16.	INCOME TAXES:

The Company is subject to income taxes in both United States and foreign jurisdictions. The effective income tax rate for the three and nine months ended September 30, 2016 was a benefit of 40.1% and an expense of 33.0%, respectively. For the three and nine months ended September 30, 2016, an income tax benefit of $1.0 million and an expense of $11.0 million, respectively, was recorded primarily related to foreign tax withheld on royalty and license fees paid to the Company and federal income taxes.

The effective income tax rate was 17.9 % and 154.9%, respectively, for the three and nine months ended September 30, 2015. The Company’s effective tax rate rose significantly due to an inventory write-down primarily related to UDC Ireland, which resulted in a loss for the full year 2015. Due to continued losses at UDC Ireland no tax benefit was recorded. For the three and nine months ended September 30, 2015, an income tax expense of $1.5 million and $9.6 million, respectively, was recorded primarily related to foreign tax withheld on royalty and license fees paid to the Company and federal income taxes.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the Company's ability to generate future taxable income to obtain benefit from the reversal of temporary differences, net operating loss carryforwards and tax credits. As part of its assessment management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. At this time there is no evidence to release the valuation allowances that relate to UDC Ireland, foreign tax credits and New Jersey research and development credits.