Note 20 Income Taxes

The components of the Company’s income before income taxes are as follows:


(in thousands)	2016		2015		2014
Income before income taxes:
Domestic	$	(53,868)	$	(580,720)	$	5,751
Foreign		14,056		(74,233)		11,636
Total	$	(39,812)	$	(654,953)	$	17,387

The components of income tax provision for the years ended December 31, 2016, 2015 and 2014 are as follows:


	2016		2015		2014
Current:
U.S. federal	$	(2,110)	$	10,753	$	23,336
State		30		169		72
Foreign		8,099		925		6,588
Total		6,019		11,847		29,996

Deferred:
U.S. federal		(1,245)		(5,252)		(21,624)
State		—		(225)		(87)
Foreign		(5,321)		2,602		(2,844)
Total		(6,566)		(2,875)		(24,555)
Total income tax (benefit) provision	$	(547)	$	8,972	$	5,441

The overall effective tax rate differs from the statutory federal tax rate for the years ended December 31, 2016, 2015 and 2014 as follows:


	% of Pretax Income
	2016			2015			2014
Tax provision based on the federal statutory rate		35.0	%		35.0	%		35.0	%
Nondeductible expenses		(1.1)			(0.1)			12.5
Foreign exchange loss		9.4			—			—
Uncertain tax positions		(25.1)			(0.5)			11.2
Deemed income related to foreign operations		(8.4)			(0.6)			8.1
Return to provision adjustments — foreign tax credit		8.4			(0.7)			2.5
Return to provision adjustments — research and development credit		4.0			—			—
Return to provision adjustments — non-consolidated U.S. entities		6.4			—			—
Impairment of definite lived intangibles		3.1			—			—
Foreign income tax rate differential		3.1			(2.0)			0.5
State taxes, net of federal benefit, before valuation allowance		3.9			0.9			0.3
Increase in valuation allowances		(58.5)			(16.4)			—
Impairment of goodwill with no tax basis		—			(16.8)			—
Foreign tax credits related to above		6.5			0.2			(6.3)
Deferred tax adjustment — deferred revenue		7.6			—			—
Deferred tax adjustment — state tax credits		1.4			—			—
Deferred tax adjustments — other		4.0			—			—
Domestic production activities deduction		—			—			(12.0)
Research credits		—			—			(21.9)
Other		1.7			(0.4)			1.4
Effective tax rate		1.4	%		(1.4)	%		31.3	%

The difference between the Company’s effective tax rate for 2016 and the federal statutory rate was 33.6 percentage points. The difference in the effective rate is due primarily to the change in valuation allowance that was recorded during the year, as well as the Company’s foreign income inclusions, return to provision adjustments and lower foreign statutory rates.

The difference between the Company’s effective tax rate for 2015 and the federal statutory rate was 36.4 percentage points. The Company recorded nondeductible expenses, including non-deductible goodwill impairment charges and a valuation allowance in the U.S. and certain foreign jurisdictions, which contributed to a difference in the effective tax rate.

The difference between the Company’s effective tax rate for 2014 and the federal statutory rate was 3.7 percentage points. The Company incurred nondeductible expenses and recognized income for tax purposes, net of tax credits, not included in financial statement income, increasing the effective tax rate. The Company is benefiting from the U.S. domestic production activities deduction and from research credits, reducing the effective tax rate.

In 2016, there were no changes to the Company’s valuation allowance assertions. During the fourth quarter of 2015, based upon the Company’s review of results of operations and forecast estimates in connection with the assessment of deferred tax benefits, the Company determined that it is more likely than not that the deferred tax assets in the US and certain foreign jurisdictions will not be realized. In 2014, the Company had no valuation allowance against net deferred income tax assets.

The components of the Company’s net deferred income tax assets and net deferred income tax liabilities at December 31, 2016 and 2015 are as follows:


(in thousands)	2016		2015
Deferred income tax assets:
Intangibles	$	40,014	$	46,293
Stock options and restricted stock awards		14,384		22,010
Reserves and allowances		20,022		18,738
Net operating loss carryforwards		29,398		16,796
Tax credit carryforwards		13,571		8,610
Accrued liabilities		5,330		4,943
Deferred revenue		3,502		405
Valuation allowance		(109,913)		(107,312)
Total deferred income tax assets		16,308		10,483

Deferred income tax liabilities:
Intangibles		16,968		22,676
Property, plant and equipment		8,818		3,851
Total deferred income tax liabilities		25,786		26,527

Net deferred income tax liabilities	$	(9,478)	$	(16,044)

At December 31, 2016, $29,398 of the Company’s deferred income tax assets was attributable to $148,199 of gross operating loss carryforwards, which consisted of $50,587 loss carryforwards for U.S. federal income tax purposes, $78,274 of loss carryforwards for U.S. state income tax purposes and $19,338 of loss carryforwards for foreign income tax purposes.

