

Note 14.	Income Taxes

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



	Years ended December 31,
	2015			2014			2013
United States operations	$	(76,450	)	$	(67,186	)	$	(50,032	)
Foreign operations	(6,231		)	(3,349		)	(4,055		)
Income (loss) before income taxes	$	(82,681	)	$	(70,535	)	$	(54,087	)

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



	Years ended December 31,
	2015			2014			2013
Current:
United States federal	$	176		$	547		$	2,460
State and local	(44		)	69			61
Foreign	592			901			1,706
Total current	724			1,517			4,227
Deferred:
United States federal	(1,636		)	21			(1,890		)
State and local	1			(40		)	51
Foreign	77			(218		)	2,515
Total deferred	(1,558		)	(237		)	676
Total income tax expense (benefit)	$	(834	)	$	1,280		$	4,903

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,
	2015			2014			2013
United States federal tax expense (benefit) at statutory rate	$	(28,938	)	$	(24,687	)	$	(18,930	)
State taxes, net of United States federal tax expense (benefit)	(1,240		)	(1,083		)	(841		)
Change in valuation allowance	27,821			27,759			25,046
Non-deductible stock compensation	218			270			415
Impact of non-U.S. jurisdictional tax rate difference	648			529			487
Research and development tax credit	(243		)	(325		)	(1,632		)
Increase (reversal) of unrecognized tax benefits	(1,269		)	(901		)	671
Non-U.S. withholding tax	141			393			1,805
Other	2,028			(675		)	(2,118		)
Total income tax expense (benefit)	$	(834	)	$	1,280		$	4,903

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



	December 31,
	2015			2014
Deferred tax assets:
United States federal net operating loss carryforwards	$	84,426		$	66,547
Deferred expenses	1,591			2,552
Research and development tax credit carryforwards	24,442			22,979
Alternative minimum tax credit carryforward	3,626			3,626
Net unrealized loss on investments	97			97
Accrued loss on excess office facilities	959			—
Stock-based compensation	11,441			11,398
State net operating loss carryforwards	10,079			8,400
Foreign net operating loss carryforwards	30,657			34,210
Deferred revenue	82			401
Equipment, software, and leasehold improvements	4,263			3,252
Intangibles	12			19
Other	5,150			4,332
Gross deferred tax assets	176,825			157,813
Less valuation allowance	173,872			149,474
Gross deferred tax assets, net of valuation allowance	$	2,953		$	8,339
Deferred tax liabilities:
Other intangible assets	$	(404	)	$	(3,035	)
Net unrealized gains and basis differences on investments	(78		)	(4,226		)
Other	(218		)	(397		)
Prepaid expenses	(1,384		)	(1,360		)
Gross deferred tax liabilities	(2,084		)	(9,018		)
Net deferred tax assets (liabilities)	$	869		$	(679	)

Income tax receivables were $0.1 million and $0.1 million at December 31, 2015 and 2014, respectively.

In 2015, 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 $24.4 million increase and a $20.6 million increase during the years ended December 31, 2015 and 2014, respectively.

We maintain a valuation allowance of $173.9 million for our deferred tax assets due to uncertainty regarding their realization as of December 31, 2015. The net increase in the valuation allowance since December 31, 2014 of $24.4 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 $241.2 million and $190.1 million at December 31, 2015 and 2014, respectively. The increase is mainly due to the current year U.S. taxable loss. The remaining net operating loss carryforwards as of December 31, 2015 are from prior U.S. taxable losses and from acquired subsidiaries that are limited under Internal Revenue Code Section 382. These net operating loss carryforwards expire between 2024 and 2035.

RealNetworks' alternative minimum tax credit carryforward remained at $3.6 million from December 31, 2014 to December 31, 2015. The alternative minimum tax credit can be carried forward indefinitely.

RealNetworks' U.S. federal research and development tax credit carryforward totaled $24.4 million and $23.0 million at December 31, 2015 and 2014, respectively. The research and development credit carryforwards expire between 2020 and 2035.

As of December 31, 2015 and 2014, we had $0.3 million and $3.5 million of unrecognized tax benefits, respectively. The decrease in unrecognized tax benefits is the result of the defense of our positions, and ultimate settlement and closure of a United States federal tax examination. As of December 31, 2015, there are no unrecognized tax benefits remaining that would affect our effective tax rate if recognized, as the offset would increase the valuation allowance. We do not anticipate that the total amount of unrecognized tax benefits will significantly change within the next twelve months.

We recognize interest and penalties related to unrecognized tax benefits within the provision for income taxes. As of December 31, 2015, and 2014 we have no accrued interest or penalties related to uncertain tax positions.

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



	Years ended December 31,
	2015			2014			2013
Balance, beginning of year	$	3,541		$	4,505		$	3,978
Decreases related to prior year tax positions	(33		)	(196		)	(125		)
Settlements with taxing authorities	(3,285		)	—			—
Increases related to current year tax positions	97			130			652
Expiration of the statute of limitations	—			(898		)	—
Balance, end of year	$	320		$	3,541		$	4,505