Income Taxes

The components of the Company’s income tax provision are as follows (in thousands):



	Year Ended December 31,
	2015		2014		2013
Current:
Federal	$	—	$	—	$	—
State	25		63		7
Total current provision	25		63		7
Deferred:
Federal	547		540		504
State	34		37		68
Total deferred provision	581		577		572
Total income tax provision	$	606	$	640	$	579

As described below, the Company has established a valuation allowance against its net deferred tax assets as the Company has determined that it is more likely than not that the deferred tax assets will not be realized. The Company’s 2015, 2014, and 2013 income tax provisions of $0.6 million primarily reflect the amortization of tax deductible goodwill that is not an available source of income to realize deferred tax assets.

The overall effective income tax rate differs from the statutory federal rate of 34% as follows:



	Year Ended December 31,
	2015		2014		2013
Income tax benefit based on the federal statutory rate	34.0	%	34.0	%	34.0	%
State income taxes, net of federal benefit	2.4		2.0		(0.9	)
Nondeductible expenses	(0.3	)	(0.7	)	(1.5	)
Change in valuation allowance	(30.7	)	(34.7	)	(26.3	)
Stock-based compensation	(6.4	)	(2.0	)	(8.3	)
Other	0.1		0.1		0.6
Overall effective income tax rate	(0.9	)%	(1.3	)%	(2.4	)%

The components of deferred tax assets (liabilities) are as follows (in thousands):



	December 31,
	2015			2014
Deferred income tax assets:
Net operating loss carryforwards	$	70,358		$	56,957
Stock-based compensation	25,057			18,648
Accrued expenses	4,160			1,932
Research and development tax credits	610			610
Other	298			277
Gross deferred tax assets	100,483			78,424
Valuation allowance	(84,167		)	(64,449		)
Net deferred tax assets	16,316			13,975
Deferred tax liabilities:
State taxes	(4,589		)	(3,802		)
Property, equipment and software	(6,974		)	(3,985		)
Intangible assets and goodwill	(7,166		)	(8,020		)
Gross deferred tax liabilities	(18,729		)	(15,807		)
Total net deferred tax liabilities	$	(2,413	)	$	(1,832	)

The net deferred tax liability at December 31, 2015 and 2014 relates to amortization of tax deductible goodwill that is not an available source of income to realize deferred tax assets. Accordingly, the net deferred tax liability does not reduce the need for a valuation allowance related to the Company’s net deferred tax assets.

At December 31, 2015, the Company had federal and state net operating loss carryforwards of $221.2 million and $156.5 million, respectively. The Company’s federal and state net operating loss carryforwards begin to expire in the years ending December 31, 2025 and 2016, respectively. At December 31, 2015, the Company had federal and state research and development tax credit carryforwards of approximately $0.8 million and $0.4 million, respectively. The federal tax credit carryforwards begin to expire in the year ending December 31, 2028. The state tax credit carryforward can be carried forward indefinitely.

The Internal Revenue Code of 1986, as amended, imposes substantial restrictions on the utilization of net operating losses and other tax attributes in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use pre-change net operating loss and research tax credits may be limited as prescribed under IRC Sections 382 and 383. Events which may cause limitation in the amount of the net operating losses and credits that the Company utilizes in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. As a result of historical equity issuances, the Company has determined that annual limitations on the utilization of its net operating losses and credits do exist pursuant to IRC Sections 382 and 383, however, such limitations are not expected to impact the Company’s ability to utilize these deferred tax assets prior to their statutory expiration dates.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2015. Such objective evidence limits the ability to consider other subjective evidence such as its projections for future growth. On the basis of this evaluation, at December 31, 2015, a valuation allowance of $84.2 million has been recorded since it is more likely than not that the deferred tax assets will not be realized.

The change in the valuation allowance for the years ended December 31, 2015, 2014, and 2013 is as follows (in thousands):



	Year Ended December 31,
	2015		2014		2013
Valuation allowance, at beginning of year	$	64,449	$	47,858	$	41,412
Increase in valuation allowance	19,718		16,591		6,446
Valuation allowance, at end of year	$	84,167	$	64,449	$	47,858

As a result of certain realization requirements of ASC 718, Compensation — Stock Compensation, the table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2015 and 2014 that arose directly from (or the use of which was postponed by) tax deductions related to stock-based compensation that are greater than the compensation recognized for financial reporting purposes. The gross and tax-effected amount of unrealized net operating loss carryforwards resulting from excess stock-based compensation tax benefits was $49.0 million and $18.0 million, respectively, at December 31, 2015. Additional paid-in capital will be increased by $18.0 million if and when such deferred tax assets are ultimately realized. The Company uses the with-and-without approach when determining when excess tax benefits have been realized.

The following is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):



	Year Ended December 31,
	2015			2014			2013
Unrecognized tax benefit, beginning of year	$	46		$	(4	)	$	(4	)
Additions based on current year tax positions	—			21			—
Additions for prior years' tax positions	—			29			—
Settlements with tax authorities	(13		)	—			—
Reductions for prior years' tax positions	(30		)	—			—
Unrecognized tax benefit, end of year	$	3		$	46		$	(4	)

Since there is a full valuation allowance recorded against the deferred tax assets, any subsequent reductions of the valuation allowance and recognition of the associated tax benefit would impact the effective tax rate.

The Company’s policy is to recognize interest and penalties related to uncertain tax positions, if any, in the income tax provision. At December 31, 2015, accrued interest and penalties related to uncertain tax positions were insignificant. The Company does not anticipate that the amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

The Company is subject to United States federal and state taxation. Due to the presence of net operating loss carryforwards, all income tax years remain open for examination by the Internal Revenue Service (“IRS”) and various state taxing authorities. During 2015, the Company concluded its IRS and state tax examinations for the 2011 and 2012 tax years, and the 2010 through 2012 tax years, respectively. These tax examinations did not result in material tax assessments, and the Company believes its income tax accruals as of December 31, 2015 are reasonable.