Income Taxes

Income (loss) before income taxes was as follows for the indicated periods:



	Year ended December 31,
	2016			2015			2014

United States	$	(24,452	)	$	(20,758	)	$	(5,488	)
Foreign	(7,019		)	(7,777		)	10,646
Income (loss) before income taxes	$	(31,471	)	$	(28,535	)	$	5,158

Income tax expense was comprised of the following for the indicated periods:



	Year ended December 31,
	2016			2015			2014

Current:
Federal	$	(4,231	)	$	(3,742	)	$	3,854
State	116			(56		)	729
Foreign	688			1,732			2,865
Total current	(3,427		)	(2,066		)	7,448

Deferred:
Federal	3,020			6,224			(4,284		)
State	545			4,417			(822		)
Foreign	(36		)	(24		)	(201		)
Total deferred	3,529			10,617			(5,307		)

Income tax expense	$	102		$	8,551		$	2,141

The following table reconciles income tax expense and rate based on the U.S. statutory rate to the Company’s income tax expense for the indicated periods:



	Year ended December 31,
	2016					2015					2014
	$			%		$			%		$			%

Income tax expense (benefit) based on the U.S. statutory rate	$	(11,015	)	35.0	%	$	(9,987	)	35.0	%	$	1,805		35.0	%
State income taxes, net of federal tax benefit	(544		)	1.7		(483		)	1.7		(60		)	(1.2	)
Permanent items	243			(0.8	)	247			(0.9	)	658			12.8
Goodwill impairment	—			—		4,020			(14.1	)	—			—
Effect of foreign operations	(431		)	1.4		304			(1.1	)	(809		)	(15.7	)
Net change in uncertain tax positions	—			—		(201		)	0.7		—			—
Change in valuation allowance -deferred tax assets	11,047			(35.1	)	14,963			(52.4	)	70			1.4
Share-based compensation	633			(2.0	)	113			(0.4	)	563			10.9
Other	169			(0.5	)	(425		)	1.5		(86		)	(1.7	)
Income tax expense	$	102		(0.3	)	$	8,551		(30.0	)	$	2,141		41.5

The tax effects of temporary differences that give rise to the Company’s deferred tax accounts were as follows for the indicated periods:



	December 31,
	2016			2015

Deferred tax assets:
Accrued compensation	$	7,655		$	7,552
Reserves and accruals	3,870			3,475
Inventory	—			1,497
Intangible asset amortization	—			366
Loss and credit carryforwards	20,557			11,432
Total gross deferred tax assets	32,082			24,322
Less: Valuation allowances	31,171			20,124
Net total deferred tax assets	911			4,198

Deferred tax liabilities:
Property and equipment depreciation	1,373			1,868
Intangible asset amortization	1,082			—
Other	222			632
Total deferred tax liabilities	2,677			2,500

Net deferred tax asset (liability)	$	(1,766	)	$	1,698

As of December 31, 2016, the Company had Federal net operating loss carry forwards of $27.4 million, which expire in 2036.

As of December 31, 2016, the Company had state net operating loss carry forwards aggregating $124.4 million, which expire at various dates from 2017 through 2036.

As of December 31, 2016, the Company had foreign tax credits of $2.5 million, which expire at various dates from 2018 through 2026.

As of December 31, 2016, the Company had foreign net operating losses of $1.4 million, the majority of which can be carried forward indefinitely.

In connection with the sale of Anders, the Company will take a $19.1 million worthless stock deduction associated with CDI AndersElite Limited on its 2016 U.S. federal income tax return, which will be treated as an ordinary loss for tax purposes. This loss will result in a deferred tax asset of $7.4 million, which can be carried forward for up to 20 years and used against future taxable income. There is no net income tax benefit related to this item due to the full valuation allowance against federal deferred tax assets.

A valuation allowance has been recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. The valuation allowance at December 31, 2016 and December 31, 2015 was $31.2 million and $20.1 million, respectively.

In 2016, the Company added $11.0 million to the valuation allowance, of which $11.4 million increase related to the Company's federal deferred tax assets, $1.5 million increase related to state tax benefits, $1.8 million increase related to the Canadian capital loss and $3.7 million reduction related to the disposition of Anders.

In 2015, the Company added $15.0 million to the valuation allowance, of which $11.3 million related to the Company's federal deferred tax assets, $3.5 million related to state tax benefits and $0.2 million related to foreign deferred tax assets due to cumulative tax losses.

In 2014, the Company released $0.3 million of valuation allowance due primarily to foreign exchange movement.

As of December 31, 2016, the Company had no material unrecognized tax benefits that, if recognized, would impact the effective tax rate.

The Company files a consolidated U.S. federal income tax return and files state and foreign income tax returns in various jurisdictions as required. The U.S. federal income tax return is open for examination back to 2013. State and foreign income tax returns remain open for examination back to 2011 in major jurisdictions in which the Company operates.

The Company has not recorded incremental deferred income taxes on the undistributed earnings of its foreign subsidiaries because it is management’s intention to reinvest such earnings for the foreseeable future. As of December 31, 2016, the undistributed earnings of the foreign subsidiaries amounted to approximately $23.3 million. The repatriation of overseas earnings by way of dividends or reduction in paid up capital would give rise to the taxation of the unremitted earnings in the United States. We estimate that there is no unrecorded deferred tax liability associated with such repatriation as of December 31, 2016 due to the availability of Federal net operating loss carryforwards and foreign tax credits that are currently subject to a valuation allowance.