9. Income Taxes

The Company follows FASB ASC 740, Income Taxes, for the computation and presentation of its tax provision. For the year ended December 31, 2015, the income tax provision of $8,000 represents a provision for income taxes of $11,000 related to foreign income taxes and state minimum income taxes of $1,000 net of deferred taxes of $4,000.

The provision for annual income taxes consisted of the following (in thousands):


	As of December 31,
	2015		2014		2013

U.S. Federal	$	—	$	—	$	—
State		1		1		1
Foreign		11		6		16
Total current	$	12	$	7	$	17
Deferred:
U.S. Federal	$	(4)	$	—	$	—
State		—		—		—
Foreign		—		—		—
Total deferred	$	(4)	$	—	$	—
Total provision for income taxes	$	8	$	7	$	17

The reconciliation of federal statutory income tax to the Company's provision for income taxes is as follows (in thousands):


	As of December 31,
	2015		2014		2013
Expected provision at statutory federal rate	$	(7,134)	$	(7,741)	$	(3,080)
State tax—net of federal benefit		1		1		1
U.S. federal research credit		(924)		(1,125)		(2,272)
Non deductible expenses		119		104		28
Others		8		8		(9)
Change in valuation allowance		7,938		8,760		5,349
Provision for income taxes	$	8	$	7	$	17

As of December 31, 2015, the Company's foreign subsidiaries had accumulated approximately $0.3 million of earnings that have been reinvested in their operations. The Company has not provided U.S. tax on these earnings as the reinvestment is considered permanent in duration.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts 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 (in thousands):


	As of December 31,
	2015		2014
Deferred tax assets:
Net operating loss federal and state	$	30,836	$	22,442
Research and foreign tax credits		12,307		10,694
Accrued compensation and vacation		411		390
Deferred revenue, other accruals and reserves		3,918		3,077
Stock-based compensation		4,319		4,028
Patents		2,884		4,472
Gross deferred tax assets	$	54,675	$	45,103
Valuation allowance	$	(54,420)	$	(45,036)
Total deferred tax asset	$	255	$	67
Deferred tax liabilities:
Property and equipment	$	255	$	67
Total deferred tax liabilities	$	255	$	67
Net deferred tax assets	$	—	$	—

The Company established valuation allowances for U.S. federal and state deferred tax assets. The valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. During the year ended December 31, 2015, the Company continued to maintain the valuation allowances for U.S. federal and state deferred tax assets. The Company intends to maintain a full valuation allowance until sufficient positive evidence exists to support reversal. The valuation allowance for deferred tax assets was $54.4 million and $45.0 million as of December 31, 2015 and 2014, respectively. The increase in the valuation allowance during the years ended December 31, 2015 and 2014 was $9.4 million and $9.5 million, respectively.

As of December 31, 2015, the Company has net operating loss carryforwards for U.S. federal and state income tax purposes of approximately $91.3 million and $82.9 million, respectively. Of these amounts, $14.6 million and $13.6 million, respectively, represent federal and state tax deductions from stock-based compensation which will be recorded as an adjustment to additional paid-in capital when they reduce taxes payable. The U.S. federal net operating loss carryforwards will start to expire in 2026 while for state purposes, the net operating losses will begin to expire in 2018. Utilization of the Company's net operating loss carryforwards and tax credits may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss before utilization. The Company has not determined whether an ownership change has occurred.

In addition, the Company has $8.9 million U.S. federal R&D credit and $9.8 million California R&D credit carryforwards to offset future income tax liabilities. U.S. federal R&D tax credits can be carried forward for 20 years and will start to expire in 2026. California R&D credits can be carried forward indefinitely.

On December 18, 2015, The Consolidated Appropriations Act of 2014 was signed into law, which retroactively reinstated and made permanent the federal research tax credit provisions from January 1, 2015 through December 31, 2015. The benefit of the reinstated credit did not impact the income statement in the period of enactment, which was the fourth quarter of 2015, as the research and development credit carryforwards are offset by a full valuation allowance.

Uncertain Tax Positions

For the year ended December 31, 2015, the total amount of unrecognized tax benefits excluding interest thereon was $3.8 million, none of which would impact the effective tax rate if realized during the year. The Company has not accrued interest and penalties related to the unrecognized tax benefits reflected in the financial statements for the years ended December 31, 2015, 2014 and 2013. Although the timing and outcome of income tax audits is highly uncertain, unrecognized tax benefits are not expected to decrease in the next twelve months.

The following table summarizes the activity related to unrecognized tax benefits (in thousands):


	As of December 31,
	2015		2014		2013
Unrecognized benefit—beginning of period	$	3,261	$	2,656	$	1,840
Gross increase—prior period tax positions		—		—		274
Gross decreases—prior period tax positions		—		—		(90)
Gross increases—current period tax positions		496		605		632
Unrecognized benefit—end of period	$	3,757	$	3,261	$	2,656

The Company's U.S. federal, state and local and foreign income tax returns are subject to audit by relevant tax authorities. The Company's income tax reporting periods beginning with tax year ended December 31, 2012 for the U.S., and tax year ended December 31, 2011 for the Company's major state and local jurisdictions remain generally open to audit by relevant tax authorities.