7. Income taxes

We recognized tax provisions of $0.3 and $1.1 million on pretax net income of $2.1 and $6.3 million during the three months ended March 31, 2016 and 2015, respectively. The provisions for income taxes before discrete items were $0.5 and $1.8 million during the three months ended March 31, 2016 and 2015, respectively. The decrease in the provision for income taxes before discrete items for the three months ended March 31, 2016, compared with the same period in the prior year, is primarily due to the decrease in profitability before income taxes and increased income earned in jurisdictions with tax rates lower than the statutory U.S. tax rate.

Primary differences between our recorded tax provision rate and the U.S. statutory rate of 35% include lower taxes on permanently reinvested foreign earnings and the tax effects of stock-based compensation expense pursuant to ASC 718-740, Stock Compensation – Income Taxes, which are non-deductible for tax purposes.

Our tax provision before discrete items is reconciled to our recorded provision for income taxes for the three months ended March 31, 2016 and 2015 as follows (in millions):


	Three months ended March 31,
	2016			2015
Provision for income taxes before discrete items	$	0.5		$	1.8
Interest related to unrecognized tax benefits		0.2			0.1
Benefit related to U.S. transfer pricing adjustment		—			(0.4	)
Benefit related to Spanish statutory and tax intangibles write-off		—			(0.3	)
Benefit for reassessment of taxes upon filing of tax returns		(0.3	)		—
Tax deductions related to ESPP dispositions		(0.1	)		(0.1	)


Provision for income taxes	$	0.3		$	1.1

As of March 31, 2016 and December 31, 2015, gross unrecognized benefits that would affect the effective tax rate if recognized were $44.0 and $43.5 million, respectively. Over the next twelve months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $3.8 million in the next twelve months primarily due to the lapse of the statute of limitations for federal and state tax purposes. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our Condensed Consolidated Statements of Operations.

In accordance with ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, we recorded $35.4 million of gross unrecognized tax benefits as an offset to deferred tax assets as of March 31, 2016, and the remaining $11.7 million has been recorded as noncurrent income taxes payable.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of March 31, 2016 and December 31, 2015, we have accrued $0.7 and $0.5 million, respectively, for potential payments of interest and penalties.

We are subject to examination by the Internal Revenue Service (“IRS”) for the 2012-2015 tax years, state tax jurisdictions for the 2011-2015 tax years, the Netherlands tax authority for the 2014-2015 tax years, the Spanish tax authority for the 2011-2015 tax years, and the Italian tax authority for the 2012-2015 tax years.