7. Income Taxes

Income (loss) before income tax expense (benefit) consists of the following for the periods shown below (in thousands):

	Year Ended December 31,
	2016			2015			2014
United States	$	(62,037	)	$	(83,432	)	$	(132,280	)
International		(42,694	)		(46,750	)		(100,947	)
Total	$	(104,731	)	$	(130,182	)	$	(233,227	)

Income tax expense (benefit) consists of the following for the periods shown below (in thousands):

	Year Ended December 31,
	2016			2015			2014
Current:
Federal	$	(30	)	$	(30	)	$	(132	)
State		2			(2,863	)		(16	)
Foreign		7,178			3,817			2,777
Total current tax expense		7,150			924			2,629
Deferred:
Federal		(2,809	)		(8,818	)		(6,888	)
State		(20	)		(504	)		(353	)
Foreign		(879	)		(274	)		(2,715	)
Total deferred tax expense (benefit)		(3,708	)		(9,596	)		(9,956	)
Provision for (benefit from) income taxes	$	3,442		$	(8,672	)	$	(7,327	)

The reconciliation of federal statutory income tax provision (benefit) to our effective income tax provision is as follows (in thousands):

	Year Ended December 31,
	2016			2015			2014
Expected benefit at U.S. federal statutory rate	$	(36,656	)	$	(45,564	)	$	(81,630	)
State income taxes - net of federal benefit		2			(2,863	)		(2,681	)
Income taxed at foreign rates		20,112			18,406			33,417
Equity-based compensation		4,295			1,125			2,865
Tax reserve for uncertain tax positions		2,382			1,827			19
Change in valuation allowance		14,786			17,526			37,202
Impact of change in tax rates		69			(18	)		25
Acquisition costs		110			650			2,981
Contingent consideration		(2,781	)		—			—
Other		1,123			239			475
	$	3,442		$	(8,672	)	$	(7,327	)

We have not provided U.S. income taxes and foreign withholding taxes on the undistributed earnings of our profitable foreign subsidiaries as of December 31, 2016 because we intend to permanently reinvest such earnings outside the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability may be reduced by any foreign income taxes previously paid on these earnings. As of December 31, 2016, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $24.0 million.

Our deferred tax assets (liabilities) are as follows (in thousands):

	Year Ended December 31,
	2016			2015
Deferred tax assets:
Net operating loss carryforwards	$	53,474		$	44,551
Tax credit carryforwards		52,564			47,978
Acquired intangible assets		22,714			13,524
Equity based compensation		16,087			24,930
Accrued expenses		8,605			11,593
Other accrued compensation		5,059			1,664
Charitable contributions		4,495			3,930
State taxes		3,168			2,321
Deferred revenue		481			1,309
Other		—			434
Valuation allowance		(164,907	)		(151,808	)
Net deferred tax assets	$	1,740		$	426
Deferred tax liabilities:
Deferred rent		(69	)		(675	)
Depreciation		(7,215	)		(5,777	)
Other		(247	)		—
Net deferred tax liabilities		(7,531	)		(6,452	)
Net deferred taxes	$	(5,791	)	$	(6,026	)

Due to our history of net operating losses, we believe it is more likely than not that certain federal, state, and foreign deferred tax assets will not be realized as of December 31, 2016. The valuation allowance as of December 31, 2016 and December 31, 2015 was $164.9 million and $151.8 million, respectively. The increase in valuation allowance for 2016 is primarily related to net operating losses generated and acquired during the current year.

Net operating loss and tax credit carryforwards as of December 31, 2016 are as follows (in thousands):

	Amount		Expiration years
Net operating losses, federal	$	427,475	2027 - 2036
Net operating losses, state		340,766	2017 - 2036
Tax credits, federal		86,116	2030-2036
Tax credits, state		78,035	2019 - indefinite
Net operating losses, foreign		9,552	2033 - indefinite
Tax credits, foreign		548	indefinite

Excess tax benefits associated with stock option exercises and other equity awards are credited to stockholders' equity in the period cash taxes payable is reduced. As of December 31, 2016, the portion of net operating loss carryforwards related to stock awards is $474.7 million, the benefit of which will be credited to additional paid-in capital when realized. The federal and state net operating loss carryforwards are subject to various annual limitations under Section 382 of the Internal Revenue Code and similar state provisions.

The following table reflects changes in the gross unrecognized tax benefits (in thousands):

December 31, 2013	$	133,491
Additions based on tax positions related to 2014		7,738
Additions for tax positions of prior years		171
Reductions for tax positions of prior years		(511	)
December 31, 2014	$	140,889
Additions based on tax positions related to 2015		8,876
Additions for tax positions of prior years		82
Reductions for tax positions of prior years		(2,817	)
Decreases related to settlements of prior year tax positions		(4,185	)
December 31, 2015	$	142,845
Additions based on tax positions related to 2016		9,043
Additions for tax positions of prior years		68
Reductions for tax positions of prior years		(856	)
December 31, 2016	$	151,100

During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations. The amount of interest and penalties accrued as of December 31, 2016 and 2015 was $0.7 million and $0.6 million, respectively.

If the balance of gross unrecognized tax benefits of $151.1 million as of December 31, 2016 was realized in a future period, this would result in a tax benefit of $10.3 million within our provision of income taxes at such time.

We classify uncertain tax positions as non-current income tax liabilities unless expected to be paid within one year or otherwise directly related to an existing deferred tax asset, in which case the uncertain tax position is recorded net of the asset on the balance sheet. As of December 31, 2016, $98.3 million of our gross unrecognized tax benefits were recorded as a reduction of the related deferred tax assets and the remaining $52.8 million of our gross unrecognized tax benefits were recorded as long-term liabilities in our consolidated balance sheets.

We file income tax returns in the U.S. federal jurisdiction as well as many U.S. states and certain foreign jurisdictions. The material jurisdictions in which we are subject to potential examination include the U.S., United Kingdom, and Ireland. We are subject to examination in these jurisdictions for all years since our inception in 2007. Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years which have been carried forward and may be audited in subsequent years when utilized. We do not expect any material changes to our unrecognized tax benefits within the next twelve months.