12. Income Taxes

The provision for income taxes attributable to continuing operations is based upon loss from continuing operations before provision for income taxes as follows (in thousands):



	Year ended December 31,
	2016			2015			2014
Domestic	$	(4,632	)	$	(11,932	)	$	(15,592	)
Foreign	711			(1,251		)	192
	$	(3,921	)	$	(13,183	)	$	(15,400	)

There were no income taxes attributable to discontinued operations in any of the periods presented.

The provision for income taxes consists of the following (in thousands):



	Year ended December 31,
	2016		2015		2014
Federal:
Current	$	—	$	—	$	—
Deferred	—		—		—
Total federal provision	—		—		—
State:
Current	18		20		16
Deferred	—		—		—
Total state provision	18		20		16
Foreign:
Current	164		30		195
Deferred	—		—		—
Total foreign provision	164		30		195
Total income tax expense	$	182	$	50	$	211

The provision for income taxes differs from the amount estimated by applying the statutory Federal income tax rate to loss before taxes as follows (in thousands):



	Year ended December 31,
	2016			2015			2014
Federal tax at statutory rate of 35%	$	(1,372	)	$	(4,615	)	$	(5,390	)
State taxes, net of federal benefit	(171		)	(634		)	(577		)
U.S.-Foreign rate differential	(96		)	480			100
Change in Valuation Allowance	939			3,072			4,115
Research and Development credits	233			175			357
Permanent items	657			1,566			1,560
Others	(8		)	6			46
Total income tax expense	$	182		$	50		$	211

As of December 31, 2016 and 2015, a valuation allowance has been recorded against 100% of the net deferred tax asset. A valuation allowance is recognized if, based on the weight of the available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realizable in a particular tax jurisdiction. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset. The Company determined that it is more likely than not that it will not realize a benefit from its United States deferred tax assets based on historical cumulative losses incurred in the United States. Therefore, a valuation allowance has been maintained on all deferred tax assets. The components of the net deferred income tax asset are as follows (in thousands):



		Year ended December 31,
		2016			2015
Deferred tax assets:
	Net operating loss carry forwards	$	100,378		$	83,522
	Tax credit carry forwards	19,248			18,940
	Fixed and intangible assets	597			868
	Capitalized research and development costs	58			58
	Stock based compensation and other reserves and allowances	3,445			3,828
	Gross deferred income tax assets	123,726			107,216
	Valuation allowance	(123,726		)	(107,216		)
	Net deferred income tax assets	$	—		$	—

As of December 31, 2016, part of the Company's valuation allowance on deferred tax assets pertains to certain tax credits and net operating loss carry forwards. In the future, it will reduce the valuation allowance associated with these credits and losses upon the earlier of the period in which it utilizes them to reduce the amount of income tax it would otherwise be required to pay on its income tax returns, or when it becomes more likely than not that the deferred tax assets are realizable. In addition, the Internal Revenue Code of 1986, as amended, contains provisions that limit the net operating loss and credit carry forwards available for use in any given period upon the occurrence of certain events, including a significant change in ownership interests. The Company performed an analysis of the ownership changes in 2016. Based on the analysis, the Company did not experience any ownership change that would limit its net operating loss and credit carry forwards. The Company's net operating loss and credit carry forwards may be limited if ownership changes occur in future periods.

In general, a corporation that undergoes an "ownership change" under Section 382 of the Internal Revenue Code is subject to limitations on its ability to utilize its pre-change net operating loss carry forwards (NOLs) to offset future taxable income and its ability to utilize tax credit carry forwards. As of December 31, 2016, the Company had net operating loss carry forwards of $256.8 million for federal income tax reporting purposes and $118.5 million for state income tax reporting purposes, which expire at various dates through 2036. In addition, as of December 31, 2016, the Company had approximately $11.2 million and $16.2 million of tax credit carry forwards for increased research expenditures for federal and California purposes, respectively. The federal research tax credits will expire at various dates if not utilized by 2036 and the state tax credit can be carried over indefinitely. In accordance with current Internal Revenue Code rules, federal net operating loss carry forwards must be utilized in full before federal research and development tax credits can be used to offset current tax liabilities. As a result, depending on the Company's future taxable income in any given year, some or all of the federal research tax credits, as well as portions of the Company's federal and state net operating loss carry forwards, may expire before being utilized.

Amounts held by foreign subsidiaries are generally subject to United States income taxation on repatriation to the United States. The Company currently intends to permanently reinvest its undistributed earnings from its foreign subsidiaries outside the United States and United States income taxes have not been provided on cumulative total earnings of $2.3 million. It is not practicable to determine the income tax liability that might be incurred if these earnings were to be distributed.

The following is a rollforward of the Company's unrecognized tax benefits related to uncertain tax positions for the years ended December 31, 2016 and 2015 (in thousands):



	Year ended December 31,
	2016			2015
Balance as of the beginning of the year	$	9,066		$	1,359
Tax positions related to current year:
Additions	152			147
Reductions	(14		)	(18		)
Tax positions related to prior years:
Additions	80			7,991
Reductions	(4		)	(28		)
Settlements	—			—
Lapses in statute of limitations	(64		)	(385		)
Balance as of the end of the year	$	9,216		$	9,066

Included in the balance of total unrecognized tax benefits at December 31, 2016 are potential benefits of $364,000, which if recognized, would affect the effective rate on income from continuing operations.

On December 31, 2016, the Company had accrued interest and penalties related to the uncertain tax benefits of approximately $62,000. During 2016, the Company decreased the prior year balance by $12,000 due to lapses in statutes of limitations in certain foreign jurisdictions. During 2015 and 2014, the Company decreased the prior year balance by $25,000 and $35,000, respectively, due to foreign currency fluctuations, lapses in statutes of limitations, and changes in methodology. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.

The Company is subject to taxation in the United States and various state and foreign jurisdictions. In the United States, the tax years from 1997 remain open to examination by federal and most state tax authorities due to certain net operating loss and credit carryforward positions. In the foreign jurisdictions, the number of tax years open to examination by local tax authorities ranges from three to six years.

As discussed in Note 1, the Company has elected to early adopt ASU 2016-09. The net operating loss carryover has been increased by the amount of windfall, which is offset in full by the valuation allowance.