2016, 2015 and 2014 consists primarily of taxes attributable to foreign operations and the tax effect of unrealized gains on our available for sale securities. The components of the provision for income taxes are as follows (in thousands):



	Years Ended December 31,
	2016			2015			2014
Current provision (benefit):
Federal	$	—		$	—		$	—
State	5			5			5
Foreign	(14		)	(13		)	(371		)
Total current provision (benefit)	(9		)	(8		)	(366		)
Deferred provision (benefit):
Federal	—			(293		)	—
State	—			(21		)	—
Foreign	(31		)	(16		)	110
Total deferred provision (benefit)	(31		)	(330		)	110
Total benefit from income taxes	$	(40	)	$	(338	)	$	(256	)

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



	Years Ended December 31,
	2016			2015			2014
Tax benefit at federal statutory rate	$	(2,924	)	$	(2,693	)	$	(6,571	)
State taxes	127			1,126			249
Research and development credits	(161		)	(85		)	(57		)
Foreign operations taxed at different rates	30			31			447
Stock-based compensation	327			77			(2		)
Other nondeductible items	660			(43		)	(364		)
Change in valuation allowance	1,901			1,249			6,042
Benefit from income taxes	$	(40	)	$	(338	)	$	(256	)

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 our deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2016			2015
Deferred tax assets:
Net operating losses	$	72,588		$	70,005
Credits	5,016			4,671
Deferred revenues	1,025			3,357
Stock-based compensation	3,750			3,460
Reserves and accruals	2,952			2,713
Depreciation	2,516			2,377
Intangible assets	5,536			5,127
Capital losses	933			933
Unrealized gain/loss	277			126
Other assets	110			98
Total deferred tax assets:	94,703			92,867
Deferred tax liabilities:
Other	(103		)	(199		)
Total deferred tax liabilities:	(103		)	(199		)
Valuation allowance	(94,663		)	(92,762		)
Net deferred tax liabilities	$	(63	)	$	(94	)

ASC Topic 740 requires that the tax benefit of NOL, temporary differences and credit carryforwards be 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 our ability to generate sufficient taxable income within the carryforward period. Because of our 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, therefore, has provided a valuation allowance against our 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 $1.9 million, $1.2 million and $5.2 million during the years ended December 31, 2016, 2015 and 2014, 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, 2016 (in thousands):



	December 31, 2016
	Amount		Expiration Years
Net operating losses, federal	$	213,061	2022-2036
Net operating losses, state	120,234		2017-2036
Tax credits, federal	5,634		2022-2036
Tax credits, state	7,048		Do not expire
Net operating losses, foreign	627		Various
Tax credits, foreign	10		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. For the year ended December 31, 2016, the Company did not record a tax expense in other comprehensive income related to available-for-sale securities.

In 2014, we determined that the undistributed earnings of our India subsidiary will be repatriated to the United States, and accordingly, we have provided a deferred tax liability totaling $0.1 million as of December 31, 2016. We have not provided for U.S. federal and state income taxes on all of the remaining non-U.S. subsidiaries’ undistributed earnings as of December 31, 2016 as the remaining foreign jurisdictions are in a cumulative loss position.

We adopted ASC 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):



	Rollforward Table (at Gross): As of
	December 31,
	2016			2015			2014
Balance at beginning of year	$	8,152		$	7,838		$	8,306
Additions based on tax positions related to current year	459			368			346
Additions to tax provision of prior years	—			—			—
Reductions to tax provision of prior years	(45		)	(54		)	(814		)
Lapse of the applicable statute of limitations	—			—			—
Balance at end of year	$	8,566		$	8,152		$	7,838

We recognize interest and penalties as a component of our income tax expense. Total interest and penalties recognized in the consolidated statement of operations was $35,000, $24,000 and $(47,000), respectively, in 2016, 2015 and 2014. Total penalties and interest recognized in the balance sheet was $292,000 and $257,000, respectively, in 2016 and 2015. The total unrecognized tax benefits that, if recognized currently, would impact the Company’s effective tax rate were $0.4 million and $0.4 million as of December 31, 2016 and 2015, respectively. We do not expect any material changes to our uncertain tax positions within the next 12 months. We are 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 2010.