Note 9. Income Taxes

The components of loss before provision for income taxes were as follows (in thousands):

	Years Ended December 31,
		2016			2015			2014
United States	$	(26,161	)	$	(40,805	)	$	(33,155	)
Foreign		(4,940	)		(93	)		539
Total	$	(31,101	)	$	(40,898	)	$	(32,616	)

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

	Years Ended December 31,
		2016		2015		2014
Current:
Federal	$	—	$	—	$	—
State		7		21		—
Foreign		445		88		256
Total		452		109		256
Deferred:
Federal		—		—		—
State		—		—		—
Foreign		—		—		—
Total		—		—		—
Provision for income taxes	$	452	$	109	$	256

The items accounting for the difference between income taxes computed at the federal statutory income tax rate of 34% and the provision for income taxes consisted of the following (in thousands):

	Years Ended December 31,
		2016			2015			2014

Income tax benefit at statutory rate	$	(10,574	)	$	(13,832	)	$	(11,089	)
State taxes, net of federal benefit		(213	)		14			10
Impact of foreign income taxes		2,124			119			73
Stock-based compensation		2,340			1,629			1,043
Foreign exchange gain		(1,920	)		—			—
Change in valuation allowance		9,510			12,673			10,434
Research and development credits		(764	)		(674	)		(408	)
Other		(51	)		180			193
	$	452		$	109		$	256

At December 31, 2016, the Company has U.S. net operating loss carryforwards of $165.5 million, which may be used to offset future taxable income. The carryforwards expire in years ranging from 2027 through 2035. Carryforwards of net operating losses are subject to possible limitation should a change in ownership of the Company occur, as defined by Internal Revenue Code Section 382.

Approximately $5.3 million of net operating loss carryforwards relate to tax deductible stock-based compensation in excess of amounts recognized for financial statement purposes. To the extent that net operating loss carryforwards, if realized, relate to excess stock-based compensation, the resulting tax benefits will be recorded to stockholders’ equity (deficit), rather than to results of operations.

The Company’s net deferred tax assets consisted of the following at December 31, 2016 and 2015 (in thousands):

	December 31,
Deferred tax assets (liabilities)		2016			2015

Deferred tax assets:
Net operating loss carryforwards	$	58,457		$	52,145
Deferred revenue		372			80
Tax credits		2,829			2,065
Accrued payroll		935			1,071
Accrued expenses not currently deductible		2,121			2,171
Non-qualified stock options		3,164			1,716
Depreciation and amortization		128			—
Other		46			128
Gross deferred assets		68,052			59,376
Valuation allowance		(68,052	)		(58,542	)
Total deferred tax assets, net of valuation allowance		—			834
Deferred tax liabilities:
Depreciation and amortization		—			(399	)
Unrealized foreign currency gain/loss		—			(435	)
Total deferred tax liabilities		—			(834	)
Net deferred assets	$	—		$	—

The Company has established a full valuation allowance equal to the net deferred tax asset balance due to the uncertainty of future realization of the net deferred tax assets.

The net change in the total valuation allowance was as follows (in thousands):

	December 31,
	2016			2015			2014

Balance at beginning of period	$	(58,542	)	$	(45,011	)	$	(34,357	)
Tax valuation increase		(9,779	)		(14,375	)		(10,975	)
Tax valuation decrease		269			844			321
Balance at end of period	$	(68,052	)	$	(58,542	)	$	(45,011	)

The calculation of the Company’s tax obligations involves dealing with uncertainties in the application of complex tax laws and regulations. ASC 740, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company has assessed its income tax positions and recorded tax benefits for all years subject to examination, based upon its evaluation of the facts, circumstances and information available at each period end. For those tax positions where the Company has determined there is a greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is determined there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized.

Although the Company believes that it has adequately reserved for its uncertain tax positions, it can provide no assurance that the final tax outcome of these matters will not be materially different. As the Company expands internationally, it will face increased complexity, and its unrecognized tax benefits may increase in the future. The Company makes adjustments to its reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made.

The total balance of unrecognized gross tax benefits was as follows (in thousands):

	Years Ended December 31,
		2016		2015		2014
Unrecognized tax benefits at beginning of year	$	2,065	$	1,391	$	255
Additions for tax positions in prior years		—		—		408
Additions for tax positions in the current year		764		674		728
Unrecognized tax benefits at end of year	$	2,829	$	2,065	$	1,391

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions, and internationally in the United Kingdom, Germany, Denmark, Netherlands, France, Canada, Australia and Singapore. As of December 31, 2016, 2015 and 2014, there is no accrued interest or penalties associated with income taxes recorded in the consolidated financial statements. The 2010 through 2016 tax years are open to review by taxing authorities.