14. Income Taxes

The Company’s geographical breakdown of its loss before provision for income taxes is as follows (in thousands):

	Years Ended December 31,
	2016			2015			2014
Domestic	$	(72,139	)	$	(50,892	)	$	(55,330	)
Foreign		3,032			2,692			(2,665	)
Loss before provision for taxes	$	(69,107	)	$	(48,200	)	$	(57,995	)

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

	Years Ended December 31,
	2016			2015			2014
Current
Federal	$	—		$	—		$	—
State		62			34			66
Foreign		1,654			857			1,523
Total current provision		1,716			891			1,589
Deferred
Federal		130			63			109
State		6			(1	)		6
Foreign		(680	)		(271	)		(523	)
Total deferred provision		(544	)		(209	)		(408	)
Total	$	1,172		$	682		$	1,181

Reconciliation of the provision for income taxes at the statutory rate to the Company’s provision for income tax is as follows (in thousands):

	Years Ended December 31,
	2016			2015			2014
Tax benefit at federal statutory tax rate	$	(23,496	)	$	(16,388	)	$	(19,718	)
Tax benefit at state statutory tax rate		(1,008	)		(499	)		(1,169	)
Foreign tax rate differential		57			(826	)		(526	)
Unbenefitted loss of consolidated investment		-			-			2,366
Change in valuation allowance		17,701			9,738			12,407
Meals and entertainment		222			44			34
Stock compensation		7,857			8,492			7,160
Nondeductible expenses and other		(161	)		121			627
Provision for income taxes	$	1,172		$	682		$	1,181

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

	As of December 31,
	2016			2015
Deferred tax assets:
Reserves and accruals	$	2,817		$	2,662
Deferred revenue		10,379			8,724
Stock-based compensation		7,361			4,772
Net operating loss carryforwards		47,452			37,793
Loss on OCI		370			374
Other		67			32
Gross deferred tax assets		68,446			54,357
Valuation allowance		(68,227	)		(53,468	)
Total deferred tax assets		219			889
Deferred tax liabilities:
Stock-based compensation		(21	)		(21	)
Depreciation and amortization		(243	)		(1,425	)
Total deferred tax liabilities		(264	)		(1,446	)
Net deferred tax liability	$	(45	)	$	(557	)

Recognition of deferred tax assets is appropriate when realization of these assets is more likely than not. Based upon the weight of available evidence, which includes the Company’s historical operating performance and the recorded cumulative net losses in all prior fiscal periods, the Company has provided a full valuation allowance against its U.S. deferred tax assets and Imperva Israel net operating loss generated. The Company’s valuation allowance increased by $14.8 million, $13.0 million, and $7.8 million in the years ended December 31, 2016, 2015 and 2014, respectively.

As of December 31, 2016, the Company had U.S. federal and state net operating loss carryforwards of approximately $180.4 million and $85.2 million, respectively. The U.S. federal net operating loss carryforwards will expire at various dates beginning in 2022 through 2036 if not utilized. Most state net operating loss carryforwards will expire at various dates beginning in 2017 through 2036.

The Company uses the “with-and-without” approach to determine the recognition and measurement of excess tax benefits. Accordingly, the Company has elected to recognize excess income tax benefits from stock option exercises in additional paid in capital only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to the Company. As of December 31, 2016, the amount of such excess tax benefits from stock options included in deferred tax assets for federal and state net operating losses were $49.9 million and $29.5 million, respectively. In addition, the Company has elected to account for the indirect effects of stock-based awards on other tax attributes, such as the research and alternative minimum tax credits, through the statement of operations.

Net operating loss carryforwards reflected above may be subject to limitations due to ownership changes as provided in the Internal Revenue Code and similar state provisions.

The Company has not provided U.S. income tax on certain foreign earnings that are deemed to be indefinitely invested outside the U.S. For fiscal years 2016, 2015, and 2014 the amount of accumulated unremitted earnings from the Company’s foreign subsidiaries is approximately $9.7 million, $13.6 million and $12.9 million, respectively. Determination of the amount of unrecognized deferred U.S. income tax liability is not practical due to the complexities associated with the hypothetical calculation.

As of December 31, 2016 and 2015, the Company had gross unrecognized tax benefits of approximately $2.3 million and $1.2 million, respectively, all of which would impact the effective tax rate if recognized. While it is often difficult to predict the final outcome of any particular uncertain tax position, the Company does not believe that the amount of unrecognized tax benefits will change significantly in the next twelve months.

The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its income tax provision. For the years ended December 31, 2016 and 2015, the Company accrued interest of $0.2 million and $0.1 million in income tax expense, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2016			2015			2014
Balance at January 1	$	1,154		$	672		$	353
Additions based on tax positions taken during the current period		761			401			222
Reductions based on tax positions taken during the prior period		(42	)		(50	)		(47	)
Additions based on tax positions taken during a prior period		409			131			144
Balance at December 31	$	2,282		$	1,154		$	672

The Company’s material income tax jurisdictions are the United States (federal), California and Israel. As a result of net operating loss carryforwards, the Company is subject to audit for tax years 2004 and forward for federal purposes and 2006 and forward for California purposes. The Company’s tax years 2011 and forward are subject to audit in Israel. The Company’s 2011 and 2012 tax years are currently under examination by Israeli Tax Authorities. The Company does not expect a material impact on its consolidated financial statements as a result of this examination. There are tax years which remain subject to examination in various other jurisdictions that are not material to the Company’s financial statements.

The Company's Israeli subsidiaries ("Israeli subsidiaries") research and development intercompany services activity ("R&D activity") have a "Beneficiary Enterprise" status for a separate investment program that was elected by the Israel subsidiaries starting 2012 under the Law for Encouragement of Capital Investments, 1959 (the "Investments Law), amended from time to time. The entitlement to the above benefits is conditional upon the Israeli subsidiaries fulfilling the conditions stipulated by the Investments Law and regulations published there under.