INCOME TAXES

The domestic and foreign components of income before tax for our operations for the years ended December 31, 2015, 2014 and 2013 are summarized below:



	2015			2014			2013
Domestic	$	(16,167	)	$	(706	)	$	6,339
Foreign	(9,922		)	6,545			3,470

	$	(26,089	)	$	5,839		$	9,809

The components of the provision (benefit) for income taxes for the years ended December 31, 2015, 2014 and 2013 are as follows:



	2015			2014			2013
Current - Federal	$	(3,005	)	$	378		$	1,144
Current - State	55			16			93
Current - Foreign	1,557			3,774			3,020

Current income tax expense (benefit)	(1,393		)	4,168			4,257

Deferred - Federal	1,149			(236		)	658
Deferred - State	217			(82		)	(64		)
Deferred - Foreign	(2,091		)	63			(1,115		)

Deferred income tax benefit	(725		)	(255		)	(521		)

Income tax provision (benefit)	$	(2,118	)	$	3,913		$	3,736

A reconciliation of our income tax provision computed by applying the Federal statutory income tax rate of 35% in December 31, 2015, 2014, and 2013 to income before taxes is as follows:



	2015			2014			2013
Statutory U.S. federal income tax	$	(9,131	)	$	2,042		$	3,401
U.S. state income tax, net of federal benefit	(340		)	(15		)	85
Foreign rate differential	692			(1,558		)	(1,259		)
Domestic production activities deduction	—			(21		)	(211		)
Tax audit adjustments	—			(338		)	812
Intercompany distributions	—			16			2,239
Foreign equity compensation	224			338			234
Deemed repatriation of foreign earnings	810			—			(908		)
Current year tax credits	—			(156		)	(628		)
Impairment of goodwill	498			—			—
Other	(1,513		)	(132		)	(102		)
Change in valuation allowances	6,642			3,737			73

Provision for income taxes	$	(2,118	)	$	3,913		$	3,736

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Additionally, a three-year cumulative loss at a consolidated financial statements level may be viewed as negative evidence impacting a jurisdiction that by itself is not in a three-year cumulative loss position. At December 31, 2015, the company is in a consolidated three-year cumulative loss position. Accordingly, we have evaluated the impact on all jurisdictions and have recorded a valuation allowance against the corresponding net deferred tax assets totaling $9,357 as of December 31, 2015. We recorded valuation allowances in the amounts of $6,642 and $3,737 in 2015 and 2014, respectively. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods if positive evidence such as current and expected future taxable income outweighs negative evidence.

In January 2013, the United States Congress authorized, and the President signed into law, legislation which retroactively changed federal tax laws for 2012. Since this legislation was enacted in 2013, the financial statement benefit from these changes, totaling $908, was reflected in the provision for income taxes in the consolidated statement of operations during the twelve months ended December 31, 2013.

Our deferred tax assets and liabilities at December 31, 2015 and 2014 consist of the following:



	2015			2014
Deferred tax assets:
Net foreign operating loss carryforward	$	8,162		$	6,932
Inventory differences	1,044			2,337
Equity compensation	704			836
Investment in subsidiaries	903			935
Restructuring	2,166			1,265
Other, net	499			418
Gross deferred tax assets	13,478			12,723
Less valuation allowances	(9,357		)	(3,032		)
Total deferred tax assets	4,121			9,691

Deferred tax liabilities:
Purchased intangible assets	(4,821		)	(9,813		)
Depreciation and amortization	(1,322		)	(2,476		)
Other, net	(97		)	(220		)
Total deferred tax liabilities	(6,240		)	(12,509		)

Net deferred tax liabilities	$	(2,119	)	$	(2,818	)

As of December 31, 2015, we had loss carryforwards for tax purposes totaling approximately $55,900, comprised of $46,690 foreign and $9,210 domestic state loss carryforwards, which will be available to offset future taxable income due to laws in certain foreign jurisdictions. If not used, the foreign tax loss carryforwards generally may be carried forward indefinitely or have at least a ten-year carryforward period. We have analyzed the foreign net operating losses and placed valuation allowance on those where we have determined the realization is not more likely than not to occur.

As a result of stock-based compensation in December 31, 2015 we decreased additional paid-in-capital by $303 for the tax impact and in December 31, 2014, and 2013, we increased additional paid-in-capital by $106, and decreased additional paid-in-capital by $907, respectively, for the tax impact. To the extent these adjustments reduced taxes currently payable, they are not reflected in the current income tax provision for those years.

As of December 31, 2015, 2014 and 2013, income considered to be permanently reinvested in non-U.S. subsidiaries totaled approximately $30,726, $37,772 and $37,795, respectively. Deferred income taxes have not been provided on this undistributed income, as we do not plan to initiate any action that would require the payment of U.S. income taxes on these earnings. It is not practical to estimate the amount of additional taxes that might be payable on these amounts of undistributed foreign income.

At December 31, 2015 and 2014, the balance of unrecognized tax benefits was $0. We recognize interest and penalties related to uncertain tax positions in operating expense. As of December 31, 2015 and 2014, our accrual for interest and penalties related to uncertain tax positions was $0.

DMC files income tax returns in the U.S. federal jurisdiction, as well as various U.S. state and foreign jurisdictions. No income tax examinations are currently in progress either in the U.S. or any foreign jurisdiction. In the fourth quarter of 2015, German tax authorities announced an examination of the tax returns of our German tax authorities for the 2011 through 2014 tax years. This examination is expected to commence in the spring or summer of 2016.

Tax returns of our German subsidiaries were under routine examination by the German tax authorities for most of 2013. During 2013, German tax authorities proposed and we agreed to a settlement. The key provisions of the settlement resulted in a net reduction of the subsidiaries' loss carryforwards, which reduced the non-current deferred tax assets associated with these carryforwards that were recorded on our books. We recorded an additional $812 in income tax expense to reflect these reductions. DMC’s U.S. Federal tax returns for the tax years 2012-2015 remain open to examination while most of DMC’s state tax returns remain open to examination for the tax years 2011-2015. DMC’s foreign tax returns generally remain open to examination for the tax years 2011-2015, depending on jurisdiction.