Income Taxes

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



	Fiscal Years Ended
	December 31, 2016			December 26, 2015			December 27, 2014
United States	$	(50,947	)	$	(3,069	)	$	(23,230	)
Foreign	752			1,798			3,135
	$	(50,195	)	$	(1,271	)	$	(20,095	)

The components of the provision for income taxes are as follows (in thousands):



	Fiscal Years Ended
	December 31, 2016			December 26, 2015			December 27, 2014
Current provision (benefit):
Federal	$	—		$	(3	)	$	(983	)
State	120			72			(386		)
Foreign	1,804			198			234
	1,924			267			(1,135		)
Deferred provision (benefit):
Federal	(42,150		)	—			—
State	(2,165		)	—			—
Foreign	(1,247		)	(15		)	225
	(45,562		)	(15		)	225
Total provision (benefit) from income taxes	$	(43,638	)	$	252		$	(910	)

The following is a reconciliation of the difference between income taxes computed by applying the federal statutory rate of 35% and the provision (benefit) from income taxes for fiscal 2016, 2015 and 2014 (in thousands):



	Fiscal Years Ended
	December 31, 2016			December 26, 2015			December 27, 2014
U.S. statutory federal tax rate	$	(17,568	)	$	(445	)	$	(7,033	)
State taxes and credits, net of Federal benefit	(975		)	17			(186		)
Amortization of stock-based compensation	1,256			907			686
Research and development credits	(1,654		)	(1,872		)	(1,183		)
Foreign taxes at rates different than the U.S.	504			(66		)	(84		)
Other permanent differences	2,048			238			(972		)
Change in valuation allowance	(27,120		)	1,457			7,886
Other	(129		)	16			(24		)
Total	$	(43,638	)	$	252		$	(910	)

Deferred tax assets and liabilities are recognized for the future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax bases using enacted tax rates in effect for the year in which the differences are expected to be reversed. Significant deferred tax assets and liabilities consist of the following (in thousands):



	Fiscal Years Ended
	December 31, 2016			December 26, 2015
Tax credits	$	33,486		$	30,968
Inventory reserve	13,863			14,010
Unrealized investment gains	—			20
Other reserves and accruals	10,593			5,953
Non-statutory stock options	6,206			4,936
Depreciation and amortization	7,719			13,440
Net operating loss carryforwards	118,482			119,327
Gross deferred tax assets	190,349			188,654
Valuation allowance	(150,581		)	(176,196		)
Total deferred tax assets	39,768			12,458
Acquired intangibles & fixed assets	(39,801		)	(9,177		)
Unrealized investment gains	(289		)	—
Tax on undistributed earnings	(71		)	—
Total deferred tax liabilities	(40,161		)	(9,177		)
Net deferred tax assets (liabilities)	$	(393	)	$	3,281

We are required to evaluate the realizability of our deferred tax assets in both our U.S. and non-U.S. jurisdictions on an ongoing basis to determine whether there is a need for a valuation allowance with respect to such deferred tax assets. During fiscal 2016 and 2015, we maintained a valuation allowance against our U.S. deferred tax assets. We intend to maintain a valuation allowance until sufficient positive evidence exists to support the realization of such deferred tax assets.

The valuation allowance against deferred tax assets consisted of the following activity for the fiscal years 2016, 2015 and 2014 (in thousands):



Description	Balance at Beginning of Year		Additions		Reduction			Balance at End of Year
Allowance against deferred tax assets
Year ended December 31, 2016	$	176,196	$	—	$	(25,615	)	$	150,581
Year ended December 31, 2015	187,759		—		(11,563		)	176,196
Year ended December 31, 2014	$	180,913	$	6,846	$	—		$	187,759

At December 31, 2016, we had Federal research and development tax credit, Federal net operating loss, and foreign tax credit carryforwards of $22.5 million, $298.7 million and $2.2 million, respectively, which will expire at various dates from 2017 through 2036. We had alternative minimum tax credits of $2.4 million which do not expire. We had California and Oregon research credits of $29.9 million and $0.6 million, respectively. The California research credit can be carried forward indefinitely while Oregon research credits expire at various dates from 2017 through 2022. We had state net operating loss carryforwards of approximately $271.7 million, which will expire at various dates from 2017 through 2036. We had Singapore net operating loss carryforwards of approximately $9.7 million, which can be carried forward indefinitely.

We have not provided U.S. Federal and State income taxes, nor foreign withholding taxes, on approximately $20.2 million of undistributed earnings for certain non-US subsidiaries, because such earnings are intended to be indefinitely reinvested. If these earnings were distributed to the U.S. in the form of dividends or otherwise, or if the shares of the relevant foreign subsidiaries were sold or otherwise transferred, we would be subject to additional U.S. income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes, of approximately $0.4 million. Determination of the amount of unrecognized deferred tax liability for temporary differences related to investment in these non-U.S. subsidiaries that are essentially permanent in duration is not practicable.

During fiscal 2016 and 2015, there were $1.8 million and $6.3 million, respectively, of unrecognized tax benefit associated with the exercise of employee stock options and other employee stock programs. During fiscal 2014, there were no tax benefits associated with the exercise of employee stock options and other employee stock programs.

The following table reflects changes in the unrecognized tax benefits (in thousands):



	Fiscal Years Ended
	December 31, 2016			December 26, 2015			December 27, 2014
Unrecognized tax benefit beginning balance	$	17,033		$	16,333		$	16,972
Additions based on tax positions related to the current year	614			667			498
Additions based on tax position from prior year	450			163			324
Reductions for tax positions of prior years	—			(18		)	(1,109		)
Reductions to unrecognized tax benefits due to lapse of the applicable statute of limitations	(119		)	(112		)	(352		)
Unrecognized tax benefit ending balance	$	17,978		$	17,033		$	16,333

At December 31, 2016, we had total tax-effected unrecognized tax benefits of $18.0 million of which $1.3 million, if recognized, would impact the effective tax rate.

We recognize interest (benefit) charges and penalties related to uncertain tax positions as part of the income tax provision. We recognized interest (benefit) charges and penalties of $22 thousand, $50 thousand and $(0.1) million in fiscal 2016, 2015, and 2014, respectively. As of December 31, 2016 and December 26, 2015, we have accrued total interest charges and penalties of $0.2 million and $0.2 million, respectively, related to uncertain tax positions.

The amount of income taxes we pay is subject to ongoing audits by Federal, State and foreign tax authorities which might result in proposed assessments. Our estimate for the potential outcome for any uncertain tax issue is judgmental in nature. However, we believe we have adequately provided for any reasonably foreseeable outcome related to those matters. Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire. As of December 31, 2016, changes to our uncertain tax positions in the next 12 months that are reasonably possible are not expected to have a significant impact on our financial position or results of operations.

We and our subsidiaries file income tax returns in the U.S. Federal jurisdiction, various states and non U.S. jurisdictions. The material income tax jurisdictions are the United States (Federal), California, Germany, Singapore, China and Japan. The audit of income tax returns for Federal and California for the tax years 2010 to 2012 stub period and 2010 to 2011, respectively, have been settled. However, as a result of net operating loss carryforwards, we are subject to audit for tax years 2007 and forward for Federal purposes and 2008 and forward for California purposes. For Germany, Singapore, China and Japan purposes, we are subject to audit for tax years after 2012.