Income Taxes

The sources of income (loss) before income taxes are as follows (in thousands):



	Years Ended December 31,
	2016			2015			2014
Domestic	$	(41,246	)	$	21,065		$	(162,151	)
Foreign	(19,060		)	(42,175		)	55,215
Total	$	(60,306	)	$	(21,110	)	$	(106,936	)

Components of income taxes are as follows (in thousands):



	Years Ended December 31,
	2016			2015			2014
Current:
Federal	$	—		$	(4,715	)	$	(678	)
State and local	28			41			(42		)
Foreign	5,574			1,274			21,722
Deferred:
Federal	—			2,726			1,004
Foreign	(1,181		)	4,718			(1,424		)
Total income tax expense	$	4,421		$	4,044		$	20,582

A reconciliation of the expected income tax expense on income (loss) before income taxes using the statutory federal income tax rate of 35% for 2016, 2015 and 2014 to income tax expense follows (in thousands):



	Years Ended December 31,
	2016			2015			2014
Expected income tax expense at 35%	$	(21,107	)	$	(7,389	)	$	(37,428	)
Foreign tax rate differential	5,932			1,769			(10,481		)
Foreign tax differences	(4,828		)	4,104			6,444
State and local taxes	28			41			(42		)
Nondeductible expenses	(259		)	578			(1,584		)
Goodwill impairment	—			—			9,444
Expired Capital Loss	1,321			15,950			—
Valuation allowance:
Valuation allowance on equity in losses of INOVA Geophysical	—			—			17,644
Valuation allowance on expiring capital losses	(1,321		)	(15,950		)	—
Valuation allowance on operations	24,655			4,941			36,585
Total income tax expense	$	4,421		$	4,044		$	20,582

The tax effects of the cumulative temporary differences resulting in the net deferred income tax asset (liability) are as follows (in thousands):



	December 31,
	2016			2015
Non-current deferred:
Deferred income tax assets:
Accrued expenses	$	2,994		$	2,976
Allowance Accounts	4,861			6,739
Net operating loss carryforward	98,896			95,640
Capital loss carryforward	1,114			2,434
Equity method investment	58,820			58,820
Original issue discount	17,924			—
Basis in identified intangibles	15,286			5,978
Tax credit carryforwards	7,051			7,051
Contingency accrual	—			7,700
Other	10,755			12,138
Total non-current deferred income tax asset	217,701			199,476
Valuation allowance	(217,589		)	(194,255		)
Net non-current deferred income tax asset	112			5,221
Deferred income tax liabilities:
Other	(1,240		)	—
Unbilled receivables	(1,908		)	(6,516		)
Basis in property, plant and equipment	(531		)	(3,439		)
Total net non-current deferred income tax liability	$	(3,567	)	$	(4,734	)

During 2013 the Company established a valuation allowance on the substantial majority of U.S. net deferred tax assets due to the significant charges taken during the year and the related inability to rely on projections of future income. As of December 31, 2016, the Company has a full valuation allowance on all net U.S. deferred tax assets. The valuation allowance was calculated in accordance with the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires that a valuation allowance be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. The Company will continue to record a valuation allowance for the substantial majority of its deferred tax assets until there is sufficient evidence to warrant reversal.

At December 31, 2016, the Company had U.S. net operating loss carryforwards of approximately $217.6 million, expiring in 2034, and net operating loss carryforwards outside of the U.S. of approximately $97.1 million, the majority of which expires beyond 2027. At December 31, 2016, the Company also had $3.2 million of U.S. capital loss carryforwards. The majority of these capital loss carryforwards expire in 2017.

As of December 31, 2016, the Company has approximately $1.3 million of unrecognized tax benefits and does not expect to recognize any significant increases in unrecognized tax benefits during the next twelve-month period. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense. During 2016, 2015 and 2014, the aggregate changes in the Company’s total gross amount of unrecognized tax benefits are summarized as follows (in thousands):



	Years Ended December 31,
	2016		2015			2014
Beginning balance	$	1,250	$	1,957		$	2,219
Increases in unrecognized tax benefits – prior year positions	—		—			—
Increases in unrecognized tax benefits – current year positions	49		75			263
Decreases in unrecognized tax benefits – prior year position	—		(782		)	(525		)
Ending balance	$	1,299	$	1,250		$	1,957

The Company’s U.S. federal tax returns for 2013 and subsequent years remain subject to examination by tax authorities. The Company is no longer subject to IRS examination for periods prior to 2012, although carryforward attributes that were generated prior to 2012 may still be adjusted upon examination by the IRS if they either have been or will be used in a future period. In the Company’s foreign tax jurisdictions, tax returns for 2011 and subsequent years generally remain open to examination.

As of December 31, 2016, the Company considered the outside book-over-tax basis difference in its foreign subsidiaries to be in the amount of approximately $86.3 million. United States income taxes have not been provided on this difference as it is the Company’s intention to reinvest the undistributed earnings of its foreign subsidiaries indefinitely. The Company’s U.S. operations are expected to be fully supported by existing cash balances and U.S.-generated cash flows. These foreign earnings could become subject to additional tax if remitted, or deemed remitted, to the United States as a dividend; however, it is not practicable to estimate the additional amount of taxes payable.