13. Income Taxes

The components of income before income taxes are as follows (in thousands):


	Year Ended April 30,
	2016		2015		2014
Domestic	$	8,125	$	2,138	$	14,996
Foreign		(57)		(245)		(100)
Total	$	8,068	$	1,893	$	14,896

The Company expects any foreign earnings to be reinvested in such foreign jurisdictions and, therefore, no deferred tax liabilities for U.S. income taxes on undistributed earnings are recorded. The foreign subsidiaries do not have any undistributed earnings.

A reconciliation of income tax expense computed using the U.S. federal statutory rates to actual income tax (benefit) expense is as follows:


	Year Ended April 30,
	2016		2015		2014
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%
State and local income taxes, net of federal benefit	(15.3)		(84.4)		(17.0)
R&D and other tax credits	(49.9)		(172.3)		(21.5)
Valuation allowance	17.1		96.7		8.7
Uncertain tax position adjustment	—		(1.9)		4.4
Return to provision adjustments	6.1		78.3		(0.1)
Permanent items	(2.6)		(5.2)		(1.3)
Other	(1.5)		0.9		(0.3)
Effective income tax rate	(11.1)	%	(52.9)	%	7.9	%

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


	Year Ended April 30,
	2016		2015		2014
Current:
Federal	$	1,804	$	573	$	4,307
State		154		(1,292)		(1,879)
		1,958		(719)		2,428
Deferred:
Federal		(2,859)		(1,972)		(1,694)
State		3		1,689		444
		(2,856)		(283)		(1,250)
Total income tax (benefit) expense	$	(898)	$	(1,002)	$	1,178

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


	April 30,
	2016		2015
Deferred income tax assets:
Accrued expenses	$	8,238	$	8,442
Allowances, reserves, and other		1,330		1,543
Unrealized loss on securities		119		—
Net operating loss and credit carry-forwards		9,554		5,692
Intangibles basis		416		464
Total deferred income tax assets		19,657		16,141
Deferred income tax liabilities:
Unrealized gain on securities		—		(237)
Fixed asset basis		(395)		(86)
Total deferred income tax liabilities		(395)		(323)
Valuation allowance		(4,511)		(3,127)
Net deferred tax assets	$	14,751	$	12,691

At April 30, 2016 and 2015 the Company recorded a valuation allowance of $4,511,000 and $3,127,000, respectively, against state R&D credits as the Company is currently generating more tax credits than it will utilize in future years and against foreign net operating losses that are not more likely than not to be utilized. The valuation allowance increased by $1,383,000 and $1,829,000 for April 30, 2016 and April 30, 2015, respectively.

At April 30, 2016 the Company had state credit carryforwards of $16,533,000 that do not expire and federal tax credit carryforwards of $6,144,000 that expire in 2034. As of April 30, 2016, the Company had federal and state credits of $265,000 and $33,000, respectively, for which the tax benefit, when recognized, will be recorded in equity.

At April 30, 2016, the Company had multiple state net operating loss carryforwards and had foreign losses of approximately $130,000 and $99,000,respectively. The state net operating loss carryforwards begin to expire in 2023 and the foreign losses carryforward indefinitely.

At April 30, 2016 and 2015, the Company had approximately $9,905,000 and $8,190,000, respectively, of unrecognized tax benefits all of which would impact the Company’s effective tax rate if recognized. The Company estimates that none of its unrecognized tax benefits will decrease in the next twelve months due to statute of limitation expiration.

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the Emerging Issues Task Force). As a result of the adoption of this guidance the Company reclassified $2,484,000 at April 30, 2015 from the liability for uncertain tax positions to reduce deferred income tax assets on the balance sheet.

The following table summarizes the activity related to the Company’s gross unrecognized tax benefits for the years ended April 30, 2016 and 2015 (in thousands):


	April 30,
	2016		2015
Balance as of May 1	$	8,190	$	6,334
Increases related to prior year tax positions		581		747
Decreases related to prior year tax positions		—		(12)
Increases related to current year tax positions		1,144		1,158
Decreases related to lapsing of statute of limitations		(10)		(37)
Balance as of April 30,	$	9,905	$	8,190

The Company records interest and penalties on uncertain tax positions to income tax expense. As of April 30, 2016 and 2015, the Company had accrued approximately $55,000 and $43,000, respectively, of interest and penalties related to uncertain tax positions. The Company is currently under audit by various state jurisdictions but does not anticipate any material adjustments from these examinations. The tax years 2011 to 2015 remain open to examination by the IRS for federal income taxes. The tax years 2008 to 2015 remain open for major state taxing jurisdictions.