INCOME TAXES

The components of income (loss) before income taxes were as follows:



(in thousands)	2017			2016		2015
Domestic	$	(9,658	)	$	5,345	$	31,827
Foreign	32,669			28,167		27,345
Total income (loss) before income taxes	$	23,011		$	33,512	$	59,172

The income tax provision (benefit) was as follows:



(in thousands)	2017			2016			2015
Current
Federal	$	(1,493	)	$	3,169		$	4,588
State	156			138			527
Foreign	11,980			6,712			8,025
Deferred	(12,716		)	(4,001		)	570
Income tax provision (benefit)	$	(2,073	)	$	6,018		$	13,710

A reconciliation from the U.S. federal statutory income tax rate to our effective income tax rate is as follows:



(in thousands)	2017		2016		2015
U.S. federal statutory income tax rate	35	%	35	%	35	%
Impact from foreign operations	(10	)	(5	)	(4	)
State income taxes, net of federal benefit	(1	)	—		1
R&D tax credits	(22	)	(16	)	(8	)
Domestic production activities deduction	(10	)	(2	)	(2	)
Foreign tax credits	—		—		—
Acquisition costs	(3	)	5		—
Nondeductible stock option expense and other permanent items	2		1		1
Effective income tax rate	(9	)%	18	%	23	%

The effective tax rate was lower during fiscal year 2017 primarily due to certain discrete benefits of $2,801 recognized during the third quarter of fiscal year 2017, which consisted of additional U.S. tax benefits for prior fiscal years associated with domestic manufacturing, deductible PCB acquisition-related expenses, and the U.S. R&D tax credit. Excluding the impact of these discrete benefits, the effective tax rate for fiscal year 2017 was 3.2%, and declined compared to the prior year due to lower income before taxes and a more favorable geographic mix of earnings.

The effective tax rate of 18.0% during fiscal year 2016 included a $2,283 discrete tax benefit for retroactive reinstatement of the U.S. R&D tax credit, which was partially offset by a one-time tax cost of $1,834 associated with nondeductible PCB acquisition-related expenses. Excluding the impact of these items, the effective tax rate for fiscal year 2016 was 19.3%.

The effective tax rate of 23.2% during fiscal year 2015 included a discrete tax benefit of $1,836 due to the resolution of audit matters in connection with the IRS examination of tax years ended October 1, 2011 and September 29, 2012 and a discrete tax benefit of $2,098 during fiscal year 2015 for retroactive reinstatement of the U.S. R&D tax credit. Excluding the impact of these discrete benefits, the effective tax rate for fiscal year 2015 was 29.8%.

A summary of the deferred tax assets and liabilities are as follows:



(in thousands)	2017			2016
Deferred tax assets
Accrued compensation and benefits	$	13,841		$	15,888
Inventory reserves	6,550			6,128
Other assets	4,920			4,685
Allowance for doubtful accounts	1,766			1,488
Net operating loss carryovers	227			140
State and foreign tax credit carryovers	3,358			1,249
Research and development tax credit carryovers	2,231			1,540
Unrealized derivative instrument gains	—			185
Total deferred tax asset before valuation allowance	32,893			31,303
Less valuation allowance	(3,487		)	(3,009		)
Total deferred tax assets	29,406			$	28,294
Deferred tax liabilities
Property and equipment	13,382			$	15,128
Foreign deferred revenue and other	3,009			3,320
Intangible assets	83,207			90,450
Unrealized derivative instrument gains	1,233			—
Total deferred tax liabilities	100,831			$	108,898
Net deferred tax assets (liabilities)	$	(71,425	)	$	(80,604	)

As of September 30, 2017, we had a Minnesota R&D tax credit carryover of $2,231, 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 September 30, 2017, 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 and we have recorded a full valuation allowance against this deferred tax asset.

During fiscal year 2017, we repatriated $15,272 of current earnings from our German and Japanese subsidiaries. We recorded $11 of tax expense during fiscal year 2017 related to these repatriations. During fiscal year 2016, we repatriated $10,324 of earnings from our German and Japanese subsidiaries. We recorded a $112 tax benefit during fiscal year 2016 related to these repatriations. 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.

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. As of September 30, 2017 and October 1, 2016, undistributed earnings were $111,717 and $93,510, respectively. Because of the availability of U.S. foreign tax credits, it is impracticable 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 is as follows:



(in thousands)	2017			2016
Beginning liability for unrecognized tax benefits	$	6,232		$	5,649
Increase due to tax positions related to the current year	852			269
Increase (decrease) due to tax positions related to prior years	189			500
Decrease due to settlements with tax authorities	(493		)	—
Decrease due to lapse of statute of limitations	(931		)	(186		)
Exchange rate change	—			—
Ending liability for unrecognized tax benefits	$	5,849		$	6,232

Included in the liability of unrecognized tax benefits as of September 30, 2017 and October 1, 2016 are potential benefits of $3,234 and $3,429, respectively, that, if recognized, would affect the effective tax rate.

As of September 30, 2017 and October 1, 2016, we have accrued interest related to uncertain income tax positions of approximately $404 and $519, respectively. As of September 30, 2017 and October 1, 2016, 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 2014 and with limited exceptions, state and foreign income tax examinations for fiscal years before 2011. During fiscal year 2015, the IRS completed the audit of our consolidated income tax returns for fiscal years 2011 and 2012. During fiscal year 2017, the German tax authorities concluded an audit of our German subsidiaries' fiscal years 2012, 2013 and 2014 income tax returns. As of September 30, 2017, we do not expect significant changes in the amount of unrecognized tax benefits for our U.S. or foreign subsidiaries during the next 12 months.

As of September 30, 2017 and October 1, 2016, we were expected to receive income tax refunds within the next fiscal year. As a result, we recognized a current income tax receivable of $5,392 and $3,238 as of September 30, 2017 and October 1, 2016, respectively, which is included in prepaid expenses and other current assets in the Consolidated Balance Sheets.