INCOME TAXES

Current and Deferred Income Tax Expense

Domestic and foreign pre-tax income (loss) is as follows:



	Year Ended December 31,
	2015			2014			2013
Domestic	$	(11,675	)	$	(10,858	)	$	(9,705	)
Foreign	1,425			1,416			1,163
Domestic and foreign pre-tax loss	$	(10,250	)	$	(9,442	)	$	(8,542	)

Income tax expense attributable to operations is comprised of the following:



	Year Ended December 31,
	2015		2014		2013
Current:
Federal	$	55	$	55	$	55
State	2		—		(17		)
Foreign	240		374		136
Total current	297		429		174
Deferred:
Foreign	23		89		154
Total deferred	23		89		154
Income tax expense	$	320	$	518	$	328

The reconciliation of the U.S. federal statutory income tax rate to our effective income tax rate is as follows:



	Year Ended December 31,
	2015		2014		2013
Federal statutory rate	34	%	34	%	34	%
Expiration of tax attributes	(18	)	(4	)	(38	)
Change in valuation allowance	(17	)	(39	)	8
Stock-based compensation	(7	)	(2	)	(6	)
State income taxes, net of federal tax benefit	3		3		2
Impact of foreign earnings	1		1		2
Tax contingencies, net of reversals	—		1		(5	)
Other	1		1		(1	)
Effective income tax rate	(3	)%	(5	)%	(4	)%

Deferred Tax Assets, Liabilities and Valuation Allowance

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:



	December 31,
	2015			2014
Deferred tax assets:
Net operating loss carryforwards	$	73,903		$	70,237
Research and experimentation credit carryforwards	11,688			11,026
Foreign tax credit carryforwards	3,884			4,049
Deferred stock-based compensation	2,623			2,794
Depreciation and amortization	1,800			2,046
Reserves and accrued expenses	606			740
Capital loss carryforwards	358			2,212
Other	490			529
Total gross deferred tax assets	95,352			93,633
Deferred tax liabilities:
Foreign earnings	(376		)	(350		)
Other	(317		)	(335		)
Total gross deferred tax liabilities	(693		)	(685		)
Less valuation allowance	(94,524		)	(92,792		)
Net deferred tax assets	$	135		$	156

With the adoption of ASU 2015-17 in the fourth quarter of 2015, we were required to classify all deferred tax assets and liabilities, and any related valuation allowance, as non-current on the balance sheet. We elected to prospectively adopt the accounting standard in the beginning of our fourth quarter of 2015 and prior periods in the consolidated balance sheets were not retrospectively adjusted. Therefore, the current portion of the net deferred tax asset balance was $0 and $133 as of December 31, 2015 and 2014, respectively, and is included in prepaid expenses and other current assets in the consolidated balance sheets. The non-current portion of the net deferred tax asset balance was $135 and $27 as of December 31, 2015 and 2014, respectively, and is included in other assets, net in the consolidated balance sheets. Long-term deferred tax liabilities were $0 and $4 as of December 31, 2015 and 2014, respectively, and are included in long-term liabilities, net of current portion in the consolidated balance sheets.

We continue to record a full valuation allowance against our U.S. net deferred tax assets as of December 31, 2015 and 2014 as it is not more likely than not that we will realize a benefit from these assets in a future period. We have not provided a valuation allowance against any of our foreign net deferred tax assets as we have concluded it is more likely than not that we will realize a benefit from these assets in a future period because our subsidiaries in these jurisdictions are cost-plus taxpayers. The net valuation allowance increased $1,732, increased $3,656 and decreased $705 for the years ended December 31, 2015, 2014, and 2013, respectively.

As of December 31, 2015, we had federal and state net operating loss carryforwards of $214,415 and $16,932 respectively, which will expire between 2016 and 2035. As of December 31, 2015, we had available federal and state research and experimentation tax credit carryforwards of $8,523 and $3,639, respectively, which will begin expiring in 2019. We have a general foreign tax credit of $3,209 which will begin expiring in 2016. Our ability to utilize our federal net operating losses may be limited by Section 382 of the Internal Revenue Code of 1986, as amended, which imposes an annual limit on the ability of a corporation that undergoes an "ownership change" to use its net operating loss carryforwards to reduce its tax liability. An ownership change is generally defined as a greater than 50% point increase in equity ownership by 5% shareholders in any three-year period.

We had undistributed earnings of foreign subsidiaries of $2,577 as of December 31, 2015, for which we have recorded a deferred tax liability.

Our Chinese subsidiary is designated as an Advanced Technology Service Enterprise, allowing it to benefit from a Chinese tax holiday resulting in a reduction of its tax rate to 15% through 2018.

On December 18, 2015, the Protecting Americans From Tax Hikes Act of 2015 was enacted, which permanently extended the research and development tax credit retroactively, beginning on January 1, 2015. The estimated research credit for 2015 has been included in our annual effective tax rate.

On December 19, 2014, the Tax Increase Prevention Act of 2014 was enacted, which retroactively extended the research credit from January 1, 2014 to December 31, 2014. The estimated research credit for 2014 has been included in the calculation of our annual effective tax rate.

The American Taxpayer Relief Act of 2012, which reinstated the United States federal research and development tax credit retroactively from January 1, 2012 through December 31, 2013, was not enacted into law until the first quarter of 2013. Therefore, the deferred tax asset resulting from such reinstatement for 2012 was reflected in 2013.

Uncertain Tax Positions

We have recorded tax reserves to address potential exposures involving positions that could be challenged by taxing authorities. As of December 31, 2015 the amount of our uncertain tax positions was a liability of $1,519 and a reduction to deferred tax assets of $473. As of December 31, 2014, the amount of our uncertain tax positions was a liability of $1,712 and a reduction to deferred tax assets of $160.

The following is a summary of the change in our liability for uncertain tax positions and interest and penalties:



	2015			2014
Uncertain tax positions:
Balance at beginning of year	$	1,646		$	1,592
Accrual for positions taken in a prior year	135			(21		)
Accrual for positions taken in current year	299			249
Reversals due to lapse of statute of limitations	(217		)	(174		)
Balance at end of year	$	1,863		$	1,646
Interest and penalties:
Balance at beginning of year	$	226		$	305
Accrual for positions taken in prior year	9			17
Reversals due to lapse of statute of limitations	(106		)	(96		)
Balance at end of year	$	129		$	226

During the years ended December 31, 2015, 2014 and 2013, we recognized $9, $17 and $27, respectively, of interest and penalties in income tax expense in our consolidated statements of operations.

We file income tax returns in the U.S. and various foreign jurisdictions. A number of years may elapse before an uncertain tax position is resolved by settlement or statute of limitations. Settlement of any particular position could require the use of cash. If the uncertain tax positions we have accrued for are sustained by the taxing authorities in our favor, the reduction of the liability will reduce our effective tax rate. We reasonably expect reductions in the liability for unrecognized tax benefits and interest and penalties of approximately $170 within the next twelve months due to the expiration of statutes of limitation in foreign jurisdictions.

We are no longer subject to U.S. federal, state, and foreign examinations for years before 2012, 2011 and 2008, respectively. Our net operating loss and tax credit carryforwards from all years may be subject to adjustment for three years following the year in which utilized. We do not anticipate that any potential tax adjustments will have a significant impact on our financial position or results of operations.

We were not subject to, nor have we received any notice of, income tax examinations in any jurisdiction as of December 31, 2015. During 2014, we were under examination in Japan for the tax years 2011 through 2013. The tax examination was finalized during 2015 and did not result in a material impact on the Company's financial position, results of operations or cash flows.