At December 31, 2015, $16,796 of the Company’s deferred income tax assets was attributable to $85,609 of gross net operating loss carryforwards, which consisted of $33,606 loss carryforwards for U.S. federal income tax purposes, $34,492 of loss carryforwards for U.S. state income tax purposes and $17,511 of loss carryforwards for foreign income tax purposes.

The net operating loss carryforwards for U.S. federal income tax purposes begin to expire in 2022. The net operating loss carryforwards for U.S. state income tax purposes begin to expire in 2017. In addition, certain loss carryforwards for foreign income tax purposes begin to expire in 2018 and certain other loss carryforwards for foreign purposes do not expire.

At December 31, 2016, tax credit carryforwards included in the Company’s deferred income tax assets consisted of $2,544 of research and experimentation credit carryforwards for U.S. federal income tax purposes, $2,649 of research and experimentation tax credit carryforwards for U.S. state income tax purposes, $7,155 of foreign tax credits for U.S. federal income tax purposes, $474 of other U.S. federal tax credits, $149 of research and experimentation tax credit carryforwards for foreign income tax purposes and $600 of other state tax credits. Certain state research and experimentation credits begin to expire in 2017; other state credits begin to expire in 2024. The Company recorded a valuation allowance related to the U.S. federal and state tax credits.

At December 31, 2015, tax credit carryforwards included in the Company’s deferred income tax assets consisted of $2,544 of research and experimentation credit carryforwards for U.S. federal income tax purposes, $2,082 of research and experimentation tax credit carryforwards for U.S. state income tax purposes, $2,740 of foreign tax credits for U.S. federal income tax purposes, $474 of other U.S. federal tax credits, $155 of research and experimentation tax credit carryforwards for foreign income tax purposes and $615 of other state tax credits. The state research and experimentation credits do not expire; the other state credits begin to expire in 2017. The Company recorded a valuation allowance related to the U.S. federal and state tax credits.

During 2016, the Company decreased its deferred tax asset in the amount of approximately $17,849 with the offset to other comprehensive loss. Additionally, a decrease in the Company's valuation allowance of approximately $17,849 was allocated to accumulated other comprehensive loss in the consolidated balance sheets.

The Company has not provided for any taxes on approximately $38,545 of unremitted earnings of its foreign subsidiaries, as the Company intends to permanently reinvest all such earnings outside the U.S. The Company believes a calculation of the deferred tax liability associated with these undistributed earnings is impracticable.

Including interest and penalties, the Company increased its unrecognized benefits by $10,077 and $6,451 for the years ended December 31, 2016 and 2015, respectively. The Company does not anticipate any additional unrecognized tax benefits during the next 12 months that would result in a material change to its consolidated financial position. The Company includes interest and penalties in the Consolidated Financial Statements as a component of income tax expense.


	Unrecognized Tax Benefits
(in thousands)	2016		2015		2014
Balance at January 1	$	(8,296)	$	(1,845)	$	(16)
Increases related to prior year tax positions		(2,658)		—		—
Decreases related to prior year tax positions		—		1,475		—
Increases related to current year tax positions		(7,297)		(7,926)		(1,829)
Decreases related to current year tax positions		—		—		—
Decreases in unrecognized liability due to settlements with foreign tax authorities		—		—		—
Balance at December 31	$	(18,251)	$	(8,296)	$	(1,845)

Tax years 2003 through 2015 remain subject to examination by the U.S. Internal Revenue Service, with most of the years open to examination due to the generation and utilization of net operating losses. The Company files income tax returns (which are open to examination beginning in the year shown in parentheses) in Australia (2012), Belgium (2013), Brazil (2011), China (2013), France (2013), Germany (2012), India (2013), Israel (2012), Italy (2011), Japan (2011), Korea (2011), Mexico (2011), Netherlands (2011), Switzerland (2011), the United Kingdom (2015) and Uruguay (2011).