INCOME TAXES

The following table reflects income from continuing operations by location, the provision for income taxes and the effective tax rate for fiscal 2016, 2015, and 2014:



	Fiscal
(dollar amounts in thousands)	2016			2015			2014
United States operations	$	(12,600	)	$	4,178		$	7,700
Foreign operations	67,350			33,527			69,433
Income from operations before tax	54,750			37,705			77,133
Income tax expense/(benefit)	7,638			(12,934		)	14,145
Net income	$	47,112		$	50,639		$	62,988

Effective tax rate	14.0		%	(34.3		)%	18.3		%

The following table reflects the provision for income taxes from continuing operations for fiscal 2016, 2015, and 2014:



	Fiscal
(in thousands)	2016			2015			2014
Current:
Federal	$	871		$	1,459		$	843
State	53			76			78
Foreign	21,841			4,707			5,534
Deferred:
Federal	(13,423		)	(20,250		)	5,474
State	12			(10		)	5
Foreign	(1,716		)	1,084			2,211
Provision for income taxes	$	7,638		$	(12,934	)	$	14,145

The following table reflects the difference between the provision for income taxes and the amount computed by applying the statutory federal income tax rate for fiscal 2016, 2015, and 2014:



	Fiscal
(in thousands)	2016			2015			2014
Computed income tax expense based on U.S. statutory rate	$	19,163		$	13,197		$	26,997
Effect of earnings of foreign subsidiaries subject to different tax rates	(7,330		)	(6,103		)	(9,763		)
Benefits from foreign approved enterprise zones	(8,531		)	(5,855		)	(17,423		)
Benefits from research and development tax credits (including prior years)	(2,839		)	(4,090		)	—
Change in permanent reinvestment assertion	(9,696		)	(19,704		)	—
Tax impact on restructuring	4,238			—			—
Tax audit settlement	4,889			—			—
Dividend income	—			—			8,190
Effect of permanent items	(2,274		)	1,822			(298		)
Changes in valuation allowance	3,585			2,634			(1,820		)
Foreign operations (withholding taxes, deferred taxes on unremitted earnings, US taxation of foreign earnings)	4,981			4,904			5,906
Reserve for uncertain tax positions	208			886			131
State income tax expense	996			(1,543		)	2,241
Other, net	248			918			(16		)
Provision for income taxes	$	7,638		$	(12,934	)	$	14,145

Income tax expense for the current year includes approximately $1.8 million, $1.0 million and $1.2 million of taxes payable for deemed distributions from earnings for the years ended October 1, 2016, October 3, 2015 and September 27, 2014, respectively.

In fiscal 2016, the Company restructured its entities resulting in a change in its permanent reinvestment assertion outside the United States. During the year ended October 1, 2016, approximately $9.7 million of deferred tax liability was reversed and recorded as a tax benefit due to the change in its permanent reinvestment assertion. As part of the plan, the Company also recorded restructuring related tax expense of approximately $4.2 million for transfers and exchanges of certain foreign subsidiaries.

We consider the earnings of certain foreign subsidiaries to be permanently reinvested outside the United States. We have not recorded a deferred tax liability for U.S. federal income taxes of approximately $570.9 million of undistributed earnings. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable, with the exception of certain foreign subsidiaries where we continue to retain a deferred tax liability for foreign withholding taxes of approximately $20.0 million, as those earnings may be distributed to its foreign parent company.

Undistributed earnings of approximately $0.4 million are not considered to be permanently reinvested outside the United States. As of October 1, 2016, the Company has provided a deferred tax liability of approximately $0.2 million for withholding taxes associated with future repatriation of earnings for certain subsidiaries to the United States.

The following table reflects the net deferred tax balance, composed of the tax effects of cumulative temporary differences for fiscal 2016 and 2015:



	Fiscal
(in thousands)	2016			2015
Inventory reserves	$	546		$	641
Stock options	647			525
Other accruals and reserves	4,940			3,797
Domestic tax credit carryforwards	8,011			5,035
Net operating loss carryforwards	31,817			32,983
	$	45,961		$	42,981

Valuation allowance	(27,381		)	(23,128		)
Total long-term deferred tax asset (1)	$	18,580		$	19,853

Repatriation of foreign earnings, including foreign withholding taxes	$	20,119		$	27,101
Depreciable assets	9,333			16,735
Total long-term deferred tax liability	$	29,452		$	43,836
Total net deferred tax liability	$	10,872		$	23,983

Reported as
Current deferred tax asset	$	—		$	4,126
Deferred tax asset	16,825			3,230
Current deferred tax liability	—			23
Deferred tax liability	27,697			31,316
Total net deferred tax liability	$	10,872		$	23,983


(1)	Included in other assets on the Consolidated Balance Sheets are deferred tax assets of $16.8 million and $3.2 million as of October 1, 2016 and October 3, 2015, respectively.

