Note 11. Income Taxes

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

	Fiscal Year Ended January 31,
	2014			2015			2016
Domestic	$	(79,588	)	$	(186,922	)	$	(195,019	)
International		1,318			5,028			(17,164	)
Total	$	(78,270	)	$	(181,894	)	$	(212,183	)

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

	Fiscal Year Ended January 31,
	2014		2015		2016
Current:
State		37		56		210
Foreign		162		1,073		2,198
Total		199		1,129		2,408
Deferred:
Foreign		92		208		(839	)
Total provision for income taxes	$	291	$	1,337	$	1,569

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

	Fiscal Year Ended January 31,
	2014			2015			2016
				(in thousands)
Tax at federal statutory rate	$	(26,611	)	$	(61,844	)	$	(72,142	)
State tax, net of federal benefit		32			44			152
Stock-based compensation expense		1,570			5,328			10,866
Research and development tax credits		(1,036	)		(1,999	)		(3,832	)
Foreign rate differential		(194	)		(429	)		7,106
Change in valuation allowance		26,152			60,042			58,979
Other		378			195			440
Provision for income taxes	$	291		$	1,337		$	1,569

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant component of our deferred tax assets and liabilities were as follows:

	January 31,
	2015			2016
	(in thousands)
Deferred tax assets:
Net operating loss carryforwards	$	101,815		$	137,456
Tax credit carryover		6,136			12,406
Accruals and reserves		729			1,921
Deferred revenue		3,538			20,314
Stock-based compensation expense		4,258			12,588
Depreciation and amortization		2,054			3,397
Charitable contribution carryforwards		—			4,380
Total deferred tax assets		118,530			192,462
Deferred tax liabilities:
Deferred commissions		(5,924	)		(11,000	)
Total deferred tax liabilities		(5,924	)		(11,000	)
Valuation allowance		(112,906	)		(180,926	)
Net deferred tax assets (liabilities), net of valuation allowance	$	(300	)	$	536

As of January 31, 2016, the undistributed earnings of $7.3 million from non-U.S. operations held by our foreign subsidiaries are designated as permanently reinvested outside the U.S. Accordingly, no additional U.S. income taxes or additional foreign withholding taxes have been provided thereon. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

As of January 31, 2016, we had net operating loss carryforwards for federal income tax purposes of approximately $392.4 million and state income tax purposes of approximately $402.2 million. These net operating loss carryforwards will expire, if not utilized, beginning in 2028 for federal and state income tax purposes. As of January 31, 2016, approximately $27.7 million of federal net operating loss carryforwards and $30.2 million of state net operating loss carryforwards are related to excess tax benefits from stock-based compensation expense. The tax benefits associated with net operating losses attributed to stock-based compensation expense will be credited to additional paid-in capital when realized.

We had federal and state research and development tax credit carryforwards of approximately $10.0 million and $9.9 million as of January 31, 2016. The federal research and development tax credit carryforwards will expire commencing in 2028, while the state research and development tax credit carryforwards have no expiration date.

Realization of deferred tax assets is dependent on future taxable income, the existence and timing of which is uncertain. Based on our history of losses, management has determined that it is more likely than not that the U.S. deferred tax assets will not be realized, and accordingly has placed a full valuation allowance on the net U.S. deferred tax assets. The valuation allowance increased by $28.8 million, $66.6 million, and $68.0million, respectively, during the fiscal years ended January 31, 2014, 2015 and 2016.

Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

Uncertain Tax Positions

The activity related to the unrecognized tax benefits is as follows:

	Fiscal Year Ended January 31,
	2014			2015		2016
	(in thousands)
Gross unrecognized tax benefits—beginning balance	$	479		$	4,676	$	13,874
Decreases related to tax positions taken during prior years		(10	)		—		(3,969	)
Increases related to tax positions taken during prior years		—			—		35
Increases related to tax positions taken during current year		4,207			9,198		5,530
Gross unrecognized tax benefits—ending balance	$	4,676		$	13,874	$	15,470

As of January 31, 2016, our gross unrecognized tax benefit was approximately $15.5 million and if recognized, would have no impact to the effective tax rate because it would be offset by the reversal of deferred tax assets which are subject to a full valuation allowance.

As of January 31, 2016, we had no current or cumulative interest and penalties related to uncertain tax positions.

It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on our assessment, including experience and complex judgments about future events, we do not expect that changes in the liability for unrecognized tax benefits during the next twelve months will have a significant impact on our consolidated financial position or results of operations.

We file income tax returns in the U.S. federal jurisdiction as well as many U.S. states and foreign jurisdictions. The tax years 2011 to 2013 remain open to examination by the major jurisdictions in which we are subject to tax. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.