Income Taxes

Income (loss) from continuing operations before provision for income taxes during fiscal year 2017, 2016 and 2015 consisted of the following:



	Fiscal Year
(In thousands)	2017			2016			2015
United States	$	10,979		$	(4,248	)	$	(18,603	)
Foreign	(11,584		)	(24,295		)	(7,355		)
Total loss from continuing operations before income taxes	$	(605	)	$	(28,543	)	$	(25,958	)

Provision for (benefit from) income taxes from continuing operations for fiscal year 2017, 2016 and 2015 were summarized as follows:



	Fiscal Year
(In thousands)	2017			2016			2015
Current provision (benefit):
Federal	$	(14	)	$	131		$	—
Foreign	(52		)	1,814			3,378
State and local	7			24			23
	(59		)	1,969			3,401
Deferred provision (benefit):
Federal	168			(468		)	(216		)
Foreign	(93		)	134			(4,495		)
	75			(334		)	(4,711		)
Total provision for (benefit from) income taxes from continuing operations	$	16		$	1,635		$	(1,310	)

The provision for (benefit from) income taxes from continuing operations differed from the amount computed by applying the federal statutory rate of 35% to our income before provision for income taxes as follows:



	Fiscal Year
(In thousands)	2017			2016			2015
Tax benefit at statutory rate	$	(196	)	$	(9,990	)	$	(9,065	)
Valuation allowances	(1,346		)	6,609			(3,900		)
Foreign non-deductible expenses	628			103			(80		)
State and local taxes, net of U.S. federal tax benefit	358			(134		)	(500		)
Foreign income taxed at rates less than the U.S. statutory rate	2,062			6,019			9,970
Dividend from foreign subsidiary	—			(1,781		)	—
Foreign branch income/withholding taxes	1,116			292			1,350
Singapore refund	(3,778		)	—			—
Change in uncertain tax positions	1,173			437			610
Other	(1		)	80			305
Total provision for (benefit from) income taxes from continuing operations	$	16		$	1,635		$	(1,310	)

The income tax expense (benefit) from continuing operations was $16 thousand of expense for fiscal 2017, $1.6 million of expense for fiscal 2016 and $1.3 million of benefit for fiscal 2015. The difference between our income tax expense (benefit) from continuing operations and income tax expense at the statutory rate of 35% was primarily attributable to losses in tax jurisdictions in which we cannot recognize a tax benefit and increase in foreign withholding taxes. During fiscal 2017, we recorded a $3.7 million tax benefit from the audit assessment refund received from the Inland Revenue Authority of Singapore. During fiscal 2015, we released approximately $4.4 million of the deferred tax valuation allowance in jurisdictions where management believed the utilization of deferred tax assets was more likely than not based on the weighting of positive and negative evidence.

The components of deferred tax assets and liabilities were as follows:



(In thousands)	June 30, 2017			July 1, 2016
Deferred tax assets:
Inventory	$	4,390		$	6,652
Accruals and reserves	2,611			2,497
Bad debts	669			1,091
Amortization	1,870			3,148
Stock compensation	2,266			2,599
Deferred revenue	3,127			1,759
Unrealized exchange gain/loss	3,295			3,422
Other	3,715			6,623
Tax credit carryforwards	15,337			18,016
Tax loss carryforwards	168,115			167,468
Total deferred tax assets before valuation allowance	205,395			213,275
Valuation allowance	(197,951		)	(202,824		)
Total deferred tax assets	7,444			10,451
Deferred tax liabilities:
Branch undistributed earnings reserve	990			822
Depreciation	1,501			4,596
Other	456			462
Total deferred tax liabilities	2,947			5,880
Net deferred tax assets	$	4,497		$	4,571

As Reported on the Consolidated Balance Sheets
Deferred income tax assets	$	6,178		$	6,068
Deferred income tax liabilities	1,681			1,497
Total net deferred income taxes	$	4,497		$	4,571

Our valuation allowance related to deferred income taxes, as reflected in our consolidated balance sheets, was $198.0 million as of June 30, 2017 and $202.8 million as of July 1, 2016. The decrease in valuation allowance in fiscal 2017 was primarily due to the release of valuation allowance in certain foreign jurisdictions, partially offset by losses in tax jurisdictions in which we cannot recognize tax benefits.