As of October 1, 2016, the Company has foreign net operating loss carryforwards of $97.0 million, domestic state net operating loss carryforwards of $176.9 million, domestic federal net operating loss carryforwards of $1.1 million, and tax credit carryforwards of $10.9 million that can reduce future taxable income. These carryforwards can be utilized in the future, prior to expiration of certain carryforwards in fiscal years 2016 through 2035 with the exception of certain credits and foreign net operating losses that have no expiration date. Pennsylvania tax law limits the time during which carryforwards may be applied against future taxes and also limits the utilization of domestic state net operating loss carryforwards to $5.0 million annually, but recent developments may change this amount in future years. The Company has recorded a valuation allowance against domestic state tax attributes and certain foreign tax attributes.

The Company continues to evaluate the realizability of all of its net deferred tax assets at each reporting date and records a benefit for deferred tax assets to the extent it has projected future income or deferred tax liabilities that provide a source of future income to benefit the deferred tax asset. As a result of this analysis, the Company continues to maintain a valuation allowance against a majority of its state deferred tax assets as the realization of these assets is not more likely than not given uncertainty of future earnings in these jurisdictions.

The beginning and ending balances of the Company's unrecognized tax benefits are reconciled below for fiscal 2016, 2015, and 2014:



	Fiscal
(in thousands)	2016			2015			2014
Unrecognized tax benefit, beginning of year	$	7,101		$	7,192		$	6,869
Additions for tax positions, current year	519			—			—
Additions for tax positions, prior year	827			5,140			717
Reductions for tax positions, prior year	(994		)	(5,231		)	(394		)
Unrecognized tax benefit, end of year	$	7,453		$	7,101		$	7,192

Approximately $6.2 million of the $7.5 million of unrecognized tax benefit as of October 1, 2016, if recognized, would impact the Company's effective tax rate.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. There were no additional accruals of interest expense on various uncertain tax positions during fiscal 2016 for matters involving jurisdictions where interest is not assessed.

The Company's future effective tax rate would be affected if earnings were lower than anticipated in countries where it is subjected to lower statutory rates and higher than anticipated in countries where it is subjected to higher statutory rates, by changes in the valuation of its deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, changes in assertion for foreign earnings permanently or non-permanently reinvested as a result of changes in facts and circumstances could significantly impact the effective tax rate. The Company regularly assesses the effects resulting from these factors to determine the adequacy of its provision for income taxes.

It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months due to the expected lapse of statutes of limitation and/or settlements of tax examinations. We cannot practicably estimate the financial outcomes of these examinations.

The Company files U.S. federal income tax return, as well as income tax returns in various state and foreign jurisdictions.The U.S. Internal Revenue Service is currently examining the fiscal years 2011 and 2012, and all years prior to fiscal 2011 are closed. For most state tax returns, tax years following fiscal 2001 remain subject to examination as a result of the generation of net operating loss carry-forwards. In the foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these jurisdictions vary from jurisdiction to jurisdiction and range from 4 to 6 years. The Company is currently under income tax examination by tax authorities in certain foreign jurisdictions. The Company believes that adequate provisions have been made for any adjustments that may result from tax examinations.

As a result of committing to certain capital investments and employment levels, income from operations in Singapore and Malaysia is subject to reduced tax rates. In connection with Singapore operations, the Company has been granted a decreased effective tax rate of five percent in that jurisdiction until February 1, 2020 subject to the fulfillment of certain continuing conditions. In fiscal 2016, 2015, and 2014, the preferential rate reduced income tax expense by approximately $8.5 million or $0.12 per share, $5.9 million or $0.08 per share and $17.4 million or $0.23 per share, respectively.