Income Taxes

Information pertaining to the Company’s loss before income taxes and the applicable provision for income taxes is as follows:



	December 31,
	2015			2014			2013
Loss before income taxes:
Domestic loss	$	(2,310,565	)	$	(7,638,422	)	$	(13,466,322	)
Foreign income	756,747			936,692			959,964
Total loss before income taxes:	(1,553,818		)	(6,701,730		)	(12,506,358		)
Provision (benefit) for income taxes:
Current:
Federal	$	3,939		$	(843	)	$	(1,823,192	)
State and local	16,002			26,145			(209,079		)
Foreign	482,242			400,407			348,300
	502,183			425,709			(1,683,971		)
Deferred:
Federal	$	(167,634	)	$	14,878		$	14,875
State and local	7,006			(3,027		)	981
Foreign	33,988			72,531			94,347
	(126,640		)	84,382			110,203
Total provision (benefit) for income taxes:	$	375,543		$	510,091		$	(1,573,768	)

During 2015, the Company recorded a tax provision of $0.6 million related to state and local and foreign taxes offset by a tax benefit of $0.2 million related to certain AMT tax credits that became realizable on a more-likely-than-not basis as a result of recent federal tax legislation enacted in December 2015. During 2014, the Company recorded a tax provision of $0.5 million related to state and local and foreign taxes. During 2013, the Company recorded a tax benefit of $1.6 million primarily related to the reversal of unrecognized tax benefits of $2.3 million due to the expiration of applicable statutes of limitations partly offset by state and local and foreign taxes, withholding taxes on the gain on the sale of our cost-method investment and interest related to federal uncertain tax positions.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:



	December 31,
	2015			2014
Deferred Tax Assets:
Allowance for receivables	$	72,539		$	42,861
Deferred revenue	2,939,462			4,198,465
Share-based compensation	3,095,723			3,099,636
Accrued expenses and other liabilities	307,565			362,721
Domestic net operating loss carryforwards	26,023,318			23,386,049
Foreign net operating loss carryforwards	99,544			7,503
Tax credit carryforwards	574,997			574,998
AMT tax credit carryforwards	483,285			484,077
Capital loss carryforwards	77,586			75,607
Fixed assets	554,154			527,881
Intangibles	1,762,519			2,051,230
Sub-total	35,990,692			34,811,028
Valuation allowance	(35,121,608		)	(34,625,398		)
Total Deferred Tax Assets	869,084			185,630
Deferred Tax Liabilities:
Deferred state income tax	(541,359		)	—
Foreign withholding taxes	(128,261		)	(111,291		)
Total Deferred Tax Liabilities	(669,620		)	(111,291		)
Net Deferred Tax Assets	$	199,464		$	74,339

As of each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2015, the Company considered the impact of new legislation regarding potential refunds of its AMT tax credits and determined that there is sufficient positive evidence to conclude that it is more-likely-than-not that AMT credits of $0.2 million are realizable which resulted in a reduction to the valuation allowance and a benefit to income tax expense. With respect to the Company’s other net domestic deferred tax assets, the Company’s conclusion did not change and, therefore, the Company did not record any benefit for its net domestic deferred tax assets for 2015 and 2014.

As of December 31, 2015, the Company had federal net operating loss carryforwards of approximately $74.0 million which are set to expire beginning in 2030 through 2035, if not utilized. As of December 31, 2015, the Company had approximately $1.1 million of various tax credit carryforwards, of which, approximately $0.6 million related to research and development tax credit carryforwards which expire at various dates beginning in 2020 through 2029, if not utilized. As of December 31, 2015, the Company had approximately $0.5 million related to AMT credit carryforwards, which may be carried forward indefinitely.

As of December 31, 2015, the Company has not provided for the United States income or additional foreign withholding taxes on approximately $4.1 million of undistributed earnings of its subsidiaries operating outside of the United States, with the exception of China. It is the Company’s practice and intention to reinvest those earnings permanently. Generally, such amounts become subject to United States taxation upon remittance of dividends and under certain other circumstances. Determination of the amount of any unrecognized deferred tax liability related to investments in these foreign subsidiaries is not practicable.

The effective tax rate before income taxes varies from the current statutory federal income tax rate as follows:



	December 31,
	2015			2014			2013
Tax at Federal statutory rate	$	(543,836	)	$	(2,345,606	)	$	(4,377,225	)
Increase (reduction) in income taxes resulting from:
State and local taxes	3,195			10,182			8,948
Non-deductible expenses	(31,199		)	52,565			25,295
Settlement costs	—			(80,406		)	56,882
Net effect of foreign operations	235,850			129,003			552,855
Uncertain tax positions	26,814			28,485			(2,173,905		)
Change in valuation allowance	680,780			2,715,868			4,333,382
Other	3,939			—			—
	$	375,543		$	510,091		$	(1,573,768	)

A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows:



	2015			2014
Balance at January 1,	$	224,637		$	217,237
Increases to tax positions taken in prior years	9,306			7,400
Decreases to tax positions taken in prior years	—			—
Increase for tax positions taken during the current year	—			—
Expiration of statutes of limitation	—			—
Translation	(16,654		)	—
Balance at December 31,	$	217,289		$	224,637

At December 31, 2015, $0.3 million including interest, if recognized, would reduce the Company’s annual effective tax rate. As of December 31, 2015, the Company had approximately $0.1 million of accrued interest. The Company believes it is reasonably possible that $14,265 of its unrecognized tax benefits will reverse within the next 12 months. The Company records any interest and penalties related to unrecognized tax benefits in income tax expense.

The Company files federal, state, and foreign income tax returns in jurisdictions with varying statutes of limitations. The 2012 through 2015 tax years generally remain subject to examination by federal and most state tax authorities. In addition to the U.S., the Company’s major taxing jurisdictions include China, Taiwan, Japan, South Korea, France and Germany.