INCOME TAXES

The income tax provision for the years ended December 31, 2014, 2013 and 2012, as a percentage of income before income taxes, was 19%, 8% and 56%, respectively.

A reconciliation of the statutory federal income tax rate to the effective tax rate for the years ended December 31 was as follows:



	2014		2013		2012
Statutory federal income tax rate	35	%	35	%	35	%
Research and development credit	(14	)	(22	)	—
Qualified production activities deduction	(5	)	(3	)	(4	)
State income taxes (net of federal income tax benefit)	—		—		(2	)
Non-deductible stock compensation	—		1		1
Valuation allowance	—		—		27
Deemed dividend income	—		3		—
Other *	3		(6	)	(1	)
Effective tax rate	19	%	8	%	56	%

* Other, in 2014 and 2013, includes foreign tax rate differential, foreign tax credits and other expenditures not deductible for tax purposes which are all individually insignificant.

The provision for income taxes for the years ended December 31, 2014, 2013, and 2012 consisted of the following (in thousands):



	2014			2013			2012
Current:
Federal	$	4,869		$	4,833		$	8,847
State	78			(66		)	(1,731		)
Foreign	544			494			563
Total current	5,491			5,261			7,679
Deferred:
Federal	(2,179		)	(3,698		)	(8,489		)
State	(5		)	(31		)	16,901
Foreign	(140		)	52			(125		)
Total deferred	(2,324		)	(3,677		)	8,287
Total provision	$	3,167		$	1,584		$	15,966

Pre-tax income from U.S. and non-U.S. jurisdictions was $16.6 million and less than $0.1 million, respectively, for the year ended December 31, 2014. Pre-tax income from U.S. and non-U.S. jurisdictions was $16.9 million and $2.3 million, respectively, for the year ended December 31, 2013. Pre-tax income from U.S. and non-U.S. jurisdictions was $28.0 million and $0.3 million, respectively, for the year ended December 31, 2012.

Deferred tax assets and liabilities result primarily from temporary differences between book and tax bases of assets and liabilities and state research and development credit carryforwards. The Company had net deferred tax assets of $24.3 million at December 31, 2014. The Company must regularly assess the likelihood that future taxable income levels will be sufficient to ultimately realize the tax benefits of these deferred tax assets. The Company believes that future taxable income levels will be sufficient to realize the tax benefits of net deferred tax assets. Therefore, the Company has not established a valuation allowance except for a valuation allowance of $12.2 million and $9.0 million, respectively, that was established against state deferred assets at December 31, 2014 and 2013 due to California tax law changes in 2012 which require mandatory single sales factor apportionment in California for most multi-state taxpayers for tax years beginning on or after January 1, 2013. Should the Company determine that future realization of these tax benefits is not more likely than not, additional valuation allowances would be established which would increase the Company’s tax provision in the period of such determination.

Deferred tax assets and liabilities at December 31, 2014 and 2013 were as follows (in thousands):



	2014			2013
Deferred tax assets:
Accruals, reserves and other amounts not currently deductible	$	13,034		$	11,346
Deferred income	8,106			9,547
Tax credit carryforwards	12,184			9,170
Non-qualified share-based compensation	6,245			6,115
Capitalized research and development	18			—
Unrealized loss on investments and other	181			278
Gross deferred tax assets	39,768			36,456
Valuation allowance	(12,229		)	(8,999		)
Total deferred tax assets	27,539			27,457
Deferred tax liabilities:
Long-lived assets	(3,265		)	(5,187		)
Foreign undistributed earnings	(18		)	—
Total deferred tax liability	(3,283		)	(5,187		)
Net deferred tax assets (current and non-current)	$	24,256		$	22,270

Included in net deferred tax assets are credit carryforwards. The Company has available state research and development credit carryforwards of approximately $22.1 million. The state research credit carryforwards are not subject to expiration and may be carried forward indefinitely until utilized.

At December 31, 2014, the gross liability for uncertain tax positions was $7.6 million and the net liability, reduced for the federal effects of potential state tax exposures, was $6.0 million. If these uncertain tax positions are sustained upon tax authority audit, or otherwise become certain, a net $3.5 million would favorably affect the Company’s tax provision in such future periods. The remaining $2.5 million would increase deferred assets on which a valuation allowance is placed and would be expected to also increase the valuation allowance by a corresponding amount. The $3.5 million liability is included in long-term income taxes payable. The Company does not anticipate a significant change to unrecognized tax benefits for uncertain income tax positions within the next 12 months.

The amount of unrecognized tax benefits for the years ended December 31 consisted of the following (in thousands):



	2014			2013			2012
Beginning balance	$	9,433		$	8,259		$	8,532
Additions based on tax positions related to the current year	909			762			487
Additions for tax positions related to prior years	662			1,593			77
Subtractions for tax positions related to prior years and settlements of audits	(4,959		)	(1,181		)	(837		)
Ending balance	$	6,045		$	9,433		$	8,259

The unrecognized tax benefits presented above include amounts related to potential tax exposures, which are presented net of federal tax benefits.

During 2014, the Company recognized $4.9 million of previously unrecognized tax benefits due to expiration of statutes of limitations and settlement of the California FTB audit.

The Company continues to recognize interest and penalties related to uncertain tax benefits as part of the income tax provision. At December 31, 2014 and 2013, the Company had $0.3 million and $0.3 million, respectively, accrued for interest and none accrued for penalties for both years. These accruals were included as a component of long-term income taxes payable for $3.5 million and reduction of prepaid taxes of less than $0.1 million at December 31, 2014.

The Company is required to file U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. The Company may be subject to examination by the Internal Revenue Service (“IRS”) for calendar years 2010 and forward. Significant state tax jurisdictions include California and Texas, and generally, the Company is subject to routine examination for years 2008 and forward in these jurisdictions. In addition, any research and development credit carryforwards that were generated in prior years and utilized in these years may also be subject to examination by respective state taxing authorities. Generally, the Company is subject to routine examination for years 2007 and forward in various immaterial foreign tax jurisdictions in which it operates.