INCOME TAXES

As of December 31, 2015, the Company had a domestic net operating loss carryforward ("NOL"), of approximately $104.8 million, a domestic alternative minimum tax credit of approximately $0.4 million and a domestic research and development tax credit carryforward of approximately $0.4 million for federal tax purposes. The Company's federal NOL is expected to expire as follows if unused: $98.8 million in 2018 through 2022, $5.5 million in 2024 and 2025 and $0.5 million in 2027 and later. The NOL and tax credit carryforwards are subject to alternative minimum tax limitations and to examination by the tax authorities. In addition, the Company had a "change of ownership" as defined under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended (an "Ownership Change").

The Company does not believe this Ownership Change will place a significant restriction on its ability to utilize its NOL in the future. The Company has established a valuation allowance against those NOL's for which it is estimated to be more likely than not that they will expire unutilized.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various foreign, state and local jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. Cash paid for income taxes for the twelve months ended December 31, 2013, 2014 and 2015 was $84 thousand, $272 thousand and $55 thousand, respectively.

The components of income (loss) before income taxes were as follows (in thousands):



	Year Ended December 31,
	2013			2014		2015

Domestic	$	(1,508	)	$	2,837	$	8,325
Foreign	115			113		102
	$	(1,393	)	$	2,950	$	8,427

Temporary differences that give rise to the components of net deferred tax assets are as follows (in thousands):



	December 31,
	2014			2015
Inventory	$	643		$	954
Accrued compensation	124			267
Stock Options	57			344
Research and development	472			440
Alternative minimum tax credit	308			367
Deferred revenue	4,396			3,638
Property and equipment	1,777			1,967
Net operating loss carryforwards – domestic	40,277			37,845
Capital Lease	—			(384		)
Other	(131		)	(8		)
	47,923			45,430
Valuation allowance	(20,713		)	(19,547		)
Total net deferred tax assets	$	27,210		$	25,883

The components of the income tax expense (benefit) are as follows (in thousands):



	Year Ended December 31,
	2013			2014		2015
Current income tax expense:
Federal	$	95		11		$	1,492
State	62			7		65
Foreign	26			29		24
Total current expense	183			47		1,581
Deferred income tax expense (benefit):
Federal	(583		)	1,181		1,043
State	(54		)	123		284
Foreign	—			—		—
Total deferred expense (benefit)	(637		)	1,304		1,327
Total income tax expense (benefit)	$	(454	)	$	1,351	$	2,908

The Company's income tax expense (benefit) relating to income (loss) for the periods presented differs from the amounts that would result from applying the federal statutory rate to that income (loss) as follows:



	Year Ended December 31,
	2013		2014		2015
Statutory federal tax rate	34	%	34	%	34	%
State income taxes, net of federal benefit	3	%	5	%	3	%
Non-controlling interest in Heska Imaging US, LLC	6	%	12	%	(1	)%
Other permanent differences	(10	)%	(3	)%	(1	)%
Change in tax rate	—	%	2	%	(1	)%
Foreign rate difference	(1	)%	—	%	—	%
Change in valuation allowance	(13	)%	78	%	(14	)%
Other	13	%	(82	)%	15	%
Effective income tax rate	32	%	46	%	35	%

ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold before a benefit is recognized in the financial statements. As of December 31, 2015, the Company has not recorded a liability for uncertain tax positions. The Company would recognize interest and penalties related to uncertain tax positions in income tax expense (benefit). No interest and penalties related to uncertain tax positions were accrued at December 31, 2015.