The Company periodically undertakes a review of its valuation allowance and evaluates all positive and negative factors that may affect whether it is more likely than not that the Company would realize its future tax benefits from its deferred tax balances. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable.

In 2014, the Company introduced a number of changes, most notably the decision to exit the low-margin, high-volume telecommunications market and focus on engineered solutions in the aerospace and defense markets. This turnaround plan was engineered and executed by the Company’s management with the consent of the Board. Over the following years, the negative factors that caused the Company to produce continuing losses in the U.S. tax jurisdiction were eliminated with the result being sustained increases in the Company’s sales, revenues and backlog. Margins from its new and improved products and services have increased, and the Company maintains a strong backlog of orders with its customers. As these changes supported and continue to support the assertion that it is more likely than not that substantially all of the Company’s net deferred tax assets will be utilized, during the third quarter of 2019, $3,344,000 of the Company’s valuation allowance of its deferred tax assets was reversed.

Income tax provision (benefit) for the years ended December 31, 2020 and 2019 is as follows:

	2020			2019
	(in thousands)
Current:
Federal	$	—		$	—
State and local		31			30
Foreign		50			43
Total Current		81			73
Deferred:
Federal		238			1,322
State and local		(6	)		147
Foreign		32			60
Total before change in valuation allowance		264			1,529
Change in valuation allowance		(9	)		(4,709	)
Net deferred		255			(3,180	)
Income tax provision (benefit)	$	336		$	(3,107	)

A reconciliation of the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate to income before income taxes is detailed below:

	2020			2019
	(in thousands)
Tax provision at expected statutory rate	$	274		$	821
State taxes, net of federal benefit		31			92
Permanent differences		45			34
Credits		7			(108	)
Foreign tax expense, and other		1			13
Change in rate		(38	)		63
Change in valuation allowance		(9	)		(4,709	)
Provision to return		15			—
Permanent true-ups		—			687
Other		10			—
Provision (benefit) for income taxes	$	336		$	(3,107	)

Deferred income taxes for 2020 and 2019 were provided for the temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. Tax effects of temporary differences and carry-forwards at December 31, 2020 and 2019 were as follows:

	December 31, 2020					December 31, 2019
	Deferred Tax					Deferred Tax
	Asset			Liability		Asset			Liability
	(in thousands)
Inventory reserve	$	286		$	—	$	239		$	—
Fixed assets		—			58		—			100
Other reserves and accruals		311			—		358			—
Stock-based compensation		8			—		6			—
Other		—			12		—			18
Tax credit carryforwards		1,717			—		1,724			—
Federal tax loss carryforwards		892			—		1,169			—
State tax loss carryforwards		252			—		250			—
Foreign tax loss carryforwards		35			—		67			—
Total deferred income taxes		3,501		$	70		3,813		$	118
Valuation allowance		(379	)				(388	)
Net deferred tax assets	$	3,052				$	3,307

Deferred tax assets totaled $3.5 million at December 31, 2020 which includes the tax effect of federal, state and foreign net operating loss carryforwards and our federal tax credits. We recognize federal, state and foreign net operating loss carryforwards and our federal tax credits as deferred tax assets, subject to valuation allowances. At each balance sheet date, we estimate the amount of carryforwards that are not expected to be used prior to expiration of the carryforward period.

The Company has a total gross federal NOL carryforward of $4,254,000 as of December 31, 2020. This federal NOL carryforward expires through 2038, if not utilized prior to that date. The Company has total state NOL carryforwards of $5,815,000 as of December 31, 2020. These state NOL balances expire between 2037 and 2047. The Company has research and development tax credit carryforwards of approximately $1,717,000 at December 31, 2020 that can be used to reduce future income tax liabilities and expire principally between 2021 and 2039. The tax effect of the carryforwards that are not expected to be used prior to their expiration is included in the valuation allowance. At December 31, 2020, the balance in the Company’s valuation allowance was $379,000 consisting primarily of research and development tax credits expiring between 2021 and 2025.

The Company files income tax returns in the U.S. federal, various state, Hong Kong and India jurisdictions. The statute of limitations for assessment by the Internal Revenue Service ("IRS") and state tax authorities is open for tax returns for years ended December 31, 2017, 2018 and 2019; although carryforward attributes that were generated prior to tax year 2017, including NOL carryforwards and tax credits, may still be adjusted upon examination by the IRS or state tax authorities, if they either have been or will be used in a future period. The Company is generally subject to examinations by foreign tax authorities from 2015 to the present.

The Company will recognize any interest and penalties related to unrecognized tax positions in income tax expense. At the date of adoption of ASC 740, the Company did not have a liability for unrecognized tax positions. As of December 31, 2020, management assessed the balances of the Company’s deferred tax assets and liabilities and has determined that it has not taken any aggressive tax positions that may be considered uncertain under ASC 740.