Income Taxes

The Company recognized a benefit for income taxes of $1.3 million for the year ended December 31, 2014, primarily as a result of a foreign tax benefit of $1.7 million recognized upon the conclusion of tax examinations by a foreign tax authority offsetting the domestic current and deferred provision for the year. The Company recognized a benefit for income taxes of $9.3 million for the year ended December 31, 2013, primarily as a result of a reversal of $7.2 million of reserves for foreign taxes upon the expiration of the statute of limitations. In addition, in 2013 the Company reversed a portion of its valuation allowance for deferred tax assets as a result of deferred tax liabilities recognized in connection with unrealized gains on marketable securities included as a component of other comprehensive income. The Company recognized a benefit for income taxes of $15.7 million for the year ended December 31, 2012, primarily from a reversal of a portion of its valuation allowance for deferred tax assets as a result of deferred tax liabilities recognized on the identifiable intangible assets acquired in connection with the acquisition of Sun Well.

The components of the benefit from income taxes were as follows:



	Year Ended December 31,
	2014			2013			2012
	(in thousands)
Federal:
Current	$	(191	)	$	14		$	34
Deferred	105			3,402			15,066
	(86		)	3,416			15,100

Foreign:
Current	1,719			7,281			1,373
Deferred	—			(1,696		)	—
	1,719			5,585			1,373

State:
Current	(403		)	509			(979		)
Deferred	93			(168		)	218
	(310		)	341			(761		)

	$	1,323		$	9,342		$	15,712

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



	Year Ended December 31,
	2014			2013		2012
	(in thousands)
Domestic	$	(25,580	)	$	6,990	$	6,326
Foreign	(12		)	59		141
	$	(25,592	)	$	7,049	$	6,467

The benefit for income taxes varied from the Federal statutory income tax rate due to the following:



	Year Ended December 31,
	2014		2013		2012

Federal statutory rate	35.0	%	35.0	%	35.0	%
State taxes, net of federal benefit	(0.5	)%	(8.1	)%	15.1	%
Foreign losses not benefited	—	%	(0.3	)%	(0.6	)%
Changes in tax reserves	0.2	%	(78.6	)%	(53.9	)%
Change in valuation allowance	30.3	%	(78.7	)%	(263.5	)%
Permanent differences	(64.6	)%	(1.8	)%	24.6	%
Foreign tax refund	6.5	%	—	%	—	%
Other	(1.7	)%	—	%	0.3	%
	5.2	%	(132.5	)%	(243.0	)%

The components of the deferred tax assets and liabilities were as follows:



	December 31,
	2014			2013
	(in thousands)
Deferred tax assets
Net operating loss carryforward	$	49,096		$	61,212
Research and development credits	33,484			33,484
Compensatory and other accruals	2,698			1,800
Unrealized losses on investments	5,265			—
Intangible assets	819			—
Foreign tax credits	201			—
Other, net	3,725			1,785
Gross deferred tax assets	95,288			98,281

Deferred tax liabilities:
Unremitted foreign earnings	—			7,001
Unrealized gains on investments	—			3,704
Intangible assets	—			6,525
Fixed assets	19,128			13,354
Gross deferred tax liabilities	19,128			30,584

Net deferred tax asset before valuation allowance	76,160			67,697
Valuation Allowance	(78,018		)	(69,753		)

Net deferred tax liability	$	(1,858	)	$	(2,056	)

The components of the Company's deferred tax assets and deferred tax liabilities were classified in the consolidated balance sheets as follows:



	December 31,
	2014			2013
	(in thousands)
Deferred income tax assets - current	$	1,696		$	—
Deferred income tax assets - non-current	80			1,556
Total deferred income tax assets	1,776			1,556

Deferred income tax liabilities - current	85			3,612
Deferred income tax liabilities - non-current	3,549			—
Total deferred income tax liabilities	3,634			3,612

Net deferred income tax liability	$	(1,858	)	$	(2,056	)

At December 31, 2014, the Company had Federal net operating loss carryforwards of approximately $113.0 million that expire in 2020 through 2031, and domestic state net operating loss carryforwards of approximately $159.9 million that expire in 2015 through 2031. The Company also had Federal research and development credit carryforwards of approximately $30.3 million that expire in 2018 through 2029, and domestic state research and development credit carryforwards of approximately $17.7 million that do not expire. Of the total Federal net operating loss carryforwards, approximately $10.5 million related to deductions for stock-based compensation, the tax benefit of which will be credited to additional paid-in capital when realized. The Company's ability to utilize its net operating loss and other credit carryforwards would be subject to limitation upon a change in control. Federal income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries have been fully provided.

The Company established a valuation allowance to reserve its net deferred tax assets at December 31, 2014 and 2013, based on its assessment that it is more likely than not that such benefit will not be fully realized. This assessment was based on, but not limited to, the Company’s operating results for the past three years, uncertainty in the Company’s projections of taxable income, uncertainty in general economic conditions in general and in the oil and gas industry in particular, and the effects of multiple acquisitions and the Company’s ability to effectively integrate the acquired entities.

The changes in unrecognized tax positions were as follows:



	Year Ended December 31,
	2014			2013			2012
	(in thousands)
Balance at beginning of period	$	19,121		$	26,419		$	29,903
Tax positions related to prior year:
Additions	—			—			—
Expiration of statute of limitations	(45		)	(7,298		)	—
Settlements	—			—			(3,484		)
Balance at ending of period	$	19,076		$	19,121		$	26,419

As of December 31, 2014, the Company’s total gross unrecognized tax benefits were $19.1 million, of which $0.1 million, if recognized, would affect the provision for income taxes. In 2014, the Company reversed approximately $45,000 of reserves for foreign taxes upon the expiration of the statute of limitations. The Company recognizes interest and penalties related to uncertain tax positions as a component of “Benefit from income taxes” in its consolidated statements of operations. For the years ended December 31, 2014. 2013, and 2012, the amount of such interest and penalties recognized was immaterial.

The Company is subject to Federal income tax as well as income taxes in many domestic states and foreign jurisdictions in which the Company operates or formerly operated. As of December 31, 2014, fiscal years from 1999 onward remain open to examination by the United States taxing authorities. In 2014, tax examinations were completed for fiscal years 2009 through 2013 in Singapore, resulting in a refund to the Company of $1.7 million. The Company is not currently under tax examination in any foreign jurisdictions.