Income Taxes

The following are the domestic and foreign components of the Company’s loss before income taxes for the years ended December 31, 2015, 2014, and 2013:



	Year Ended
	December 31, 2015			December 31, 2014			December 31, 2013

	(in thousands)
Domestic	$	15,723		$	(19,081	)	$	(9,535	)
International	(19,862		)	580			533
Loss before income taxes	$	(4,139	)	$	(18,501	)	$	(9,002	)

The following are the components of the provision (benefit) for income taxes for the years ended December 31, 2015, 2014, and 2013:



	Year Ended
	December 31, 2015			December 31, 2014			December 31, 2013

	(in thousands)
Current:
Federal	$	196		$	—		$	—
State	90			16			58
Foreign	367			308			189
Total current provision	653			324			247
Deferred:
Federal	—			(10		)	9
State	1			(1		)	1
Foreign	(5,215		)	(141		)	(10		)
Total deferred benefit	(5,214		)	(152		)	—
Total provision (benefit) for income taxes	$	(4,561	)	$	172		$	247

The Company recorded an income tax benefit for the year ended December 31, 2015 of $4.6 million and an income tax expense for the years ended December 31, 2014 and 2013 of $0.2 million and $0.2 million, respectively. The tax benefit for the year ended December 31, 2015 is the result of the net operating losses generated by the Canadian operations, which include acquisitions from the last two years.

Set forth below is a reconciliation of the components that caused the Company’s provision (benefit) for income taxes to differ from amounts computed by applying the U.S. Federal statutory rate of 34.0% for the years ended December 31, 2015, 2014, and 2013:



	Year Ended
	December 31, 2015		December 31, 2014		December 31, 2013
U.S. federal statutory income tax rate	34.0	%	34.0	%	34.0	%
State income taxes, net of federal benefit	(1.4	)%	(0.1	)%	(0.4	)%
Foreign income at other than U.S. rates	(31.0	)%	0.8	%	—	%
Stock-based compensation expense	(31.5	)%	(4.4	)%	(10.0	)%
Meals and entertainment	(14.2	)%	(1.7	)%	(1.3	)%
Acquisition and related items	(8.6	)%	(0.1	)%	—	%
Non-deductible gifts	(0.8	)%	(0.1	)%	(0.2	)%
Research and development tax credits	42.3	%	4.7	%	5.6	%
Tax effect of intercompany financing	11.2	%	—	%	—	%
Other permanent items	(0.5	)%	(1.6	)%	(0.5	)%
Provision to return adjustments	(9.4	)%	(0.2	)%	—	%
Change in valuation allowance	120.1	%	(32.2	)%	(29.9	)%
Effective income tax rate	110.2	%	(0.9	)%	(2.7	)%

Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities as of December 31, 2015 and 2014:



	December 31, 2015			December 31, 2014

	(in thousands)
Deferred Tax Assets:
Accrued liabilities	$	1,777		$	649
Stock-based compensation	7,737			6,401
Net operating loss carryovers	18,609			23,241
Research tax credit carryovers	7,931			4,596
Other	1,926			1,357
Total deferred tax assets	37,980			36,244
Less valuation allowance	(29,255		)	(32,481		)
Deferred tax assets, net of valuation allowance	8,725			3,763
Deferred Tax Liabilities:
Fixed assets	(2,630		)	(777		)
Intangible assets	(12,198		)	(3,036		)
Other	—			—
Total deferred tax liabilities	(14,828		)	(3,813		)
Net deferred tax liability	$	(6,103	)	$	(50	)

The change in valuation allowance for the year ended December 31, 2015, 2014, and 2013 was $3.2 million, $8.5 million and $1.1 million, respectively.

At December 31, 2015, the Company had U.S. federal net operating loss carryforwards, or NOLs, of approximately $59.8 million, which will begin to expire in 2027. At December 31, 2015, the Company had state NOLs of approximately $54.8 million, which will begin to expire in 2027. At December 31, 2015, the Company had foreign NOLs of approximately $13.7 million, which will begin to expire in 2026. At December 31, 2015, the Company had federal research and development tax credit carryforwards, or credit carryforwards, of approximately $6.1 million, which will begin to expire in 2027. At December 31, 2015, the Company had state research and development tax credits of approximately $5.1 million, which carry forward indefinitely. At December 31, 2015, the Company had foreign research tax credits of approximately $0.5 million, which carry forward indefinitely.

Utilization of certain NOLs and credit carryforwards may be subject to an annual limitation due to ownership change limitations set forth in the Internal Revenue Code of 1986, as amended, or the Code, and comparable state income tax laws. Any future annual limitation may result in the expiration of NOLs and credit carryforwards before utilization. A prior ownership change and certain acquisitions resulted in the Company having NOLs subject to insignificant annual limitations.

The Company recognizes excess tax benefits associated with stock-based compensation to stockholders’ deficit only when realized based upon applying a with-and-without approach. At December 31, 2015, the Company had approximately $7.5 million of unrealized excess tax benefits associated with stock-based compensation.

At December 31, 2015, unremitted earnings of the subsidiaries outside of the United States were approximately $1.5 million, on which no U.S. taxes had been paid. The Company’s intention is to indefinitely reinvest these earnings outside the United States. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. The amounts of such tax liabilities that might be payable upon repatriation of foreign earnings, after consideration of corresponding foreign tax credits, are not material.

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



	Amount
	(in thousands)
Balance at January 1, 2013	$	1,067
Increases related to current year tax positions	408
Decreases related to prior year tax positions	(21		)
Balance at December 31, 2013	1,454
Increases related to current year tax positions	679
Decreases related to prior year tax positions	(2		)
Balance as of December 31, 2014	2,131
Increases related to current year tax positions	2,194
Decreases related to prior year tax positions	—
Balance as of December 31, 2015	$	4,325

Interest and penalties related to the Company’s unrecognized tax benefits accrued at December 31, 2015, 2014, and 2013 were not material.

Due to the net operating loss carryforwards, the Company's United States federal and state returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception. For Australia, Brazil, Canada, France, Germany, Italy, Japan, Singapore and the United Kingdom, all tax years remain open for examination by the local country tax authorities.

The Company does not expect its uncertain income tax positions to have a material impact on its consolidated financial statements within the next twelve months.