13. Income taxes

The components of the Company’s income before (benefit) provision for income taxes by jurisdiction are as follows:


	Year ended December 31,
	2015		2014		2013
United States	$	4,431,779	$	2,563,036	$	537,097
Outside United States		1,960,309		1,397,812		(474,222)
Income before (benefit) provision for income taxes, net	$	6,392,088	$	3,960,848	$	62,875

The components of the (benefit) provision for income taxes are as follows:


	Year ended December 31,
	2015		2014		2013
Current tax:
United States—Federal	$	—	$	—	$	—
United States—State and local		24,456		9,456		5,754
Outside United States		1,484,002		756,752		619,043
Total current tax		1,508,458		766,208		624,797
Deferred tax:
United States—Federal		(5,840,470)		—		—
United States—State and local		(352,782)		—		—
Outside United States		714,434		34,255		(583,928)
Total deferred tax		(5,478,818)		34,255		(583,928)
(Benefit) provision for income taxes, net	$	(3,970,360)	$	800,463	$	40,869

For 2015, the benefit for income taxes of $4.0 million related to current tax from foreign operations of $1.5 million, primarily the result of revenue withholding taxes paid in foreign tax jurisdictions. The 2015 current tax expense from foreign operations includes $0.7 million related to a foreign tax receivable that was expensed as collectability was no longer deemed probable. The current tax expense was fully offset by a partial reversal of the valuation allowance of the deferred tax asset that pertains to our net operating loss carryforwards in the United States and changes in certain deferred tax items in and current tax obligations in foreign entities. Based on all available evidence, the Company recorded a tax benefit of $6.2 million for tax attribute carryforwards in the jurisdictions in which there is sufficient positive evidence that the deferred tax asset will be realized. In addition, the deferred tax expense from outside the United States includes an expense of $0.5 million related to the reversal of a previously deferred tax asset as the Company determined that the deferred tax asset will not be utilized and the impact on current and prior years accounts are immaterial.

The Company has not provided for U.S. income taxes or foreign withholding taxes on the undistributed earnings from operations of its subsidiaries operating outside of the United States. Such undistributed earnings are considered permanently reinvested. The Company does not provide deferred taxes on translation adjustments on unremitted earnings under the indefinite reversal exception. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable due the complexities of a hypothetical calculation.

For 2014, the provision for income taxes of $0.8 million related primarily to foreign entities. The Company has tax carryforwards in its federal, state and foreign jurisdictions. Based on all available evidence, it is not more likely than not that the Company would realize the benefit from $29.9 million of the deferred tax assets. Therefore, a valuation allowance of $28.5 million is recorded, which takes into account a deferred tax liability of $0.7 million. The Company has recorded a tax benefit for tax attribute carryforwards in the jurisdictions in which there is sufficient positive evidence that the deferred tax asset will be realized, resulting in a net deferred tax asset of $0.7 million.

For 2013, the provision for income taxes of $40,869 related primarily to foreign entities. The Company has tax carryforwards in its federal, state and foreign jurisdictions. Based on all available evidence, it is not more likely than not that the Company would realize the benefit from $31.2 million of the deferred tax assets. Therefore, a valuation allowance of $29.4 million is recorded, which takes into account a deferred tax liability of $1.0 million. The Company has recorded a tax benefit for tax attribute carryforwards in the jurisdictions in which there is sufficient positive evidence that the deferred tax asset will be realized, resulting in a net deferred tax asset of $0.8 million.

