INCOME TAXES

For the years ended December 31, 2015, 2014 and 2013, income before income taxes is broken out between U.S. and foreign-sourced operations and consisted of the following (in thousands):



	2015		2014		2013
Domestic	$	9,470	$	16,961	$	5,435
Foreign	21,730		14,611		14,404

Total	$	31,200	$	31,572	$	19,839

The components of the provision for income taxes for the years ended December 31, 2015, 2014 and 2013, consisted of the following (in thousands):



	2015			2014			2013

Current expense (benefit):
Federal	$	(17	)	$	1,316		$	(747	)
State	747			768			333
Foreign	3,218			2,644			2,324

Total current expense	3,948			4,728			1,910

Deferred expense (benefit):
Federal	3,250			4,078			1,089
State	294			(119		)	278
Foreign	(94		)	(89		)	(8		)

Total deferred expense	3,450			3,870			1,359

Total income tax expense	$	7,398		$	8,598		$	3,269

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, 2015, 2014 and 2013, consisted of the following (in thousands):



	2015			2014			2013

Computed federal income tax expense at statutory rate of 35%	$	10,920		$	11,050		$	6,943
State income taxes	698			438			397
Tax credits	(1,019		)	(888		)	(1,385		)
Foreign tax rate differential	(3,564		)	(1,958		)	(2,374		)
Uncertain tax positions	536			(76		)	(520		)
Deferred compensation insurance assets	182			(81		)	(358		)
Other — including the effect of graduated rates	(355		)	113			566

Total income tax expense	$	7,398		$	8,598		$	3,269

Deferred income tax assets and liabilities at December 31, 2015 and 2014, consisted of the following temporary differences and carry-forward items (in thousands):



	2015			2014

Deferred income tax assets:
Allowance for uncollectible accounts receivable	$	531		$	366
Accrued compensation expense	5,534			5,492
Inventory differences	2,043			2,401
Net operating loss carryforwards	11,434			13,542
Deferred revenue	118			87
Stock-based compensation expense	2,532			2,479
Uncertain tax positions	—			284
Federal research and development credit carryforward	2,355			1,413
Foreign Tax Credits	600			1,374
Other	5,754			4,173
Total deferred income tax assets	30,901			31,611

Deferred income tax liabilities:
Prepaid expenses	(841		)	(708		)
Property and equipment	(24,467		)	(23,298		)
Intangible assets	(6,495		)	(4,853		)
Other	(1,077		)	(1,150		)
Total deferred income tax liabilities	(32,880		)	(30,009		)
Valuation allowance	(1,981		)	(1,603		)
Net deferred income tax assets (liabilities)	$	(3,960	)	$	(1	)

Reported as:
Deferred income tax assets - Current	$	7,025		$	6,375
Deferred income tax assets - Long-term	—			9
Deferred income tax liabilities - Current	—			—
Deferred income tax liabilities - Long-term	(10,985		)	(6,385		)

Net deferred income tax liabilities	$	(3,960	)	$	(1	)

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 $378,000, $240,000, and $138,000 during the years ended December 31, 2015, 2014 and 2013, 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, 2015 and 2014, we had U.S federal net operating loss carryforwards of approximately $32.7 million and $38.7 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 11 years. We utilized a total of approximately $6.0 million and $13.5 million in U.S. federal net operating loss carryforwards during the year ended December 31, 2015 and 2014, respectively.

As of December 31, 2015, we had $0 of non-U.S. net operating loss carryforwards. As of December 31, 2014, we had non-U.S. net operating loss carryforwards of approximately $53,000, which have no expiration date. Non-U.S. net operating loss carryforwards utilized during 2015 and 2014 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 2012. In foreign jurisdictions, we are no longer subject to income tax examinations for years before 2009.

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, 2015, including interest and penalties, was approximately $2.2 million, of which approximately $2.2 million would favorably impact our effective tax rate if recognized. Approximately $1.4 million of the total liability at December 31, 2015 was presented as a reduction to non-current deferred income tax assets on our consolidated balance sheet. 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 December 31, 2015 and 2014, we had accrued approximately $187,000 and $181,000 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 years ended December 31, 2015 and 2014, we added interest and penalties of approximately $6,000 and $42,000, respectively, to our liability for unrecognized tax benefits. During the year ended December 31, 2013, we removed interest and penalties of approximately$22,000 from our liability for unrecognized tax benefits. It is reasonably possible that within the next 12 months the total liability for unrecognized tax benefits may increase, net of potential decreases due to the expiration of statutes of limitation, up to $400,000 .

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax benefits for the years ended December 31, 2015, 2014 and 2013, consisted of the following (in thousands):



Tabular Roll-forward	2015			2014			2013

Unrecognized tax benefits, opening balance	$	1,736		$	2,129		$	2,776
Gross increases in tax positions taken in a prior year	187			142			107
Gross increases in tax positions taken in the current year	763			309			236
Lapse of applicable statute of limitations	(704		)	(844		)	(990		)
Unrecognized tax benefits, ending balance	$	1,982		$	1,736		$	2,129

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