INCOME TAXES

For the years ended December 31, 2014, 2013 and 2012, income before income taxes is broken out between U.S. and foreign-sourced operations and consisted of the following (in thousands):



	2014		2013		2012
Domestic	$	16,961	$	5,435	$	15,958
Foreign	14,611		14,404		11,660

Total	$	31,572	$	19,839	$	27,618

The components of the provision for income taxes for the years ended December 31, 2014, 2013 and 2012, consisted of the following (in thousands):



	2014			2013			2012

Current expense (benefit):
Federal	$	1,316		$	(747	)	$	5,350
State	768			333			1,014
Foreign	2,644			2,324			995

Total current expense	4,728			1,910			7,359

Deferred expense (benefit):
Federal	4,078			1,089			871
State	(119		)	278			(343		)
Foreign	(89		)	(8		)	21

Total deferred expense	3,870			1,359			549

Total income tax expense	$	8,598		$	3,269		$	7,908

The difference between the income tax expense reported and amounts computed by applying the statutory federal rate of 35.0% to pretax income for the years ended December 31, 2014, 2013 and 2012, consisted of the following (in thousands):



	2014			2013			2012

Computed federal income tax expense at statutory rate of 35%	$	11,050		$	6,943		$	9,667
State income taxes	438			397			436
Tax credits	(888		)	(1,385		)	(779		)
Production activity deduction	—			—			(388		)
Foreign tax rate differential	(1,958		)	(2,374		)	(1,419		)
Uncertain tax positions	(76		)	(520		)	(42		)
Deferred compensation insurance assets	(81		)	(358		)	(155		)
Other — including the effect of graduated rates	113			566			588

Total income tax expense	$	8,598		$	3,269		$	7,908

Deferred income tax assets and liabilities at December 31, 2014 and 2013, consisted of the following temporary differences and carry-forward items (in thousands):



	2014			2013

Deferred income tax assets:
Allowance for uncollectible accounts receivable	$	366		$	342
Accrued compensation expense	5,492			5,001
Inventory differences	2,401			2,317
Net operating loss carryforwards	13,542			18,060
Deferred revenue	87			280
Stock-based compensation expense	2,479			2,704
Uncertain tax positions	284			559
Federal research and development credit carryforward	1,413			569
Foreign Tax Credits	1,374			—
Other	4,173			3,197
Total deferred income tax assets	31,611			33,029

Deferred income tax liabilities:
Prepaid expenses	(708		)	(751		)
Property and equipment	(23,298		)	(21,893		)
Intangible assets	(4,853		)	(3,837		)
Other	(1,150		)	(1,295		)
Total deferred income tax liabilities	(30,009		)	(27,776		)
Valuation allowance	(1,603		)	(1,363		)
Net deferred income tax assets (liabilities)	$	(1	)	$	3,890

Reported as:
Deferred income tax assets - Current	$	6,375		$	5,638
Deferred income tax assets - Long-term	9			800
Deferred income tax liabilities - Current	—			—
Deferred income tax liabilities - Long-term	(6,385		)	(2,548		)

Net deferred income tax assets (liabilities)	$	(1	)	$	3,890

The long-term deferred income tax balances are not netted as they represent deferred amounts applicable to different taxing jurisdictions. Deferred income tax balances reflect the temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. The valuation allowance is primarily related to state credit carryforwards and capital losses for which we believe it is more likely than not that the deferred tax assets will not be realized. The valuation allowance increased by approximately $240,000, $138,000, and $864,000 during the years ended December 31, 2014, 2013 and 2012, respectively.

We have not provided U.S. deferred income taxes or foreign withholding taxes on the undistributed earnings of certain foreign subsidiaries that are intended to be reinvested indefinitely in operations outside the United States. It is not practical to estimate the amount of additional taxes that might be payable on such undistributed earnings.

As of December 31, 2014 and 2013, we had U.S federal net operating loss carryforwards of approximately $38.7 million and $52.2 million, respectively. These net operating loss carryforwards, which expire at various dates through 2030, are subject to an annual limitation under Internal Revenue Code Section 382. We anticipate that we will utilize the net operating loss carryforwards over the next 12 years. We utilized a total of approximately $13.5 million and $3.8 million in U.S. federal net operating loss carryforwards during the year ended December 31, 2014 and 2013, respectively.

As of December 31, 2014 and 2013, we had non-U.S. net operating loss carryforwards of approximately $53,000 and $125,000, respectively, which have no expiration date. Non-U.S. net operating loss carryforwards utilized during 2014 and 2013 were not material.

We are subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. In our opinion, we have made adequate provisions for income taxes for all years subject to audit. We are no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2011. In foreign jurisdictions, we are no longer subject to income tax examinations for years before 2008.

Although we believe our estimates are reasonable, the final outcomes of these matters may be different from those which we have reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and operating results in the period in which we make such determination.

The total liability for unrecognized tax benefits at December 31, 2014, including interest and penalties, was approximately $1.9 million, of which approximately $1.6 million would favorably impact our effective tax rate if recognized. Approximately $563,000 of the total liability at December 31, 2014 was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet as of that date. The total liability for unrecognized tax benefits at December 31, 2013, including interest and penalties, was approximately $2.3 million, of which approximately $1.7 million would favorably impact our effective tax rate if recognized. Approximately $236,000 of the total liability at December 31, 2013 was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet as of that date. As of December 31, 2014 and 2013, we had accrued approximately $181,000 and $139,000 respectively, in total interest and penalties related to unrecognized tax benefits. We account for interest and penalties for unrecognized tax benefits as part of our income tax provision. During the year ended December 31, 2014, we added interest and penalties of approximately $42,000 to our liability for unrecognized tax benefits. During the years ended December 31, 2013 and 2012, we removed interest and penalties of approximately $22,000, and $215,000, respectively, from our liability for unrecognized tax benefits. The decrease in interest and penalties during 2012 was primarily related to an interest payment to the IRS in order to settle a withholding tax issue related to our acquisition of BioSphere. We anticipate the total liability for unrecognized tax benefits may be reduced, net of potential increases and decreases due to the expiration of statutes of limitation, by a range of approximately $400,000 to $800,000 within the next 12 months.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax benefits for the years ended December 31, 2014, 2013 and 2012, consisted of the following (in thousands):



Tabular Roll-forward	2014			2013			2012

Unrecognized tax benefits, opening balance	$	2,129		$	2,776		$	3,113
Gross increases in tax positions taken in a prior year	142			107			83
Gross increases in tax positions taken in the current year	309			236			260
Lapse of applicable statute of limitations	(844		)	(990		)	(680		)
Unrecognized tax benefits, ending balance	$	1,736		$	2,129		$	2,776

The tabular roll-forward ending balance does not include interest and penalties related to unrecognized tax benefits.