Tax loss and credit carryforwards as of June 30, 2017 have expiration dates ranging between one year and no expiration in certain instances. The amount of U.S. federal tax loss carryforwards as of June 30, 2017 and July 1, 2016 were $339.8 million and $345.3 million, respectively, and begin to expire in fiscal 2023. The amount of U.S. federal and state tax credit carryforwards as of June 30, 2017 were $16.4 million, and certain credits will begin to expire in fiscal 2018. The amount of foreign tax loss carryforwards as of June 30, 2017 was $232.1 million and certain losses begin to expire in fiscal 2018. The amount of foreign tax credit carryforwards as of June 30, 2017 were $4.4 million, and certain credits will begin to expire in fiscal 2023.

United States income taxes have not been provided on basis differences in foreign subsidiaries of $5.0 million and $5.6 million, respectively, as of June 30, 2017 and July 1, 2016, because of our intention to reinvest these earnings indefinitely. The residual U.S. tax liability, if such amounts were remitted, would be nominal.

We entered into a tax sharing agreement with Harris effective on January 26, 2007, the date of the acquisition of Stratex. The tax sharing agreement addresses, among other things, the settlement process associated with pre-merger tax liabilities and tax attributes that are attributable to the Microwave Communication Division when it was a division of Harris. There were no settlement payments recorded in fiscal year 2017, 2016 or 2015.

As of June 30, 2017 and July 1, 2016, we had unrecognized tax benefits of $18.7 million and $27.0 million, respectively, for various federal, foreign, and state income tax matters. Unrecognized tax benefits decreased by $8.3 million. Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $2.5 million and $1.4 million, respectively, as of June 30, 2017 and July 1, 2016. These unrecognized tax benefits are presented on the accompanying consolidated balance sheets net of the tax effects of net operating loss carryforwards.

We account for interest and penalties related to unrecognized tax benefits as part of our provision for income taxes. The interest accrued was $0.2 million as of June 30, 2017 and immaterial as of July 1, 2016. No penalties have been accrued.

Our unrecognized tax benefit activity for fiscal 2017, 2016 and 2015 was as follows:



(In thousands)	Amount
Unrecognized tax benefit as of June 27, 2014	$	28,209
Additions for tax positions in prior periods	673
Decreases for tax positions in prior periods	(227		)
Decreases related to change of foreign exchange rate	(1,745		)
Unrecognized tax benefit as of July 3, 2015	26,910
Additions for tax positions in current periods	397
Additions for tax positions in prior periods	246
Decreases related to change of foreign exchange rate	(515		)
Unrecognized tax benefit as of July 1, 2016	27,038
Additions for tax positions in prior periods	626
Additions for tax positions in current periods	831
Decreases for tax positions in prior periods	(9,279		)
Decreases related to change of foreign exchange rate	(477		)
Unrecognized tax benefit as of June 30, 2017	$	18,739

During the fiscal year 2014, we received an assessment letter from the Inland Revenue Authority of Singapore (“IRAS”) related to deductions claimed in prior years and made a payment of $13.2 million related to tax years 2007 through 2010, reflecting all of the taxes incrementally assessed by IRAS. While we disagreed with the IRAS assessment, the payment was a required step in order to continue our appeal. Since the initial assessment, we have continued to challenge this assessment. During the first quarter of fiscal year 2017, we received an initial refund of $3.7 million from IRAS and recognized a discrete benefit in the first quarter of fiscal year 2017. During the first quarter of fiscal 2018, we received an additional refund of $1.3 million from IRAS which represents a final settlement. We will recognize the refund as a discrete tax benefit in the first quarter of fiscal 2018. During the next twelve months, it is reasonably possible that our unrecognized tax benefits will be impacted by up to $3.0 million.

We have a number of years with open tax audits which vary from jurisdiction to jurisdiction. Our major tax jurisdictions include the U.S., Singapore, Nigeria and the Ivory Coast. The earliest years still open and subject to potential audits for these jurisdictions are as follows: U.S. —2003; Singapore — 2006; Nigeria — 2011, and Ivory Coast — 2016.