

Note 14.	Income Taxes

Components of income (loss) before income taxes (in thousands):



	Years ended December 31,
	2014			2013			2012
United States operations	$	(67,186	)	$	(50,032	)	$	59,807
Foreign operations	(3,349		)	(4,055		)	(2,448		)
Income (loss) before income taxes	$	(70,535	)	$	(54,087	)	$	57,359

Components of income tax expense (benefit) (in thousands):



	Years ended December 31,
	2014			2013			2012
Current:
United States federal	$	547		$	2,460		$	1,372
State and local	69			61			(2,957		)
Foreign	901			1,706			(6,221		)
Total current	1,517			4,227			(7,806		)
Deferred:
United States federal	21			(1,890		)	22,029
State and local	(40		)	51			556
Foreign	(218		)	2,515			(2,261		)
Total deferred	(237		)	676			20,324
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Income tax expense differs from “expected” income tax expense (computed by applying the U.S. federal income tax rate of 35%) due to the following (in thousands):



	Years ended December 31,
	2014			2013			2012
United States federal tax expense (benefit) at statutory rate	$	(24,687	)	$	(18,930	)	$	20,076
State taxes, net of United States federal tax expense (benefit)	(1,083		)	(841		)	(1,098		)
Change in valuation allowance	27,759			25,046			2,136
Non-deductible stock compensation	270			415			341
Impact of non-U.S. jurisdictional tax rate difference	529			487			313
Research and development tax credit	(325		)	(1,632		)	(1,923		)
Increase (reversal) of unrecognized tax benefits	(901		)	671			(7,826		)
Non-U.S. withholding tax	393			1,805			471
Other	(675		)	(2,118		)	28
Total income tax expense (benefit)	$	1,280		$	4,903		$	12,518

Net deferred tax assets are comprised of the following (in thousands):



	December 31,
	2014			2013
Deferred tax assets:
United States federal net operating loss carryforwards	$	66,547		$	41,612
Deferred expenses	2,552			7,166
Research and development tax credit carryforwards	22,979			23,079
Alternative minimum tax credit carryforward	3,626			3,561
Net unrealized loss on investments	97			109
Accrued loss on excess office facilities	—			54
Stock-based compensation	11,398			12,225
State net operating loss carryforwards	8,400			7,392
Foreign net operating loss carryforwards	34,210			37,594
Deferred revenue	401			128
Equipment, software, and leasehold improvements	3,252			2,736
Intangibles	19			27
Other	4,332			4,489
Gross deferred tax assets	157,813			140,172
Less valuation allowance	149,474			128,865
Gross deferred tax assets, net of valuation allowance	$	8,339		$	11,307
Deferred tax liabilities:
Other intangible assets	$	(3,035	)	$	(3,761	)
Net unrealized gains and basis differences on investments	(4,226		)	(6,912		)
Other	(397		)	(560		)
Prepaid expenses	(1,360		)	(814		)
Gross deferred tax liabilities	(9,018		)	(12,047		)
Net deferred tax assets (liabilities)	$	(679	)	$	(740	)

Income tax receivables were $0.1 million and $0.4 million at December 31, 2014 and 2013, respectively.

In 2014, we continued to record a valuation allowance on the deferred tax assets that we believe are not more likely than not to be realized. The net change in valuation allowance was a $20.6 million increase and a $38.1 million increase during the years ended December 31, 2014 and 2013, respectively.

We maintain a valuation allowance of $149.5 million for our deferred tax assets due to uncertainty regarding their realization as of December 31, 2014. The net increase in the valuation allowance since December 31, 2013 of $20.6 million was the result of an increase in current year deferred tax assets for which the Company maintains a valuation allowance.

RealNetworks' U.S. federal net operating loss carryforwards totaled $190.1 million and $118.9 million at December 31, 2014 and 2013, respectively. The increase is mainly due to the current year U.S. taxable loss. The remaining net operating loss carryforwards as of December 31, 2014 are from the U.S. taxable losses in 2010, 2011 and 2013 and from acquired subsidiaries that are limited under Internal Revenue Code Section 382. These net operating loss carryforwards expire between 2024 and 2034.

RealNetworks' alternative minimum tax credit carryforward remained at $3.6 million from December 31, 2013 to December 31, 2014. The alternative minimum tax credit can be carried forward indefinitely.

RealNetworks' U.S. federal research and development tax credit carryforward totaled $23.0 million and $23.1 million at December 31, 2014 and 2013, respectively. The research and development credit carryforwards expire between 2020 and 2034.

As of December 31, 2014 and 2013, we had $3.5 million and $4.5 million of unrecognized tax benefits, respectively. The decrease in unrecognized tax benefits is due to the expiration of the statute of limitations. As of December 31, 2014, there are no unrecognized tax benefits remaining that would affect our effective tax rate if recognized, as the offset would increase the valuation allowance. The total amount of unrecognized tax benefits that would affect our effective tax rate if recognized was $0.4 million in December 31, 2013.

As of December 31, 2014, we have no accrued interest or penalties related to uncertain tax positions. As of December 31, 2013, we had approximately $0.1 million of accrued interest and penalties related to uncertain tax positions. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

Reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits (in thousands):



	Years ended December 31,
	2014			2013			2012
Balance, beginning of year	$	4,505		$	3,978		$	16,721
Increases related to prior year tax positions	—			—			416
Decreases related to prior year tax positions	(196		)	(125		)	(94		)
Settlements with taxing authorities	—			—			(13,065		)
Increases related to current year tax positions	130			652			—
Expiration of the statute of limitations	(898		)	—			—
Balance, end of year	$	3,541		$	4,505		$	3,978