15.Income Taxes

Income (loss) before income taxes consists of the following components (in thousands):

	Successor			Predecessor
	August 1, 2015 Through December 31, 2015			January 1, 2015 Through July 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Domestic	$	(34,139	)	$	29,053		$	122,347		$	72,660
Foreign	470			(32,261		)	(53,091		)	(20,063		)

	$	(33,669	)	$	(3,208	)	$	69,256		$	52,597

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

	Successor			Predecessor
	August 1, 2015 Through December 31, 2015			January 1, 2015 Through July 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013
Current:
Federal	$	—		$	14,370		$	49,918		$	31,629
State and Local	8			305			1,085			696
Foreign	646			392			135			1,530

	654			15,067			51,138			33,855

Deferred:
Federal	(18,308		)	(4,115		)	(7,808		)	(7,025		)
State and Local	(789		)	(57		)	(110		)	(98		)
Foreign	(789		)	(46		)	(1,821		)	(1,591		)

	(19,886		)	(4,218		)	(9,739		)	(8,714		)

(Benefit) provision for income taxes	$	(19,232	)	$	10,849		$	41,399		$	25,141

A reconciliation of income tax expense at the U.S. Federal statutory income tax rate to actual income tax provision is as follows (in thousands):

	Successor			Predecessor
	August 1, 2015 Through December 31, 2015			January 1, 2015 Through July 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013

Tax at Statutory Rate	$	(11,785	)	$	(1,123	)	$	24,240		$	18,410
State income taxes, net of federal tax benefit	(508		)	141			596			354
Effect of Foreign Items	(411		)	2,315			4,017			(1,516		)
Valuation Allowance	(2,004		)	9,321			12,878			8,477
Tax Incentives	(34		)	—			(332		)	(584		)
Warrants	(4,557		)	—			—			—
Other	67			195			—			—

(Benefit) provision for income taxes	$	(19,232	)	$	10,849		$	41,399		$	25,141

Income tax expense for the five months ended December 31, 2015, seven months ended July 31, 2015, and fiscal years 2014 and 2013 include certain discrete tax items for changes in valuation allowances, foreign effective rate items and other rate modifying items. These items total ($19.2 million), $10.8 million, $41.4 million, and $25.1 million in 2015 (Successor), 2015 (Predecessor), 2014, and 2013, respectively.

For the five months ended December 31, 2015, the discrete items include $4.6 million of benefit recorded for the non-taxable marked to market gains from Private Placement Warrants. In addition, the Company recorded a current period tax benefit of $2.0 million for changes in valuation allowances on certain tax attributes, including net operating losses. This change in valuation allowance followed the purchase of the AgroFresh business on July 31, 2015, since the Company now estimates that it will be able to realize its deferred tax assets in the U.S.

The tax rate for the seven months ended July 31, 2015 was unfavorably impacted by the increase of valuation allowances ($9.3 million) primarily in Canada and South Africa and by losses in multiple foreign jurisdictions with tax rates less than 35% ($2.3 million).

The tax rate for 2014 was unfavorably impacted by the increase of valuation allowances ($12.9 million) primarily in Australia, Brazil, and France and by losses in multiple foreign jurisdictions with tax rates less than 35% ($4.0 million).

The tax rate for 2013 was unfavorably impacted by the increase of valuation allowance due to losses in multiple foreign jurisdictions ($8.4 million) primarily in Argentina, Italy, and France. The tax rate was favorably impacted by earnings outside the U.S., primarily in Switzerland ($1.5 million).

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	Successor			Predecessor
	December 31, 2015			December 31, 2014
Deferred Tax Assets:
Intangible assets other than goodwill	$	3,788		$	—
Pension and other retiree obligations	425			—
Inventory	2,070			—
Other Accruals and Reserves	1,132			2,479
Loss and Credit Carryforwards	12,991			31,217
Other	816			2,247

Gross Deferred Tax Assets	21,222			35,943
Valuation Allowance	(9,111		)	(27,813		)

Net Deferred Tax Asset	12,111			8,130

Liabilities:
Intangible assets other than goodwill	—			(31,637		)
Property, Plant and Equipment	(118		)	—

Total Deferred Tax Liabilities	(118		)	(31,637		)

Net Deferred Tax Asset / (Liability)	$	11,993		$	(23,507	)

The Company makes significant judgments regarding the realizability of its deferred tax assets (principally net operating losses). The carrying value of deferred tax assets is based on the Company’s assessment that it is more likely than not that the Company will realize these assets after consideration of all available positive and negative evidence.

Gross operating loss carryforwards amounted to $2.6 million for foreign jurisdictions, $33.5 million for U.S. federal, and $6.5 million for U.S. States at December 31, 2015. These operating loss carryforwards related to the 2013, 2014 and current 2015 tax periods. At December 31, 2015, none of the operating loss carryforwards were subject to expiration in 2015 through 2020. The operating loss carryforwards expiring in years 2022 through 2026 make up $0.1 million of the recorded deferred tax asset. The operating loss carryforwards expiring in years 2034 through 2035 make up $12.1 million of the recorded deferred tax asset. The remaining deferred tax asset relating to operating loss carryforwards of $0.5 million have an indefinite expiration. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.

As of December 31, 2015, a component of the Company’s deferred tax assets was the result of U.S. NOL and Section 195(b) Start-up expenditures to be amortized in future periods. A valuation allowance of $5.8 million was recorded against its gross deferred tax asset balance as of July 31, 2015. For the five-month period ended December 31, 2015, the Company recorded a net valuation allowance release of $2.0 million, on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized.

There are tax credits in the U.S. for foreign taxes and research and development expenditures that were created in 2015. These credits are $0.3 million and less than $0.1 million, respectively. They will expire beginning in 2025 and 2035, respectively.

U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of the investments in foreign subsidiaries that is indefinitely reinvested outside the United States. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. There is not a gross temporary difference as of December 31, 2015, since the tax basis of investments in foreign subsidiaries is in excess of the financial reporting basis.

During November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”, which simplifies the presentation of deferred income taxes. This ASU requires that deferred tax assets and liabilities be classified as non-current in a statement of financial position. We early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. Adoption of this ASU resulted in a reclassification of our net current deferred tax asset to a net non-current deferred tax asset in our Consolidated Balance Sheet as of December 31, 2015. No prior periods were retrospectively adjusted.

Uncertain Tax Positions

Interest and penalties associated with uncertain tax positions are recognized as components of the “Provision for income taxes.” For the period ended December 31, 2015, no uncertain income tax positions were identified and no uncertain income tax positions were identified in related prior years.