INCOME TAXES

The domestic and foreign source component of income (loss) from continuing operations before income taxes was:



	Year Ended December 31,
	2016			2015			2014
U.S.	$	(5,244	)	$	(21,246	)	$	(10,677	)
Foreign	6,357			6,094			5,781
Total	$	1,113		$	(15,152	)	$	(4,896	)

Significant components of the provision for income taxes from continuing operations were:



	Year Ended December 31,
	2016			2015			2014
Current:
Federal	$	(28	)	$	(264	)	$	(110	)
State	(23		)	33			53
Foreign	504			360			(360		)
Total current (benefit) expense	$	453		$	129		$	(417	)

Deferred:
Federal	$	203		$	164		$	65
State	27			11			4
Foreign	35			160			912
Total deferred expense	$	265		$	335		$	981

Income tax expense	$	718		$	464		$	564

GAAP requires all items be considered, including items recorded in other comprehensive income, in determining the amount of tax benefit that results from a loss from continuing operations that should be allocated to continuing operations.

Significant components of deferred tax assets and deferred tax liabilities included in the accompanying consolidated balance sheets as of December 31, 2016, 2015, and 2014 were:



	Year Ended December 31,
	2016			2015			2014
Long-term deferred tax assets (liabilities):
Fixed assets	$	2,511		$	2,077		$	704
Prepaid expenses	(569		)	(554		)	(343		)
Accrued stock compensation	4,641			4,114			3,656
Accrued restructuring costs	—			303			65
Work opportunity credit carryforward	5,226			5,234			5,121
Operating loss carryforward	16,231			18,066			13,717
Intangibles and goodwill	(77		)	(53		)	(35		)
Derivative Instruments	354			202			456
Cumulative Translation adjustment	(1,381		)	(1,178		)	(1,150		)
Other	297			39			589
Net long-term deferred tax assets	$	27,233		$	28,250		$	22,780

Subtotal	$	27,233		$	28,250		$	22,780
Valuation allowance	(27,384		)	(28,162		)	(22,314		)

Total net deferred tax asset (liability)	$	(151	)	$	88		$	466

We consider all available evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become realizable. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), and projected taxable income in assessing the realizability of deferred tax assets. In making such judgments, significant weight is given to evidence that can be objectively verified. In order to fully realize the U.S. deferred tax assets, we will need to generate sufficient taxable income in future periods before the expiration of the deferred tax assets governed by the tax code.

We do not provide for deferred taxes on the excess of the financial reporting basis over the tax basis in our investments in foreign subsidiaries that are essentially permanent in duration. In general, it is our practice and intention to reinvest the earnings of our foreign subsidiaries in those operations. Generally, the earnings of our foreign subsidiaries become subject to U.S. taxation upon the remittance of dividends and under certain other circumstances. Exceptions may be made on a year-by-year basis to repatriate current year earnings of certain foreign subsidiaries based on cash needs in the U.S.

At December 31, 2016, 2015, and 2014, U.S. income and foreign withholding taxes have not been provided for on approximately $0, $1,300, and $1,872, respectively, of unremitted earnings of subsidiaries operating outside of the U.S. These earnings are estimated to represent the excess of the financial reporting over the tax basis in our investments in those subsidiaries and would become subject to U.S. income tax if they were remitted to the U.S.

Differences between U.S. federal statutory income tax rates and our effective tax rates for the years ended December 31, 2016, 2015, and 2014 for continuing operations were:



	Year Ended December 31,
	2016		2015		2014
U.S. statutory tax rate	35.0	%	35.0	%	35.0	%
Effect of state taxes (net of federal benefit)	-12.2	%	1.7	%	0.6	%
Rate differential on foreign earnings	-146.0	%	10.9	%	31.9	%
Foreign income taxed in the U.S.	133.9	%	-8.3	%	-55.2	%
Uncertain tax positions	107.1	%	-4.9	%	25.1	%
Unremitted foreign earnings of subsidiary	19.7	%	—	%	-1.1	%
Tax expense allocation to OCI	-2.7	%	—	%	—	%
Valuation allowance	-67.1	%	-40.4	%	-49.5	%
Other, net	-3.2	%	2.9	%	1.7	%
Total	64.5	%	-3.1	%	-11.5	%

As of December 31, 2016, we had gross federal net operating loss carry forwards of approximately $51,798 expiring beginning in 2030 and gross state net operating loss carry forwards of approximately $61,963 expiring beginning in 2017.

We have been granted “Tax Holidays” as an incentive to attract foreign investment by the governments of Honduras, Jamaica, and certain qualifying locations in the Philippines. Generally, a Tax Holiday is an agreement between us and a foreign government under which we receive certain tax benefits in that country. In Honduras, we have been granted approval for an indefinite exemption from income taxes. The tax holidays for our qualifying Philippines facilities expire at staggered dates through 2019. Our Tax Holidays could be eliminated if there are future changes in our operations or the governmental authorities approve legislation to modify the Tax Holidays in the various taxing jurisdictions. The aggregate reduction in income tax expense for the years ended December 31, 2016, 2015, and 2014 was $1,136, $1,106, and $1,370.

Under accounting standards for uncertainty in income taxes (ASC 740-10), a company recognizes a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods.

The following table indicates the changes to our unrecognized tax benefits for the years ended December 31, 2016, 2015, and 2014. The term “unrecognized tax benefits” in the accounting standards for income taxes refers to the differences between a tax position taken or expected to be taken in a tax return and the benefit measured and recognized in the financial statements. If recognized, all of these benefits would impact our income tax expense, before consideration of any related valuation allowance.



	Years Ended December 31,
	2016		2015			2014
Unrecognized, January 1,	$	2,962	$	2,215		$	3,502
Additions based on tax positions taken in current year	$	1,193	$	888		$	561
Reductions based on tax positions taken in prior year	$	—	$	(141	)	$	(1,848	)
Unrecognized, December 31,	$	4,155	$	2,962		$	2,215

We file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state jurisdictions, as well as in Canada, the Philippines, Costa Rica and Honduras. Our U.S. federal returns and most state returns for tax years 2013 and forward are subject to examination. Canadian returns for tax years 2012 and forward are subject to examination. Our returns in the Philippines in 2013, Costa Rica in 2012 and Honduras in 2012 are subject to examination. In December 2014, our Canadian subsidiary was notified that its income tax returns for the years ended December 31, 2013 and 2012 are under examination. The Company has received additional correspondence related to the examination, but does not have any additional information on the timing of the resolution of the examination. Also, in May 2016, our Philippine subsidiary received notification that its income tax return for the year ended December 31, 2014 is under examination. The Company has not yet received any additional correspondence related to this examination.