(12)Income Taxes

For the years ended December 31, 2016, 2015 and 2014, net income before income taxes and non-controlling interest consisted of the following (in thousands):



	Year Ended December 31,
	2016		2015		2014
U.S. operations	$	8,996	$	6,682	$	7,853
Foreign operations		882		24,305		59,336
	$	9,878	$	30,987	$	67,189

Income tax expense (benefit) attributable to income from operations consisted of (in thousands):



	Year Ended December 31,
	2016		2015		2014
Current
Federal	$	312	$	(2,083)	$	3,005
State		56		(4)		62
Foreign		2,338		1,372		1,954
		2,706		(715)		5,021
Deferred
Federal		3,090		5,406		930
State		238		19		247
Foreign		(2,190)		(458)		993
		1,138		4,967		2,170
Income tax expense	$	3,844	$	4,252	$	7,191

The reconciliations between the Company’s income tax expense and the amounts computed by applying the U.S. federal income tax rate of 35.0% for the years ended December 31, 2016, 2015 and 2014 are as follows (in thousands):



	Year Ended December 31,
	2016		2015		2014
Computed expected tax expense	$	3,458	$	10,845	$	23,516
Increase (decrease) in income taxes resulting from:
Foreign tax differential		(88)		(7,676)		(17,955)
State income tax expense, net of federal income tax benefit		310		220		55
Subpart F income		711		597		1,106
Adjustment to contingent consideration		(634)		-		-
Increase in uncertain tax positions		36		17		38
Non-deductible stock-based compensation		155		134		112
Change in valuation allowance		(15)		(152)		167
Other		(89)		267		152
	$	3,844	$	4,252	$	7,191

As of December 31, 2016, the Company had $72.1 million, $5.6 million and $11.3 million of net operating loss (NOL) carry forwards available to offset future federal, foreign and state taxable income, respectively. The NOL carry forwards will begin to expire in 2035, 2017 and 2029 for federal, foreign and state income tax purposes, respectively.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2016 and 2015 are presented below (in thousands):



	Year Ended December 31,
	2016		2015
Deferred tax assets:
Accounts receivable	$	307	$	123
Accrued expenses and other current liabilities		423		145
Unearned revenue		856		436
Stock-based compensation		2,280		1,812
Other		616		442
Net operating loss carry forwards		27,225		13,814
Gross deferred tax assets		31,707		16,772
Valuation allowance		-		(15)
Net deferred tax assets		31,707		16,757

Deferred tax liabilities:
Intangible assets		2,946		29
Depreciation and amortization		73,305		56,478
Foreign deferred tax liabilities		760		2,664
Deferred subpart F income		6,500		5,790
Gross deferred tax liabilities		83,511		64,961
Net deferred tax liability	$	51,804	$	48,204

The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company’s management considers the projected future taxable income for making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, the Company’s management believes it is more likely than not the Company will realize the benefits of the deductible differences noted above.

Tax attributes related to stock option windfall deductions are not recorded until they result in a reduction of cash tax payable. Our federal and state net operating losses from windfall deductions were excluded from our deferred tax balance as of December 31, 2016. As of December 31, 2016, the benefit of the federal and state net operating loss deferred tax assets of $1.0 million and less than $0.1 million, respectively, will be recorded to additional paid-in capital when they reduce cash tax payable.

Deferred income taxes have not been provided on the undistributed earnings of foreign subsidiaries. As of December 31, 2016, the amount of such earnings totaled approximately $264.9 million. These earnings have been permanently reinvested and the Company does not plan to initiate any action that would precipitate the payment of income taxes thereon. The amount of income taxes that would have resulted had such earnings been repatriated is not practically determinable.

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



Balance at January 1, 2015	$	188
Increases related to current year tax positions		119
Decreases related to lapsing of statute		(87)
Balance at December 31, 2015		220
Increases related to current year tax positions		77
Decreases related to lapsing of statute		(31)
Balance at December 31, 2016	$	266

The unrecognized tax benefits of approximately $0.3 million at December 31, 2016, if recognized, would reduce the Company’s effective tax rate. The Company accrued potential interest and penalties of less than $0.1 million related to unrecognized tax benefits for each of the years ended December 31, 2016 and 2015.

The Company’s tax returns, including the United States, California, New Jersey and South Carolina, are subject to examination by the tax authorities. The Company accrues for unrecognized tax benefits based upon its best estimate of the additional taxes, interest and penalties expected to be paid. These estimates are updated over time as more definitive information becomes available from taxing authorities, completion of tax audits, expiration of statute of limitations, or upon occurrence of other events.

The Company does not believe the total amount of unrecognized tax benefit as of December 31, 2016 will increase or decrease significantly in the next twelve months. As of December 31, 2016, the statute of limitations for tax examinations in the United States has not expired for the years ended December 31, 2013 through 2015 and California, New Jersey and South Carolina have not expired for tax returns filed for the years ended December 31, 2012 through 2015.