The table below shows reconciliation from the U.S. Federal statutory income rate of 34.0% to the effective income tax rate:


	Year ended December 31,
	2015		2014		2013
Federal statutory rate	34.00	%	34.00	%	34.00	%
State tax	0.38		0.24		9.20
Permanent differences	0.42		2.49		54.30
Foreign tax rates at rates different from U.S. rates	(11.90)		(22.06)		(82.70)
Valuation allowance	(85.02)		6.05		50.20
Total tax (benefit) provision	(62.12)	%	20.72	%	65.00	%

With few exceptions, the statute of limitations for the years 2011 and prior has expired. Earlier years related to certain foreign jurisdictions remain subject to examination. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and may make adjustments up to the amount of the net operating loss carryforward. As of December 31, 2015 and 2014, the Company has no significant uncertain tax positions and, therefore, has not recorded any significant liabilities, interest or penalties for uncertain tax positions. To the extent that the Company records any interest or penalties, these amounts will be recorded as part of the income tax provision. If the Company’s positions are sustained by the taxing authorities, there will be no impact to the Company’s income tax provision. The federal income tax return for the year 2013 is under examination by the Internal Revenue Service. The Company does not believe that there will be any additional tax due.

The components of deferred tax assets and liabilities are as follows:


	As of December 31,
	2015		2014
Deferred tax assets:
Net operating loss carryforwards	$	22,842,817	$	25,425,715
Stock options		3,458,886		3,482,800
Bonuses and salaries		26,988		26,993
Restricted stock		247,620		91,580
Provision for doubtful accounts		10,987		14,568
Foreign nonrefundable withholding tax		—		478,295
Foreign tax credit		589,188		335,698
Total deferred tax assets		27,176,486		29,855,649
Less: Valuation allowance		(20,561,516)		(28,475,080)
Net deferred tax assets		6,614,970		1,380,569
Deferred tax liabilities:
Depreciation and amortization		(408,657)		(653,074)
Total deferred tax liabilities		(408,657)		(653,074)
Total deferred tax assets, net(*)	$	6,206,313	$	727,495

(*)As of December 31, 2015 and 2014, deferred tax assets, net, are included in the balance sheet classification “Deferred tax asset and other long-term assets.”

As of December 31, 2015, the Company has available federal net operating loss carryforwards of $61.2 million, the most significant of which expire from 2020 through 2033.

We recognize deferred tax assets and liabilities for future tax consequences arising from differences between the carrying amounts of existing assets and liabilities under GAAP and their respective tax basis, and for net operating loss carryforwards and tax credit carryforwards. We evaluate the recoverability of our deferred tax assets, weighing all positive and negative evidence, and are required to establish or maintain a valuation allowance for these assets if we determine that it is more likely than not that some or all of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which the evidence can be objectively verified. If negative evidence exists, positive evidence is necessary to support a conclusion that a valuation allowance is not needed.

Our framework for assessing the recoverability of deferred tax assets requires us to weigh all available evidence, including:

the sustainability of recent profitability required to realize the deferred tax assets;

the historical cumulative net losses in our consolidated statements of operations in recent years; and

the carryforward periods for the net operating losses and tax credits.

As of December 31, 2014, we had a valuation allowance of $28.5 million against our deferred tax assets of $29.9 million. After weighing all of the evidence, we determined that the positive evidence in favor of releasing a portion the valuation allowance outweighed the negative evidence against releasing the allowance as of December 31, 2015. Therefore, we concluded that it was more likely than not that a portion our deferred tax assets, relating to net operating loss carryforwards in the United States, would be realized. As a result, we released $6.2 million of the valuation allowance on our deferred tax assets as of December 31, 2015.

The positive evidence that weighed in favor of partially releasing the valuation allowance as of December 31, 2015 and ultimately outweighed the negative evidence against releasing the allowance was the following:

our U.S. profitability for the year end December 31, 2015 and our expectations regarding the sustainability of these profits;

our three-year U.S. cumulative income position as of December 31, 2015;

the recent term extensions of certain material customers;

our taxable income for 2015 and our expectations regarding the likelihood of future taxable income; and

that our net operating loss carryforwards expire from 2020 through 2033.

As the Company has recently transitioned from incurring losses since inception to a cumulative income position over the three years ended December 31, 2015 the Company concluded on reversing a portion of the valuation allowance and will continue to evaluate the recoverability of the remaining $16.6 million in net operating loss deferred tax assets over the next several quarters.