Income Taxes

Income Tax Provision (Benefit)

Pretax income (loss) is as follows (in thousands):



	Year Ended December 31,
	2015			2014			2013
Domestic	$	(35,009	)	$	(55,660	)	$	(76,714	)
Foreign	1,407			645			333
Total	$	(33,602	)	$	(55,015	)	$	(76,381	)

The provision (benefit) for federal, state and foreign income taxes was as follows (in thousands):



	Year Ended December 31,
	2015		2014		2013
Current tax provision (benefit):
Federal	$	—	$	—	$	—
State	157		50		79
Foreign	965		1,015		142
Total current tax provision (benefit)	1,122		1,065		221
Deferred tax provision (benefit):
Federal	103		50		(1,025		)
State	26		23		(206		)
Foreign	—		—		—
Total deferred tax expense	129		73		(1,231		)
Provision for (benefit from) income taxes	$	1,251	$	1,138	$	(1,010	)

The 2015 provision for income taxes includes $0.4 million charge related to foreign withholding taxes. The 2014 provision for income taxes includes a $0.5 million charge related to our Israeli tax examination. The 2013 benefit from income taxes includes a $1.4 million tax benefit from the release of valuation allowance on our deferred tax assets related to an acquisition. In connection with the acquisition of StreamOnce, a deferred tax liability was established for the book-tax basis differences related to the non-goodwill intangibles. The net deferred tax liability created an additional source of income to offset our deferred tax assets. The impact on our deferred tax assets and liabilities caused by the acquisition is recorded outside of acquisition accounting.

The reconciliation of the statutory federal income tax rate to the effective tax rate is as follows:



	Year Ended December 31,
	2015		2014		2013
Federal statutory tax rate	(34.0	)%	(34.0	)%	(34.0	)%
State tax	(11.1	)	(6.9	)	(10.5	)
Change in valuation allowance	45.9		40.0		44.0
Permanent differences	5.4		5.3		4.6
Tax credits	(6.2	)	(3.8	)	(4.4	)
Foreign rate impact	(0.6	)	(0.2	)	(0.1	)
Foreign tax withheld at source	1.5		—		—
Other	2.8		1.7		(0.9	)
	3.7	%	2.1	%	(1.3	)%

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of (i) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (ii) operating losses and tax credit carryforwards. The tax effects of significant items comprising our deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2015			2014
Deferred tax assets:
Net operating loss (“NOL”) carryforwards	$	74,486		$	69,176
Accrued expenses, reserves and allowances	940			1,220
Deferred revenue	16,545			16,429
Tax credit carryforwards	12,079			9,580
Deferred rent	320			363
Depreciation	820			—
Amortizable intangibles	203			—
Other	16,333			13,840
Total deferred tax assets	121,726			110,608
Deferred tax liabilities:
Depreciation	—			(1,212		)
Amortizable intangibles	—			(1,678		)
Indefinite lived intangibles	(367		)	(238		)
Other	—			(177		)
Total deferred tax liabilities	(367		)	(3,305		)
Valuation allowance	(121,726		)	(107,540		)
Net deferred taxes	$	(367	)	$	(237	)

The tax benefit of net operating losses, temporary differences and credit carryforwards is recorded as an asset to the extent that we assess that realization is more likely than not. Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. Due to our history of operating losses, we currently believe that the recognition of the deferred tax assets arising from the above mentioned future tax benefits is not more likely than not to be realized and, accordingly, have provided a full valuation allowance.

Certain other information regarding our deferred income taxes was as follows:



(In thousands)	Year Ended December 31,
	2015		2014		2013
Increase in valuation allowance	$	14,186	$	21,463	$	32,692



(In millions)	December 31,
	2015		2014
Federal and state NOL carryforwards	$	250.2	$	238.8
Tax credit carryforwards	12.9		10.3

These carryforwards expire between 2016 and 2035.

Approximately $74.7 million of our NOL carryforwards at December 31, 2015 were generated as a result of excess tax deductions related to exercises of stock options and disqualifying dispositions. If utilized, this portion of our carryforwards, as tax effected, will be accounted for as a direct increase to contributed capital rather than as a reduction of that year’s provision for income taxes. NOL carryforwards created by excess tax benefits from the exercise of stock options are not recorded as deferred tax assets. Accordingly, the deferred tax assets related to the net operating losses were reduced by $31.6 million and $31.1 million at December 31, 2015 and 2014, respectively.

Unrecognized Tax Benefits

We recognize the effect of income tax positions only if those positions are more likely than not of being sustained. We recognize penalties and interest related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2015 and 2014, the accrued penalties or interest recorded in the consolidated financial statements were insignificant. Only $0.4 million of the unrecognized tax benefits would currently have an impact on the effective tax rate if recognized. The following is a reconciliation of our unrecognized tax benefits (in thousands):



	Year Ended December 31,
	2015			2014			2013
Beginning balance	$	567		$	409		$	737
Additions based on tax positions related to the current year	185			240			205
Reductions based on tax positions related to the current year	(74		)	—			—
Additions based on prior year tax positions	—			36			151
Reductions for tax positions in prior years	(223		)	(118		)	(212		)
Settlements	—			—			(472		)
Ending balance	$	455		$	567		$	409

We are subject to income taxes in U.S. federal and various state, local and foreign jurisdictions. Generally, we are no longer subject to U.S. federal, state and local tax examinations for tax years ended before December 31, 2011. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where NOLs or tax credits were generated and carried forward, and make adjustments up to the amount of the NOL or credit carryforward. At December 31, 2015, we were not under exam in any jurisdictions. There could be a significant impact to our uncertain tax positions over the next twelve months depending on the outcome of any audit. We do not anticipate that unrecognized tax benefits will decrease relating to expiring statutes of limitation by the end of 2016.

Unrepatriated Foreign Earnings

We did not repatriate any earnings of our foreign subsidiaries in 2015, 2014 or 2013. We plan to indefinitely reinvest the earnings of all of our foreign subsidiaries overseas. Should we plan to repatriate any foreign earnings in the future, we will be required to establish an income tax liability and recognize additional income tax expense related to such earnings. As of December 31, 2015, we had $2.5 million of unrepatriated foreign earnings.