Income Tax

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Tax

13. Income Tax

For financial reporting purposes, loss before income taxes included the following components for the years ended December 31, 2014, 2013, and 2012 (in thousands):

	For the Years Ended December 31,
	2014			2013			2012
United States	$	(78,075	)	$	(108,901	)	$	(31,243	)
Foreign		(5,280	)		(1,281	)		(435	)
Loss before income taxes	$	(83,355	)	$	(110,182	)	$	(31,678	)

Significant components of the provision for income taxes for the years ended December 31, 2014, 2013, and 2012, are as follows (in thousands):

	For the Years Ended December 31,
	2014		2013		2012
Current:
Federal	$	—	$	—	$	—
State		355		286		233
		355		286		233
Deferred:
Federal		764		758		742
State		64		63		61
		828		821		803
Total	$	1,183	$	1,107	$	1,036

The provision for income taxes differs from income taxes computed at the federal statutory tax rates for the years ended December 31, 2014, 2013, and 2012 as a result of the following items:

	For the Years Ended December 31,
	2014			2013			2012
Federal statutory rate		35.0	%		35.0	%		35.0	%
Effect of:
Change in valuation allowance		(37.9	)		(25.7	)		(45.6	)
State income taxes-net of federal tax benefit		2.3			1.7			2.8
Fair value derivative adjustments		—			(11.7	)		10.7
Write off of deferred equity financing costs		—			—			(5.6	)
Other		(0.8	)		(0.3	)		(0.6	)
Effective tax rate		(1.4	)%		(1.0	)%		(3.3	)%

Components of the net deferred income tax asset as of December 31, 2014 and 2013 are as follows (in thousands):

	December 31, 2014			December 31, 2013
Deferred income tax assets:
Compensation accruals	$	4,103		$	6,021
Stock options		6,683			4,041
Inventory		265			243
Warranty reserves		411			333
Deferred rent		6,802			1,795
Deferred revenue		34,725			22,592
Federal net operating loss (NOL)		88,137			63,731
State NOL		7,059			5,228
UNICAP adjustment		4,610			3,611
Finite-lived intangible assets		18,018			19,487
Other		4,264			2,210
Total deferred income tax assets		175,077			129,292
Deferred income tax liabilities:
Fixed assets		(27,071	)		(13,141	)
Indefinite-lived intangible assets		(6,598	)		(5,770	)
Other		(71	)		(111	)
Total deferred income tax liabilities		(33,740	)		(19,022	)
Total deferred income tax		141,337			110,270
Valuation allowance		(147,935	)		(116,040	)
Net deferred income tax liability	$	(6,598	)	$	(5,770	)

We assess the realizability of the deferred tax assets by considering whether it is more likely than not that some portion or all of the deferred tax assets would not be realized through the generation of future taxable income. We generated net losses in fiscal years 2014, 2013, and 2012, which means we are in a domestic three-year cumulative loss position. As a result of this and other assessments in fiscal 2014, we concluded that a full valuation allowance is required for all deferred tax assets and liabilities except for deferred tax liabilities associated with indefinite-lived intangible assets.

As of December 31, 2014, the federal net operating loss (“NOL”) carryforward amount was approximately $248 million and the state NOL carryforward amount was approximately $155 million. The federal NOLs begin to expire in 2031. The state NOLs expire in various tax years beginning in 2016.

Utilization of our NOL and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the NOL and tax credit carryforwards before their utilization. The events that may cause ownership changes include, but are not limited to, a cumulative stock ownership change of greater than 50% over a three-year period.

We are subject to taxation in the United States, Canada, Switzerland, Japan and various states. With few exceptions, as of December 31, 2014, we are no longer subject to U.S. federal, state, local or foreign examinations by tax authorities for years before 2011.

	For the Years Ended December 31,
	2014		2013			2012
Unrecognized tax benefits—January 1	$	—	$	223		$	—
Additions based on tax positions related to the prior year		—		—			223
Reductions based on tax positions related to the prior year		—		(223	)		—
Unrecognized tax benefits—December 31	$	—	$	—		$	223

We record penalties and interest relating to uncertain tax positions in the income tax provision line item in the consolidated statement of operations. No penalties or interest related to uncertain tax positions were recorded for the years ended December 31, 2014, 2013 or 2012. As of December 31, 2014 and 2013, we did not have a liability recorded for interest or potential penalties.

We do not expect there will be a change in the unrecognized tax benefits within the next 12 months.

In 2013 and 2014, the IRS issued final regulations that provide guidance with respect to (i) the treatment of material and supplies, (ii) capitalization of amounts paid to acquire or produce tangible property, (iii) the determination of whether an expenditure with respect to tangible property is a deductible repair or a capital expenditure and (iv) dispositions of MACRS property. The adoption of these final regulations did not have a material impact on our results of operations, financial position, or cash flows.