Income Taxes

Domestic and foreign pre-tax income was as follows:



Fiscal year ended January 31,	2017			2016			2015
Domestic	$	(31,914	)	$	(25,971	)	$	(2,991	)
Foreign	216,770			144,900			170,749
Total pre-tax income	$	184,856		$	118,929		$	167,758

The provision for income taxes was as follows:



Fiscal year ended January 31,	2017			2016		2015
Current:
Federal	$	(427	)	$	734	$	(223	)
State	226			199		444
Foreign	19,720			17,994		13,677
Total current	19,519			18,927		13,898
Deferred:
Federal and state	10,679			4,402		7,687
Foreign	(208		)	1,424		996
Total deferred	10,471			5,826		8,683
Total provision for income taxes	$	29,990		$	24,753	$	22,581

Actual income tax expense is different from that which would have been computed by applying the statutory U.S. federal income tax rate to our income before income tax. A reconciliation of income tax expense as computed at the U.S. federal statutory income tax rate to the provision for income taxes is as follows:



Fiscal year ended January 31,	2017			2016			2015
Federal tax, at statutory rate	$	64,700		$	41,626		$	58,725
State tax, net of federal benefit	684			(60		)	900
Impact of international operations including withholding taxes and other reserves	(48,268		)	7,143			(27,042		)
Repatriation of foreign subsidiary earnings	55,812			354			21,969
Foreign tax credits	(10,739		)	(2,382		)	(5,143		)
Tax credits (excluding foreign tax credits)	(12,180		)	(11,539		)	(8,089		)
Change in valuation allowance	(25,531		)	(21,055		)	(26,443		)
Amortization of deferred charge	415			(167		)	1,168
Stock-based compensation expense	489			3,402			2,929
Non-deductible meals and entertainment	1,247			1,177			1,238
Other, net	3,361			6,254			2,369
Provision for income taxes	$	29,990		$	24,753		$	22,581

The tax effects of temporary differences and carryforwards, which gave rise to significant portions of deferred tax assets and liabilities, were as follows:



As of January 31,	2017			2016
Deferred tax assets:
Reserves and allowances	$	10,346		$	12,954
Accrued expenses not currently deductible	23,299			12,446
Stock-based compensation expense	8,403			8,259
Net operating loss carryforwards	14,743			24,138
Tax credit carryforwards	104,965			87,443
Purchased technology and other intangible assets	4,201			4,219
Deferred revenue	4,641			4,541
Other, net	8,845			8,394
Total gross deferred tax assets	179,443			162,394
Less valuation allowance	(74,041		)	(63,554		)
Deferred tax assets	105,402			98,840
Deferred tax liabilities:
Intangible assets	(14,002		)	(13,163		)
Undistributed foreign earnings	(97,696		)	(87,390		)
Convertible debt	(3,523		)	(6,322		)
Depreciation of property, plant, and equipment	(2,169		)	(1,715		)
Deferred tax liabilities	(117,390		)	(108,590		)
Net deferred tax liabilities	$	(11,988	)	$	(9,750	)

All deferred tax assets and liabilities are presented in our balance sheet in other assets and other long-term liabilities respectively.

The increase in the valuation allowance largely resulted from the early adoption of ASU 2016-09 offset by accrual of a U.S. deferred tax liability on fiscal year 2017 foreign earnings that are not permanently reinvested and may be repatriated in the future.

As of January 31, 2017, we had the following foreign and U.S. Federal and state carryforwards for income tax return purposes:



Credit or carryforward	As of January 31, 2017		Expiration
Federal credits and carryforwards:
Research and experimentation credit carryforward	$	99,194	Fiscal years 2019 - 2037
Net operating loss carryforward	$	13,863	Fiscal years 2020 - 2037
Foreign tax credits	$	12,297	Fiscal years 2020 - 2027
Alternative minimum tax credits	$	2,682	No expiration
Childcare credits	$	1,939	Fiscal years 2023 - 2037
State income tax credits and carryforwards:
Net operating loss carryforward	$	175,233	Fiscal years 2018 - 2037
Research and experimentation	$	22,629	Fiscal years 2018 - 2032
Miscellaneous	$	699	Various
Foreign net operating loss carryforwards	$	19,472	Generally indefinite

We determine deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities. In addition, we record deferred tax assets for net operating loss carryforwards and tax credit carryforwards. We calculate the deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. A valuation allowance is recorded when it is more likely than not that all or some portion of the deferred tax asset will not be realized. We have determined that it is uncertain whether our U.S. entity will generate sufficient taxable income to fully utilize tax credit carryforwards and certain net operating losses. Accordingly, we recorded a valuation allowance against those deferred tax assets for which realization does not meet the more likely than not standard. We have established valuation allowances related to certain foreign deferred tax assets based on limitations on the utilization of such deferred tax assets in certain jurisdictions. We will continue to evaluate the realizability of the deferred tax assets on a periodic basis.

