8. Income Taxes

The components of current and deferred federal and state income tax (benefits) provision are as follows:

	Year Ended March 31,
	2017			2016		2015
	(In thousands)
Current income tax provision:
Federal	$	71		$	170	$	3
State		62			50		49
Deferred income tax provision (benefit):
Federal		(166	)		8,289		(655	)
State		(11	)		570		(213	)

Net income tax (benefit) provision	$	(44	)	$	9,079	$	(816	)

The components of income tax (benefit) expense consist of the following:

	Year Ended March 31,
	2017			2016			2015
	(In thousands)
Current income tax expense	$	133		$	220		$	52
Deferred income tax expense (benefit)		1,061			1,232			(781	)
Benefit of operating loss carryforwards		(1,238	)		(1,316	)		(87	)
Recording of valuation allowance		—			8,943			—

Net income tax (benefit) provision	$	(44	)	$	9,079		$	(816	)

The reconciliation of our income tax (benefit) provision to taxes computed at U.S. federal statutory rates is as follows:

	Year Ended March 31,
	2017			2016			2015
	(In thousands)
(Benefit) for income taxes at statutory rates	$	(1,778	)	$	(1,175	)	$	(712	)
State income taxes net of federal benefit		(124	)		(184	)		(108	)
Impairment charges		737			—			—
Tax credits		(125	)		(258	)		(148	)
Change in fair value of contingent acquisition consideration		—			—			3
Compensation charges		29			91			88
Change in valuation allowance		1,148			10,557			—
Other		69			48			61

(Benefit) provision for income taxes	$	(44	)	$	9,079		$	(816	)

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

	March 31,
	2017			2016
	(In thousands)
Deferred tax assets:
Net operating losses	$	830		$	2,468
Capitalized R&D		5,003			3,557
Credit carry forwards		2,387			2,130
Deferred compensation and payroll		2,064			1,306
Bad debt allowance and other reserves		820			665
Deferred rent		313			335
Property and equipment		521			—
Other, net		255			242

Total deferred tax assets		12,193			10,703
Valuation allowance		(11,726	)		(10,561	)

Total deferred tax assets, net of valuation allowance		467			142

Deferred tax liabilities:
Property and equipment		—			(71	)
Acquired intangibles		(467	)		(71	)
Goodwill		(707	)		(685	)

Total deferred tax liabilities		(1,174	)		(827	)

Net deferred tax liabilities	$	(707	)	$	(685	)

At March 31, 2017, we had $1.1 million in federal alternative minimum tax credit carryforwards that can be carried forward indefinitely, and $922,000 in federal research credits that begin to expire in 2031. We also had $555,000 in state tax credits that begin to expire in 2023. We had $5.6 million of federal net operating loss carryforwards at March 31, 2017 that begin to expire in 2022. We also had $1.4 million of state net operating loss carryforwards at March 31, 2017 that begin to expire in 2031.

Our deferred tax assets at March 31, 2017 do not include approximately $1.1 million of excess tax benefits from employee stock option exercises that are a component of our net operating loss carryforwards. If and when such excess tax benefits are realized, stockholders' equity will be increased.

In assessing the realizability of our deferred tax assets, we review all available positive and negative evidence, including reversal of deferred tax liabilities, potential carrybacks, projected future taxable income, tax planning strategies and recent financial performance. As of December 31, 2015, the Company had generated a cumulative pre-tax loss over the trailing three years. As such, we considered it appropriate to record a valuation allowance of approximately $10.1 million in our third quarter of Fiscal 2016 against our deferred tax assets. We will continuously reassess the appropriateness of maintaining a valuation allowance.

Unrecognized Tax Benefits

As of March 31, 2017 and 2016, our gross unrecognized tax benefits were $426,000 and $394,000, respectively, of which $286,000 and $251,000, respectively, are netted against certain noncurrent deferred tax assets. The amounts that would affect our effective tax rate if recognized are $359,000 and $328,000, respectively.

We recognize interest and/or penalties related to income tax matters in income tax expense. As of March 31, 2017 and 2016, we had accrued cumulatively $46,000 and $52,000, respectively, for the payment of potential interest and penalties. The total amount of interest and penalties recognized in the consolidated statements of operations for the fiscal years ended March 31, 2017 and 2016 was $(6,000) and $5,000, respectively.

A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:

	Year Ended March 31,
	2017			2016			2015
	(In thousands)
Gross unrecognized tax benefits at beginning of year	$	394		$	319		$	281
Increases for tax positions taken in prior years		18			22			14
Decreases for tax positions taken in prior years		(8	)		—			(3	)
Increases for tax positions taken in the current year		59			68			46
Lapse in statute of limitations		(37	)		(15	)		(19	)

Gross unrecognized tax benefits at March 31	$	426		$	394		$	319

We do not anticipate a significant change in gross unrecognized tax benefits within the next twelve months. We are subject to taxation in the U.S. and various state tax jurisdictions. We are subject to U.S. federal tax examination for fiscal tax years ended March 31, 2014 or later, and state and local income tax examination for fiscal tax years ended March 31, 2013 or later. However, if NOL carryforwards that originated in earlier tax years are utilized in the future, the amount of such NOLs from such earlier years remain subject to review by tax authorities.