INCOME TAXES

The components of income before income taxes for fiscal years 2016, 2015 and 2014 were as follows:



(in thousands)	2016		2015		2014
Domestic	$	5,345	$	31,827	$	32,867
Foreign	28,167		27,345		25,576
Total income before income taxes	$	33,512	$	59,172	$	58,443

The provision for income taxes for fiscal years 2016, 2015 and 2014 were as follows:



(in thousands)	2016			2015		2014
Current
Federal	$	3,169		$	4,588	$	7,503
State	138			527		842
Foreign	6,712			8,025		13,056
Deferred	(4,001		)	570		(4,967		)
Total provision for income taxes	$	6,018		$	13,710	$	16,434

A reconciliation from the federal statutory income tax rate to our effective income tax rate for fiscal years 2016, 2015 and 2014 is as follows:



(in thousands)	2016		2015		2014
United States federal statutory income tax rate	35	%	35	%	35	%
Impact from foreign operations	(5	)	(4	)	(1	)
State income taxes, net of federal benefit	—		1		1
Research and development tax credits	(16	)	(8	)	(5	)
Domestic production activities deduction	(2	)	(2	)	(2	)
Foreign tax credits	—		—		(2	)
Nondeductible acquisition costs	5		—		—
Nondeductible stock option expense and other permanent items	1		1		2
Effective income tax rate	18	%	23	%	28	%

A summary of the deferred tax assets and liabilities for fiscal years 2016 and 2015 are as follows:



(in thousands)	2016			2015
Deferred tax assets
Accrued compensation and benefits	$	15,888		$	11,723
Inventory reserves	6,128			5,198
Other assets	4,685			4,389
Allowance for doubtful accounts	1,488			866
Net operating loss carryovers	140			84
State and foreign tax credit carryovers	1,249			—
Research and development tax credit carryovers	1,540			993
Unrealized derivative instrument gains	185			—
Total deferred tax asset before valuation allowance	31,303			23,253
Less valuation allowance	(3,009		)	(921		)
Total deferred tax assets	$	28,294		$	22,332
Deferred tax liabilities
Property and equipment	$	15,128		$	9,775
Foreign deferred revenue and other	3,320			1,738
Intangible assets	90,450			1,303
Unrealized derivative instrument gains	—			1,199
Total deferred tax liabilities	$	108,898		$	14,015
Net deferred tax assets (liabilities)	$	(80,604	)	$	8,317

As of October 1, 2016, one of our German subsidiaries had an interest deduction carryover of $613. Due to projected income limitations in the future years, we believe the benefit of this interest deduction is not likely to be realized. Accordingly, as of October 1, 2016, we have recorded a full valuation allowance against the carryover in the amount of $197.

As of October 1, 2016, we had a Minnesota Research and Development (R&D) tax credit carryover of $1,539, which may be carried forward fifteen years. We have determined that the benefit of this tax credit is not likely to be realized before it expires and have recorded a full valuation allowance against this deferred tax asset. As of October 1, 2016, we had New York and North Carolina investment tax credit carryovers of $1,224, which we acquired as part of the PCB acquisition. We have determined that the benefit of these state tax credit carryovers is not likely to be recognized. Accordingly, we have recorded a full valuation allowance against this deferred tax asset.

During fiscal year 2016, we repatriated $10,324 of current earnings from our German and Japanese subsidiaries. We recorded a $112 tax benefit during fiscal year 2016 related to these repatriations. Also, during fiscal year 2016, we recognized additional federal research and development tax credit benefits of $2,283 due to the enactment of tax legislation in the first quarter of fiscal year 2016 that made the United States R&D tax credit permanent as of January 1, 2015.

During fiscal year 2015, we repatriated $9,194 of current earnings from our German and Japanese subsidiaries. We recorded a $1,057 tax benefit during fiscal year 2015 related to these repatriations. Also, during fiscal year 2015, we recognized additional federal R&D tax credit benefits of $2,098 due to the enactment of tax legislation in the first quarter of fiscal year 2015 that retroactively extended the U.S. R&D tax credit from January 1, 2014 through December 31, 2014. In addition, we recognized a tax benefit of $1,836 associated with the favorable resolution of audit matters in connection with the IRS examination of tax years ending October 1, 2011 and September 29, 2012.

During fiscal year 2014, we repatriated $9,587 of current earnings from our German, Japanese and Korean subsidiaries. We recorded a $98 tax expense during fiscal year 2014 related to these repatriations. Also, during fiscal year 2014, we recognized additional federal and state R&D tax credit benefits of $2,563 related to prior fiscal years due to favorable guidance related to the U.S. R&D tax credit that was issued during the fourth quarter of fiscal year 2013. We were only allowed to recognize federal R&D credits on applicable spending during the first fiscal quarter of 2014, as the provision in the U.S. tax law allowing for these credits expired on December 31, 2013.

We have not recognized a deferred tax liability for the undistributed earnings of certain foreign operations because those subsidiaries have invested or will invest the undistributed earnings indefinitely. At October 1, 2016 and October 3, 2015, undistributed earnings were approximately $93,510 and $78,957, respectively. Because of the availability of U.S. foreign tax credits, it is impractical for us to determine the amount of U.S. federal tax liability that would be payable if these earnings were not indefinitely reinvested. Deferred taxes are recorded for earnings of foreign operations when we determine that such earnings are no longer indefinitely reinvested.

A summary of changes to our liability for unrecognized tax benefits for the fiscal years ended October 1, 2016 and October 3, 2015 is as follows:



(in thousands)	2016			2015
Beginning balance	$	5,649		$	5,990
Increase due to tax positions related to the current year	269			1,631
Increase (decrease) due to tax positions related to prior years	500			(1,596		)
Decrease due to settlements with tax authorities	—			(332		)
Decrease due to lapse of statute of limitations	(186		)	(43		)
Exchange rate change	—			(1		)
Ending balance	$	6,232		$	5,649

Included in the balance of unrecognized tax benefits at October 1, 2016 and October 3, 2015 are potential benefits of $3,429 and $2,265, respectively, that, if recognized, would affect the effective tax rate.

As of October 1, 2016 and October 3, 2015, we have accrued interest related to uncertain income tax positions of approximately $519 and $274, respectively. At October 1, 2016 and October 3, 2015, no accrual for penalties related to uncertain tax positions existed. Interest and penalties related to uncertain tax positions are included in interest expense, net and general and administrative expense, respectively, on the Consolidated Statements of Income.

We are subject to U.S. federal income tax as well as income tax of numerous state and foreign jurisdictions. We are no longer subject to U.S. federal tax examinations for fiscal years before 2013 and with limited exceptions, state and foreign income tax examinations for fiscal years before 2011. During 2015, the Internal Revenue Service (IRS) completed the audit of our consolidated income tax returns for fiscal years 2011 and 2012. During 2016, the German tax authorities began an audit of our German subsidiaries' fiscal years 2012, 2013 and 2014 income tax returns. As of October 1, 2016, we do not expect significant changes in the amount of unrecognized tax benefits for our U.S. or foreign subsidiaries during the next twelve months.

At October 1, 2016 and October 3, 2015, we and certain foreign subsidiaries were expected to receive income tax refunds within the next fiscal year. As a result, we recognized a current income tax receivable of $3,238 and $876 at October 1, 2016 and October 3, 2015, respectively, which is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.