
	INCOME TAXES

The components of income (loss) before income taxes for the years ended December 31 are as follows (in thousands):



	2015		2014		2013
Domestic income (loss)	$	8,104	$	7,248	$	(21,743	)
Foreign income	3,073		2,972		10,226
Income (loss) before income taxes	$	11,177	$	10,220	$	(11,517	)

The provision for (benefit from) income taxes for the years ended December 31 consists of the following (in thousands):



	2015		2014		2013
Current:
Federal	$	—	$	—	$	(466	)
State	51		28		52
Foreign	667		160		(125		)
Total current	718		188		(539		)
Deferred:
Federal	—		—		—
State	—		—		—
Foreign	144		151		(3		)
Total deferred	144		151		(3		)
Provisions for (benefit from) income taxes	$	862	$	339	$	(542	)

The provision for (benefit from) income taxes reconciles to the amount computed by multiplying income (loss) before income taxes by the U.S. statutory rate of 35 percent as follows (in thousands):



	Years Ended December 31,
	2015			2014			2013
Benefits at statutory rate	$	3,912		$	3,577		$	(4,031	)
Deferred tax asset valuation allowance	(3,705		)	(3,182		)	5,256
Foreign earnings taxed at U.S. rates	208			403			1,966
Foreign earnings taxed at different rates	(388		)	(540		)	(3,315		)
State taxes, net of Federal benefit	416			18			34
Nondeductible stock option expense	173			244			322
Uncertain tax position reserve release	41			(188		)	(579		)
Other	205			7			(195		)
Provision for (benefit from) income taxes	$	862		$	339		$	(542	)

Deferred tax assets (liabilities) as of December 31 are comprised of the following (in thousands):



	2015			2014
Net operating loss carryforwards	$	159,722		$	161,422
Reserves not currently deductible	6,106			7,547
Tax credit carryforwards	849			849
Depreciation	5,073			6,006
Deferred revenue	1,749			1,186
Other	1,599			(161		)
Total deferred tax asset	175,098			176,849
Valuation allowance	(173,081		)	(176,786		)
Net deferred tax asset	2,017			63
Deferred tax liability	(2,291		)	(192		)
Net deferred tax asset (liability)	$	(274	)	$	(129	)

The valuation allowance as of December 31, 2015 and 2014 is against all deferred tax assets for all jurisdictions except Korea. Our valuation allowance was determined in accordance with the applicable authoritative guidance, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred assets are recoverable, with such assessment being required on a jurisdiction-by-jurisdiction basis. In assessing the need for a valuation allowance in the current year, management considered historical levels of income and losses, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax planning strategies. Factors considered in providing a valuation allowance include the lack of a significant history of consistent profits, the cyclical nature of the overall semiconductor market thereby negatively impacting our ability to sustain or grow revenues and earnings and the lack of carry-back capacity to realize these assets. Based on the absence of sufficient positive objective evidence, management is unable to assert that it is more likely than not that we will generate sufficient taxable income to realize these remaining net deferred assets. The amount of the deferred tax asset valuation allowance, however, could be reduced in future periods to the extent that future taxable income is realized.

As of December 31, 2015, we had Federal and state net operating loss carryforwards of approximately $447.9 million and $113.0 million, respectively, which will begin expiring in 2018 for Federal and 2016 for state. We also have foreign net operating loss carryforwards in Canada and Germany of approximately $38.0 million and $29.2 million, respectively. Canada's net operating loss carryforwards begin expiring in 2026. The German net operating loss carryforward has an indefinite carryover life.

Our net operating losses include those acquired as a result of our acquisitions of Vortek, STEAG Semiconductor Division, CFM and Concept Systems Design, Inc. ("Concept"). The Federal and state net operating losses acquired from the STEAG Semiconductor Division, CFM and Concept are also subject to change in control limitations as defined in Section 382 of the Internal Revenue Code. If certain substantial changes in our ownership occur, there would be an additional annual limitation on the amount of the net operating loss carryforwards that can be utilized.

As of December 31, 2015, we had research credit carryforwards of approximately $2.7 million and $4.0 million for Federal and state income tax purposes, respectively. If not utilized, the Federal carryforward will expire in various amounts beginning in 2017. The California tax credit can be carried forward indefinitely.

We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries' earnings are considered indefinitely reinvested outside the U.S. As of December 31, 2015, U.S. income taxes were not provided for on a cumulative total of $0.4 million of undistributed earnings for certain foreign subsidiaries. If these earnings were repatriated, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits). It is not practical to determine the income tax liability that might be incurred if these earnings were to be repatriated. We intend to permanently reinvest all foreign unremitted earnings of foreign subsidiaries outside of the U.S., except for Germany, Korea and Canada. Our indefinitely reinvested non-U.S. earnings have been deployed in active business operations, and it is unlikely that we will repatriate any portion of our indefinitely reinvested non-U.S. earnings in the future.

As of December 31, 2015, our total unrecognized tax benefits were approximately $24.3 million exclusive of interest and penalties described below. Included in the $24.3 million is approximately $0.2 million of unrecognized tax benefits (net of Federal benefit), that if recognized, would favorably affect the effective tax rate in a future period before consideration of changes in the valuation allowance. We anticipate there will be no significant decrease in our unrecognized tax benefits within the next twelve months.

Our practice is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. Provisions for income taxes included estimated interest of zero, $0.1 million and $0.1 million for each of the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015 and 2014, we had $0.1 million and $0.1 million, respectively, accrued for estimated interest. We had no accruals for estimated penalties as of December 31, 2015 and 2014.

We are subject to United States Federal income tax as well as to income taxes in Germany, Korea and various other foreign and U.S. state jurisdictions. Our Federal and state income tax returns are generally not subject to examination by tax authorities for years before 2012 and 2011, respectively. However, due to the fact that we have net operating losses and credits carried forward, certain items attributable to technically closed years are still subject to adjustment by the relevant taxing authority through an adjustment to the tax attributes carried forward to open years. Our German and Korea income tax returns are generally not subject to examination by tax authorities before 2010. We had no material tax audits in progress as of December 31, 2015.

A reconciliation of unrecognized tax benefits is as follows (in thousands):



	Years Ended December 31,
	2015			2014			2013
Balance at the beginning of the year	$	25,100		$	25,500		$	25,900
Tax positions related to current and prior years:
Additions	—			—			1,000
Reductions	—			(100		)	(100		)
Expiration of statutes of limitations	(800		)	(300		)	(1,300		)
Balance at the end of the year	$	24,300		$	25,100		$	25,500