12. Income Taxes

The components of loss from continuing operations before income taxes are as follows:


	For the Fiscal Years Ended January 31,
	2015			2014			2013
	(Amounts in thousands)
Domestic	$	(25,920	)	$	(15,049	)	$	(15,680	)
Foreign		(2,694	)		12,833			11,133

	$	(28,614	)	$	(2,216	)	$	(4,547	)

The components of the income tax (benefit) provision from continuing operations are as follows:


	For the Fiscal Years Ended January 31,
	2015			2014			2013
	(Amounts in thousands)
Current:
Federal	$	—		$	11		$	—
State		(762	)		50			231
Foreign		24			692			(1,305	)

Total		(738	)		753			(1,074	)

Deferred:
Federal		—			—			—
State		—			—			(348	)
Foreign		(368	)		(698	)		(133	)

Total		(368	)		(698	)		(481	)

Income tax (benefit) provision	$	(1,106	)	$	55		$	(1,555	)

The income tax (benefit) provision for continuing operations computed using the federal statutory income tax rate differs from our effective tax rate primarily due to the following:


	For the Fiscal Years Ended January 31,
	2015			2014			2013
	(Amounts in thousands)
Statutory U.S. federal tax rate	$	(10,014	)	$	(774	)	$	(952	)
State taxes, net of federal tax benefit		(779	)		33			81
Income (losses) not benefitted		8,913			92			(1,068	)
Non-deductible stock compensation expense		—			15			142
Other(1)		(74	)		694			858
Innovation box		(68	)		260			(779	)
Foreign tax rate differential		916			(265	)		163

	$	(1,106	)	$	55		$	(1,555	)

(1)

Within the other line item in the table above, other non-deductible expenses were not material in fiscal 2015 and were $0.3 million and $1.1 million for the fiscal years ended January 31, 2014 and 2013, respectively. These expenses have been aggregated with various adjustments related to differences in prior year U.S. and foreign tax provisions and the actual returns filed.

Our effective tax rate was a (benefit)/provision of (4%) and 3% for the fiscal years ended January 31, 2015 and 2014, respectively, and an effective tax rate benefit of (34%) for the fiscal year ended January 31, 2013.

The components of deferred income taxes are as follows:


	January 31,
	2015			2014
	(Amounts in thousands)
Deferred tax assets:
Accruals and reserves	$	1,783		$	2,009
Deferred revenue		761			1,881
Stock-based compensation expense		3,005			2,775
U.S. federal, state and foreign tax credits		7,670			6,616
Loss carryforwards		18,298			9,071

Deferred tax assets		31,517			22,352
Less: Valuation allowance		(30,369	)		(20,789	)

Net deferred tax assets		1,148			1,563
Deferred tax liabilities:
Intangible assets		1,267			2,823
Other		74			74
Property and equipment		869			283

Total net deferred tax liabilities	$	(1,062	)	$	(1,617	)

At January 31, 2015, we had federal, state and foreign net operating loss carry forwards of $37.1 million, $65.8 million and $2.1 million respectively, which can be used to offset future tax liabilities and expire at various dates beginning in fiscal 2016. Utilization of these net operating loss carry forwards may be limited pursuant to provisions of the respective local jurisdiction. At January 31, 2015, we had a federal capital loss carry forward of $10.8 million. This loss can only be utilized to offset capital gains and it expires in fiscal 2018. In addition, at January 31, 2015, we had federal and state research and development credit carry forwards of $3.8 million and $1.8 million respectively, and state investment tax credit carry forwards of $0.3 million. The federal credit carry forwards will expire at various dates beginning in fiscal 2016, if not utilized. Certain state credit carry forwards will expire at various dates, while certain other credit carry forwards may be carried forward indefinitely. Utilization of these credit carry forwards may be limited pursuant to provisions of the respective local jurisdiction. We also have alternative minimum tax credit carry forwards of $0.6 million which are available to reduce future federal regular income taxes over an indefinite period. We have foreign tax credit carry forwards of $2.0 million which are available to reduce future federal regular income taxes.

We review quarterly the adequacy of the valuation allowance for deferred tax assets. We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets and have established a valuation allowance of $30.4 million for such assets, which are comprised principally of net operating loss carry forwards, research and development credits, deferred revenue, inventory and stock-based compensation. If we generate pre-tax income in the future, some portion or all of the valuation allowance could be reversed and a corresponding increase in net income would be reported in future periods. The valuation allowance increased $9.6 million from $20.8 million at January 31, 2014.

At January 31, 2015, we have indefinitely reinvested $83.7 million of the cumulative undistributed earnings of certain foreign subsidiaries. Approximately $48 million of such earnings would be subject to U.S. taxes if repatriated to the United States. Through January 31, 2015, we have not provided deferred income taxes on the undistributed earnings of our foreign subsidiaries because such earnings are considered to be indefinitely reinvested outside the United States. Non-U.S. current and deferred income taxes have been provided in connection with our foreign subsidiaries’ continuing operations with the exception of a subsidiary in the British Virgin Islands, which operates in a zero rate jurisdiction. Determination of the potential deferred income tax liability on these undistributed earnings is not practicable because such liability, if any, is dependent on circumstances existing if, and when, remittance occurs.

For the fiscal year ended January 31, 2015, we recognized incremental tax benefits of $0.5 million. This incremental tax benefit is primarily due to $0.3 million of tax benefit recorded for the expiration of the statute of limitations and $0.3 million for the effect of foreign translation, offset by $0.1 million in tax expense due to the increase in uncertain tax positions. None of the amounts included in the balance of unrecognized tax benefits at January 31, 2015 of $5.5 million are related to tax positions for which it is reasonably possible that the total amounts could significantly change during the next twelve months. We recognize accrued interest and penalties related to uncertain tax positions in income tax expense. A reconciliation of the beginning and ending balance of the total amounts of gross unrecognized tax benefits is as follows:


	For the Fiscal Years Ended January 31,
	2015			2014
	(Amounts in thousands)
Balance of gross unrecognized tax benefits, beginning of period	$	6,035		$	9,364
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period		96			445
Decrease due to expiration of statute of limitation		(275	)		(439	)
Gross decrease in prior period positions		—			(3,379	)
Effect of currency translation		(329	)		44

Balance of gross unrecognized tax benefits, end of period	$	5,527		$	6,035

We file income tax returns in U.S. federal jurisdiction, various state jurisdictions, and various foreign jurisdictions. We are no longer subject to U.S. federal examinations before fiscal 2010. However, the taxing authorities still have the ability to review the propriety of certain tax attributes created in closed years if such tax attributes are utilized in an open tax year, such as our federal research and development credit carryovers. Presently, we are undergoing an IRS audit for the fiscal years 2010, 2011 and 2012.