We have not provided for U.S. income taxes on the undistributed earnings of our foreign subsidiaries to the extent they are considered permanently re-invested outside the U.S. As of January 31, 2017, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $478,660. Determination of the amount of unrecognized deferred U.S. income tax liability on permanently re-invested earnings is not practicable. Where the earnings of our foreign subsidiaries are not treated as permanently reinvested, we have accrued for U.S. income taxes on those earnings in our tax provision.

We are subject to income taxes in the U.S. and in numerous foreign jurisdictions. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The statute of limitations for adjustments to our historic tax obligations will vary from jurisdiction to jurisdiction. In some cases it may be extended or be unlimited. Furthermore, net operating loss and tax credit carryforwards may be subject to adjustment after the expiration of the statute of limitations of the year such net operating losses and tax credits originated. Our larger jurisdictions generally provide for a statute of limitation from three to five years. For U.S. federal income tax purposes, the tax years which remain open for examination are fiscal years 2014 and forward, although net operating loss and credit carryforwards from all years are subject to examination and adjustment for three years following the year in which utilized. We are currently under examination in various jurisdictions. The examinations are in different stages and timing of their resolution is difficult to predict. The statute of limitations remains open for years on and after fiscal year 2013 in Ireland, fiscal year 2014 in France, fiscal year 2012 in Japan, fiscal year 2009 in India and fiscal year 2012 in Israel.

We have reserves for taxes to address potential exposures involving tax positions that are being challenged or that could be challenged by the tax authorities even though we believe the positions we have taken are appropriate. We believe our tax reserves are adequate to cover potential liabilities. We review the tax reserves as circumstances warrant and adjust the reserves as events occur that affect our potential liability for additional taxes. It is often difficult to predict the final outcome or timing of resolution of any particular tax matter. Various events, some of which cannot be predicted, such as clarification of tax law by administrative or judicial means, may occur and would require us to increase or decrease our reserves and effective tax rate. It is reasonably possible that existing unrecognized tax benefits may decrease from $0 to $2,000 due to settlements or expiration of the statute of limitations within the next twelve months. To the extent that uncertain tax positions resolve in our favor, it could have a positive impact on our effective tax rate. A portion of our reserves, which could settle or expire within the next twelve months, may result in deferred tax assets subject to a valuation allowance for which no benefit would be recognized. Income tax-related interest and penalties were $950 for the fiscal year ended January 31, 2017, $1,717 for the fiscal year ended January 31, 2016 and $884 for the fiscal year ended January 31, 2015.

The below schedule shows the gross changes in unrecognized tax benefits associated with uncertain tax positions for the fiscal years ending January 31, 2017 and 2016:



Unrecognized tax benefits as of January 31, 2015	$	39,771
Gross increases—tax positions in prior period	6,548
Gross decreases—tax positions in prior period	(1,702		)
Gross increases—tax positions in current period	6,509
Settlements	—
Lapse of statute of limitations	(1,125		)
Cumulative translation adjustment	(1,327		)
Unrecognized tax benefits as of January 31, 2016	$	48,674
Gross increases—tax positions in prior period	3,211
Gross decreases—tax positions in prior period	(2,520		)
Gross increases—tax positions in current period	7,513
Settlements	(378		)
Lapse of statute of limitations	(1,335		)
Cumulative translation adjustment	1,964
Unrecognized tax benefits as of January 31, 2017	$	57,129

The ending balances of unrecognized tax benefits represent the gross amount of exposure in individual jurisdictions and do not reflect any additional benefits expected to be realized if such positions were not sustained, such as the federal deduction that could be realized if an unrecognized state deduction was not sustained. The ending gross balances exclude accrued interest and penalties related to such positions of $10,160 as of January 31, 2017 and $9,817 as of January 31, 2016. We expect that $28,939 of our unrecognized tax benefits, if recognized, would favorably affect our effective tax rate.