4.	Income Taxes

Income tax data for the years ended December 31, 2015, 2014 and 2013 (in thousands):


	December 31, 2015			December 31, 2014			December 31, 2013
The components of income from operations before income taxes are as follows:
Domestic	$	(2,490	)	$	(1,152	)	$	12,783
Foreign		15,913			12,290			10,231

Total	$	13,423		$	11,138		$	23,014

The current and deferred components of the provision for income taxes on operations are as follows:
Current	$	3,745		$	2,480		$	4,124
Deferred		333			488			2,797

Total	$	4,078		$	2,968		$	6,921

The jurisdictional components of the provision for income taxes on operations are as follows:
Federal	$	295		$	214		$	3,322
State		276			(67	)		1,306
Foreign		3,507			2,821			2,293

Total	$	4,078		$	2,968		$	6,921

At December 31, 2015, the Company had net operating loss carryforwards of approximately $46,984,000 and business tax credits carryforwards of approximately $1,920,000 available to reduce future federal income taxes, if any. The cumulative U.S. federal net operating loss includes $10,242,000 related to excess tax deductions from share-based payments, the tax benefit of which will be recognized as an increase to additional paid in capital when the deduction reduces current taxes payable. The net operating loss and business tax credits carryforwards will continue to expire at various dates through December 2035. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant stockholders.

The Company’s consolidated deferred tax assets (liabilities) consist of the following (in thousands):


	December 31, 2015			December 31, 2014
Deferred tax assets:
Temporary timing differences:
Stock compensation	$	1,079		$	628
Contingent consideration		2,126			767
Other		1,150			1,674

Total temporary timing differences		4,355			3,069
Net operating loss carryforwards		12,389			12,580
Tax business credits carryforwards		1,820			1,782

Total deferred tax assets		18,564			17,431
Valuation allowance		(18,514	)		(17,298	)

Net deferred tax assets	$	50		$	133
Deferred tax liabilities:
Goodwill and intangible assets	$	(501	)	$	(251	)

Net deferred tax liabilities	$	(451	)	$	(118	)

The net change in the total valuation allowance was an increase of $1,216,000 in the year ended December 31, 2015. The increase is attributable to increases in deferred tax assets derived from temporary timing differences. The valuation allowance increased by $727,000 for the year ended December 31, 2014 and decreased by $1,736,000 for the year ended December 31, 2013. During 2013, based on the Company’s pre-tax income position, the Company believed that it was more likely than not that it would generate sufficient taxable income to realize the tax benefit of a portion of its deferred tax assets. As of December 31, 2013, because the Company would no longer receive royalty payments on Bristol’s sales of Orencia, the Company concluded that realization of deferred tax assets beyond December 31, 2013 was not more likely than not, and as such, the Company maintained a valuation allowance against the majority of its remaining deferred tax assets. As of December 31, 2015 the Company continues to believe that realization of deferred tax assets beyond December 31, 2015 is not more likely than not, and the Company continues to maintain a full valuation allowance against its remaining U.S. deferred tax assets with the exception for certain state tax credits.

The reconciliation of the federal statutory rate to the effective income tax rate for the fiscal years ended December 31, 2015, 2014 and 2013 is as follows (amounts in thousands):


	Year Ended
	December 31, 2015					December 31, 2014					December 31, 2013
Income before income taxes	$	13,423				$	11,138				$	23,014

Expected tax at statutory rate		4,564		34.0	%		3,787		34.0	%		7,825		34.0	%
Adjustments due to:
Difference between U.S. and foreign tax		(1,910	)	(14.2	%)		(1,471	)	(13.2	%)		(1,228	)	(5.3	%)
State income and franchise taxes		563		4.2	%		122		1.1	%		1,122		4.9	%
Business tax credits		(115	)	(0.9	%)		—		—			—		—
Permanent differences		118		0.9	%		(172	)	(1.5	%)		(298	)	(1.3	%)
Change in valuation allowance		1,216		9.1	%		727		6.5	%		(509	)	(2.2	%)
Other		(358	)	(2.7	%)		(25	)	(0.2	%)		9		—

Provision (benefit) for income taxes	$	4,078		30.4	%	$	2,968		26.7	%	$	6,921		30.1	%

In June 2015, the Company received a final assessment from the Massachusetts Department of Revenue (“DOR”) regarding an examination for the years ended March 31, 2010 and 2011 and the nine months ended December 31, 2011. This examination related to the qualification of Research and Development tax credits. The final settlement resulted in a payment to the DOR of approximately $141,000, inclusive of interest and penalties.

In December 2015, the Company reached a negotiated settlement with the DOR regarding an appeal of an assessment made in 2013 for the years ended March 31, 2008 and 2009. The primary issues in the appeal related to the sourcing of intellectual property settlements and the qualification of Research and Development tax credits. The final settlement resulted in a payment to the DOR of approximately $1,012,000, inclusive of interest. Of this amount, $926,000 had been provided for as a liability for an uncertain tax position as of September 30, 2015.

As a result of these settlements, the fiscal years ended March 31, 2008 through December 31, 2011 are now closed under the Massachusetts statute. The fiscal years ended December 31, 2012, 2013, 2014 and 2015 are subject to examination by the federal and state taxing authorities.

At December 31, 2015, the Company had accumulated Federal research credits of $2,578,000 which were not recognized for financial statement purposes, as it was not more likely than not that the Company would have sufficient earnings to realize those benefits in addition to the benefits the Company may derive from use of its Net Operating Losses. However, given the past uncertainty at the state level regarding their sustainability under audit, the Company applied a reserve of $1,289,000 against these cumulative Federal research credits

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):


Unrecognized tax benefits at January 1, 2015		2,118
Gross increases – tax positions in prior period		324
Gross decreases – settlements		(1,153	)

Unrecognized tax benefits at December 31, 2015	$	1,289

The amount of unrecognized tax benefits at December 31, 2015 that will impact our effective tax rate are $1,289,000. For the year ended December 31, 2015, the Company recognized interest and penalties of $272,000.

At December 31, 2015, the Company has not provided for U.S. income taxes or foreign withholding taxes on outside basis differences of foreign subsidiaries of approximately $30,322,000 as it is the Company’s current intention to permanently reinvest these earnings outside the U.S. It is not practical to estimate the additional taxes that may be payable upon repatriation.