INCOME TAXES

Income before income taxes included the following components (in thousands):



	Year Ended December 31,
	2015		2014		2013
U.S.	$	23,287	$	27,832	$	32,549
Foreign	124,505		99,098		119,053
Total	$	147,792	$	126,930	$	151,602

Income tax expense consisted of the following (in thousands):



	Year Ended December 31,
	2015			2014			2013
Current:
Federal	$	12,534		$	3,088		$	(851	)
State	1,079			861			419
Foreign	15,850			11,127			16,513
Total current income tax expense	29,463			15,076			16,081
U.S. deferred (benefit) expense	(2,529		)	7,174			12,645
Foreign deferred benefit	(3,151		)	(384		)	(3,797		)
Income tax expense	$	23,783		$	21,866		$	24,929

The effective income tax rate applied to net income varied from the U.S. federal statutory rate due to the following (in thousands):



	Year Ended December 31,
	2015			2014			2013
Tax expense at U.S. federal statutory rates	$	51,727		$	44,425		$	53,061
Increase (decrease) resulting from:
State income taxes, net of federal benefit	774			861			857
Foreign tax benefit	(28,602		)	(22,307		)	(25,263		)
Research and experimentation benefit	(2,675		)	(2,785		)	(5,966		)
Foreign tax credit benefit	(3,203		)	(1,490		)	(2,152		)
Lapse of a statute of limitation	(6,170		)	(2,869		)	(70		)
Stock-based compensation	3,185			2,940			2,658
Non-deductible items	3,442			3,524			2,132
Goodwill impairment	5,775			—			—
Release of valuation allowance	—			(454		)	—
Other	(470		)	21			(328		)
Income tax expense	$	23,783		$	21,866		$	24,929

Our 2015 tax expense reflected comparatively lower tax rates in foreign jurisdictions where we earn most of our profits. The tax provision also included a benefit for the reduction of unrecognized tax benefits, interest and penalties for tax credit positions taken on returns which were closed for further examination due to the lapse of a statute of limitation.

Current taxes payable were reduced for excess tax benefits recorded to common stock and related to stock-based compensation of $2.1 million, $4.5 million and $6.4 million, respectively, in 2015, 2014 and 2013.

Deferred Income Taxes

Net deferred tax assets were classified on the balance sheet as follows (in thousands):



	December 31,
	2015			2014
Deferred tax assets – current	$	10,566		$	8,225
Deferred tax assets – non-current	6,719			6,605
Deferred tax liabilities – current	(441		)	(218		)
Deferred tax liabilities – non-current	(5,187		)	(9,576		)
Net deferred tax assets	$	11,657		$	5,036
Valuation allowance	$	3,562		$	4,350

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and deferred tax liabilities were as follows (in thousands):



	December 31,
	2015			2014
Deferred tax assets:
Accrued liabilities and reserves	$	16,498		$	14,941
Tax credit and loss carryforwards	5,126			7,437
Unrealized losses	558			2,219
Stock-based compensation	3,708			3,278
Other assets	5,263			4,775
Gross deferred tax assets	31,153			32,650
Valuation allowance	(3,562		)	(4,350		)
Net deferred tax assets	27,591			28,300
Deferred tax liabilities:
Fixed assets and intangibles	(14,445		)	(18,004		)
Revenue recognition	(312		)	(2,800		)
Other liabilities	(1,177		)	(2,460		)
Total deferred tax liabilities	(15,934		)	(23,264		)
Net deferred tax assets	$	11,657		$	5,036

Deferred tax benefit of $0.9 million, $2.6 million and $1.1 million was recorded in other comprehensive income in 2015, 2014 and 2013, respectively.

As of December 31, 2015 and 2014, our valuation allowance on deferred tax assets totaled $3.6 million and $4.4 million, respectively. In assessing the realizability of deferred tax assets, we utilize a more likely than not standard. If it is determined that it is “more likely than not” that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, historical operating performance, projected future taxable income and tax planning strategies in making this assessment.

Foreign net operating loss carryforwards as of December 31, 2015 were $17.5 million and do not expire.

State research and development tax credit carryforwards as of December 31, 2015 were $1.3 million and expire between 2016 and 2020.

As of December 31, 2015, U.S. income taxes have not been provided for approximately $387.4 million of cumulative undistributed earnings of several non-U.S. subsidiaries, as our current intention is to reinvest these earnings indefinitely outside the U.S. Foreign tax provisions have been provided for these cumulative undistributed earnings. Upon distribution of those earnings in the form of dividends or otherwise, we would be subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Similarly, we have not provided deferred taxes on the cumulative translation adjustment related to those non-U.S. subsidiaries.

Unrecognized Tax Benefits and Other Tax Contingencies

A rollforward of our unrecognized tax benefits, including interest and penalties, was as follows (in thousands):



	Year Ended December 31,
	2015			2014			2013
Unrecognized tax benefits, beginning of period	$	21,759		$	23,966		$	25,135
Increases for tax positions taken in current period	3,737			—			1,197
Increases for tax positions taken in prior periods	229			2,081			1,701
Decreases for tax positions taken in prior periods	(2,422		)	(1,419		)	(3,997		)
Decreases for lapses in statutes of limitations	(6,170		)	(2,869		)	(70		)
Unrecognized tax benefits, end of period	$	17,133		$	21,759		$	23,966

Non-current unrecognized tax benefits as of December 31, 2015 and 2014 of $16.4 million and $21.8 million were classified on the balance sheet as a component of other liabilities and relate mainly to uncertainty surrounding tax credits, transfer pricing, domestic manufacturing deductions and permanent establishment.

We recognize interest and penalties related to unrecognized tax benefits in income tax expense. The liability for unrecognized tax benefits included accruals for interest and penalties of $2.9 million and $3.1 million as of December 31, 2015 and 2014, respectively.

Tax expense included the following relating to interest and penalties (in thousands):



	Year Ended December 31,
	2015			2014			2013
Benefit for lapses of statutes of limitations and settlement with taxing authorities	$	(393	)	$	(202	)	$	(24	)
Accruals (benefits) for current and prior periods	272			(405		)	1,698
Total interest and penalties	$	(121	)	$	(607	)	$	1,674

It is reasonably possible that the total amount of the unrecognized tax benefit will change during the next 12 months; however, we do not expect the potential change to have a material effect on our consolidated results of operations or financial position in the next year.

For our major tax jurisdictions, the following years were open for examination by the tax authorities as of December 31, 2015:



Jurisdiction		Open Tax Years
U.S.		2012 and forward
The Netherlands		2013 and forward
Czech Republic		2013 and forward