INCOME TAXES

The United States and foreign components of income before income taxes are as follows:



	2015			2014		2013
	(In thousands)
United States	$	(3,332	)	$	82,032	$	142,085
Foreign	315,209			193,674		245,805
Total	$	311,877		$	275,706	$	387,890

The components of the provision for income taxes are as follows:



	2015			2014			2013
	(In thousands)
Current:
Federal	$	27,860		$	22,377		$	51,389
Foreign	43,796			30,878			37,221
State	10,238			7,710			11,605
Total current	81,894			60,965			100,215
Deferred:
Federal	(75,479		)	(26,922		)	(34,897		)
Foreign	(2,746		)	(1,023		)	(8,413		)
State	(11,153		)	(9,037		)	(8,538		)
Total deferred	(89,378		)	(36,982		)	(51,848		)
Total provision	$	(7,484	)	$	23,983		$	48,367

The following table presents the breakdown between current and non-current net deferred tax assets:



	December 31,
	2015			2014
	(In thousands)
Deferred tax assets - current ⁽¹⁾	$	—		$	45,892
Deferred tax liabilities - current ⁽¹⁾	—			(1,053		)
Deferred tax assets- non current	215,196			128,198
Deferred tax liabilities - non current	(3,903		)	(8,722		)
Total net deferred tax assets	$	211,293		$	164,315

⁽¹⁾

During the year ended December 31, 2015, the Company elected to early adopt an accounting standard update on income taxes on a prospective basis. The new authoritative guidance requires deferred tax liabilities and assets along with any related valuation allowance to be classified as noncurrent on the consolidated balance sheet. The December 31, 2014 consolidated balance sheet was not retrospectively adjusted.

The significant components of the Company’s deferred tax assets and liabilities consisted of the following:



	December 31,
	2015			2014
	(In thousands)
Deferred tax assets:
Accruals and reserves	$	36,628		$	27,105
Deferred revenue	84,631			65,541
Tax credits	41,444			43,211
Net operating losses	50,466			75,318
Other	7,527			12,878
Stock based compensation	46,582			63,993
Valuation allowance	(16,673		)	(15,167		)
Total deferred tax assets	250,605			272,879
Deferred tax liabilities:
Depreciation and amortization	(16,113		)	(16,835		)
Acquired technology	(15,825		)	(82,357		)
Prepaid expenses	(7,374		)	(9,372		)
Total deferred tax liabilities	(39,312		)	(108,564		)
Total net deferred tax assets	$	211,293		$	164,315

The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if it is not more likely than not that some portion or all of the deferred tax assets will be realized. At December 31, 2015, the Company determined that a $16.7 million valuation allowance relating to deferred tax assets for net operating losses and tax credits was necessary.

The Company does not expect to remit earnings from its foreign subsidiaries. Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $2.33 billion at December 31, 2015 and are primarily held by its foreign subsidiary in the Cayman Islands. Those earnings are considered to be permanently reinvested and, accordingly, no U.S. federal and state income taxes have been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, the Company could be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to various foreign countries. The Company maintains certain strategic management and operational activities in overseas subsidiaries and its foreign earnings are taxed at rates that are generally lower than in the United States.

At December 31, 2015, the Company had $113.1 million of remaining net operating loss carry forwards in the United States from acquisitions. The utilization of these net operating loss carry forwards are limited in any one year pursuant to Internal Revenue Code Section 382 and begin to expire in 2020. At December 31, 2015, the Company had $32.3 million of remaining net operating loss carry forwards in foreign jurisdictions that do not expire.

At December 31, 2015, the Company had research and development tax credit carry forwards of $65.6 million that begin to expire in 2018.

A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:



	Year Ended December 31,
	2015		2014		2013
Federal statutory taxes	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	0.9		1.2		1.2
Foreign operations	(22.3	)	(13.8	)	(14.8	)
Permanent differences	6.1		3.3		(1.1	)
Change in deferred tax liability related to acquired intangibles	(6.6	)	(5.9	)	—
Tax credits	(13.4	)	(13.7	)	(10.9	)
Stock option compensation	0.5		1.9		0.4
Change in accruals for uncertain tax positions	(3.2	)	(0.3	)	3.3
Other	0.6		1.0		(0.6	)
	(2.4	)%	8.7	%	12.5	%

The Company’s effective tax rate generally differs from the U.S. federal statutory rate of 35% due primarily to lower tax rates on earnings generated by the Company’s foreign operations that are taxed primarily in Switzerland. The Company has not provided for U.S. taxes for those earnings because it plans to reinvest all of those earnings indefinitely outside the United States. It was not practicable to determine the amount of unrecognized deferred tax liability for temporary differences related to investments in foreign and domestic subsidiaries.

The Company and certain of its subsidiaries are subject to U.S. federal income taxes, as well as income taxes of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2012.

During the quarter ended June 30, 2015, the Internal Revenue Service (“IRS”) concluded its field examination of the Company’s 2011 and 2012 tax years and issued proposed adjustments primarily related to transfer pricing and the research and development tax credit. In June 2015, the Company finalized its tax deficiency calculations and formally closed the audit with the IRS for the 2011 and 2012 tax years. As a result, the Company recognized a net tax benefit of $20.3 million during the second quarter of 2015 related to the settlement.

The Company's effective tax rate was approximately (2.4)% and 8.7% for the year ended December 31, 2015 and 2014, respectively. The decrease in the effective tax rate when comparing the year ended December 31, 2015 to the year ended December 31, 2014 was primarily due to a change in the combination of income between the Company's U.S. and foreign operations, the decline in reserve for uncertain tax positions, as well as the impact of discrete tax benefits related to the extension of the 2015 federal research and development tax credit.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2015 and 2014 is as follows (in thousands):



Balance at January 1, 2014	$	63,792
Additions based on tax positions related to the current year	5,711
Additions for tax positions of prior years	12,998
Reductions related to the expiration of statutes of limitations	(4,118		)
Settlements	(11,465		)

Balance at December 31, 2014	66,918
Additions based on tax positions related to the current year	6,613
Additions for tax positions of prior years	4,675
Reductions related to the expiration of statutes of limitations	(9,521		)
Settlements	(14,064		)

Balance at December 31, 2015	$	54,621

The Company does not anticipate the total amount of unrecognized tax benefits will change significantly over the next 12 months.

As of December 31, 2015 the Company is offsetting unrecognized tax benefits of $25.4 million against long-term deferred tax assets.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. During the year ended December 31, 2015, amounts recognized related to interest and penalties were immaterial.

The federal research and development credit expired on December 31, 2013. On December 19, 2014, the Tax Increase Prevention Act of 2014 was signed into law. Under this act, the federal research and development credit was retroactively extended for amounts paid or incurred after December 31, 2013 and before January 1, 2015. The effects of these changes in the tax law result in net tax benefits of approximately $12.3 million, which was recognized in the fourth quarter of 2014, the quarter in which the law was enacted. The Protecting Americans from Tax Hikes Act of 2015 was signed into law on December 18, 2015, permanently extending the research credit under Section 41 for amounts paid or incurred after December 31, 2014. Accordingly, the Company recognized $19.2 million of federal research and development credit in the fourth quarter of 2015.