11. Income Taxes

Income tax expense from continuing operations and effective income tax rates consist of the following:


	December 31,
	2016			2015			2014
Current taxes:
Domestic	$	4,944		$	16,036		$	8,424
Foreign		27			254			—
		4,971			16,290			8,424
Deferred taxes:
Domestic		(1,830)			1,656			2,238
Foreign		1			(100)			(371)
		(1,829)			1,556			1,867
Income tax expense	$	3,142		$	17,846		$	10,291
Income before income taxes
Domestic	$	7,437		$	50,692		$	27,984
Foreign		1,104			(1,585)			(1,721)
Total	$	8,541		$	49,107		$	26,263
Effective income tax rate		36.8	%		36.3	%		39.1	%

The effective income tax rate differs from the U.S. federal statutory income tax rate as follows:


	December 31,
	2016		2015		2014
Tax at federal statutory rate	35.0	%	35.0	%	35.0	%
Permanent differences	(2.9)		(1.6)		(2.9)
State income taxes	6.3		2.0		3.1
Foreign taxes	(1.9)		0.3		2.5
Other	0.3		0.6		1.4
Effective income tax rate	36.8	%	36.3	%	39.1	%

The components of the deferred tax assets and liabilities are as follows:


	December 31,
	2016		2015
Deferred tax assets:
Accrued expense		1,089		927
Unrealized foreign exchange loss		1,426		652
Net operating loss carryforward		3,066		1,999
Deferred financing costs		1,355		1,564
Stock compensation		1,166		322
Other		555		486
Total gross deferred tax assets		8,657		5,950
Valuation allowance		(4,930)		(3,717)
Net deferred tax assets		3,727		2,233
Deferred tax liabilities:
Plant, equipment and leasehold improvements		(6,393)		(5,881)
Intangible assets		(17,159)		(18,962)
Prepaid expenses		(1,436)		(1,463)
Total gross deferred tax liabilities		(24,988)		(26,306)
Net deferred tax liabilities	$	(21,261)	$	(24,073)

The net deferred tax liabilities are reflected in the consolidated balance sheets as follows:


	December 31,
	2016		2015
Long-term deferred tax liabilities	$	(21,261)	$	(24,073)

The net change in the valuation allowance was an increase of $1,213 and a decrease $403 for the years ended December 31, 2016 and 2015, respectively. The change in the year ended December 31, 2016 related to foreign currency exchange rate fluctuations and changes in net operating losses of foreign locations.

The Company has potential tax benefits associated with $3,066 of foreign operating loss carryforwards, which expire at various dates from 2024 through 2032. Due to the uncertainty of being able to recognize these loss carryforwards, the Company has provided a valuation allowance of 100% of the tax benefit.

At December 31, 2016, no provision has been made for U.S. federal and state taxes on cumulative foreign earnings from CPI Card Group-Europe Limited operations of approximately $3,810, which are expected to be indefinitely reinvested outside of the U.S. The U.S. deferred tax liability associated with indefinitely reinvested earnings and profits is not material.

The Company has analyzed its filing positions in all of the jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions, and based upon its review, determined there are no uncertain tax positions as of December 31, 2016 and 2015.

The Company is generally subject to potential federal and state examinations for the tax years after December 31, 2013 for federal purposes and December 31, 2012 for state purposes.