Note 8 — Income Taxes

The components of income before income taxes by jurisdiction are as follows:


	Fiscal Years Ended
	March 31, 2017			March 31, 2016			April 3, 2015
	(In thousands)
United States	$	29,649		$	20,280		$	58,185
Foreign		(4,265	)		(2,683	)		(4,467	)

	$	25,384		$	17,597		$	53,718

The provision for (benefit from) income taxes includes the following:


	Fiscal Years Ended
	March 31, 2017			March 31, 2016			April 3, 2015
	(In thousands)
Current tax (benefit) provision
Federal	$	2,041		$	132		$	(216	)
State		1,167			543			1,507
Foreign		600			148			115

		3,808			823			1,406

Deferred tax (benefit) provision
Federal		4,410			2,266			14,546
State		(4,509	)		(7,090	)		(1,477	)
Foreign		(92	)		(172	)		(648	)

		(191	)		(4,996	)		12,421

Total provision for (benefit from) income taxes	$	3,617		$	(4,173	)	$	13,827

Significant components of the Company’s net deferred tax assets are as follows:


	As of
	March 31, 2017			March 31, 2016
	(In thousands)
Deferred tax assets:
Net operating loss carryforwards	$	202,752		$	222,332
Tax credit carryforwards		145,369			129,333
Other		74,962			64,459
Valuation allowance		(17,728	)		(17,089	)

Total deferred tax assets		405,355			399,035
Deferred tax liabilities:
Intangible assets		(98,099	)		(82,295	)
Property, equipment and satellites		(174,428	)		(182,030	)

Total deferred tax liabilities		(272,527	)		(264,325	)

Net deferred tax assets	$	132,828		$	134,710

A reconciliation of the provision for (benefit from) income taxes to the amount computed by applying the statutory federal income tax rate to income before income taxes is as follows:


	Fiscal Years Ended
	March 31, 2017			March 31, 2016			April 3, 2015
	(In thousands)
Tax provision at federal statutory rate	$	8,885		$	6,167		$	18,808
State tax provision, net of federal benefit		1,681			1,197			4,014
Tax credits, net of valuation allowance		(15,121	)		(16,016	)		(14,055	)
Non-deductible compensation		2,659			2,457			1,966
Non-deductible transaction costs		645			30			154
Non-deductible meals and entertainment		794			751			759
Stock-based compensation		886			551			478
Change in state effective tax rate		417			(354	)		508
Foreign effective tax rate differential, net of valuation allowance		2,391			859			898
Other		380			185			297

Total provision for (benefit from) income taxes	$	3,617		$	(4,173	)	$	13,827

As of March 31, 2017, the Company had federal and state research credit carryforwards of $109.6 million and $113.8 million, respectively, which begin to expire in fiscal year 2026 and fiscal year 2018, respectively. As of March 31, 2017, the Company had alternative minimum tax (AMT) and foreign tax credit (FTC) carryforwards of $0.4 million and $1.3 million, respectively. The AMT credit does not expire and the FTC begins to expire in fiscal year 2021. As of March 31, 2017, the Company had federal and state net operating loss carryforwards of $673.6 million and $556.0 million, respectively, which begin to expire in fiscal year 2020 and fiscal year 2018, respectively.

The Company recognizes excess tax benefits associated with share-based compensation to stockholders’ equity only when realized. When assessing whether excess tax benefits relating to share-based compensation have been realized, the Company follows the with-and-without approach excluding any indirect effects of the excess tax deductions. Under this approach, excess tax benefits related to share-based compensation are not deemed to be realized until after the utilization of all other tax benefits available to the Company. During fiscal year 2017, the Company did not realize any excess tax benefits. As of March 31, 2017, the Company had $58.7 million of unrealized excess tax benefits associated with share-based compensation. In accordance with ASU 2016-09, these excess tax benefits not previously recognized are recorded and simultaneously reviewed for realization, on a modified retrospective basis through a cumulative effect adjustment to retained earnings as of the beginning of the first quarter of fiscal year 2018. On a prospective basis, the Company will recognize excess tax benefits or deficiencies on vesting or settlement of awards as an income tax benefit or provision within net income (loss) and the related cash flows classified within operating activities.

In accordance with the authoritative guidance for income taxes (ASC 740), net deferred tax assets are reduced by a valuation allowance if, based on all the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Future realization of existing deferred tax assets ultimately depends on future profitability and the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under tax law. In the event that the Company’s estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established which would cause a decrease to income in the period such determination is made. A valuation allowance of $17.7 million at March 31, 2017 and $17.1 million at March 31, 2016 has been established relating to state net operating loss carryforwards and research credit carryforwards that, based on management’s estimate of future taxable income attributable to certain states and generation of additional research credits, are considered more likely than not to expire unused.

The following table summarizes the activity related to the Company’s unrecognized tax benefits:


	As of
	March 31, 2017			March 31, 2016			April 3, 2015
	(In thousands)
Balance, beginning of fiscal year	$	45,080		$	41,769		$	37,395
(Decrease) increase related to prior year tax positions		(421	)		(586	)		524
Increases related to current year tax positions		4,407			3,897			3,897
Statute expirations		—			—			(47	)

Balance, end of fiscal year	$	49,066		$	45,080		$	41,769

Of the total unrecognized tax benefits at March 31, 2017, $40.2 million would reduce the Company’s annual effective tax rate if recognized, subject to valuation allowance consideration.

In the next 12 months it is reasonably possible that the amount of unrecognized tax benefits will not change significantly.

The Company is subject to periodic audits by domestic and foreign tax authorities. By statute, the Company’s U.S. federal income tax returns are subject to examination by the Internal Revenue Service (“IRS”) for fiscal years 2014 through 2016. Additionally, tax credit carryovers that were generated in prior years and utilized in these years may also be subject to examination by the IRS. With few exceptions, fiscal years 2013 to 2016 remain open to examination by state and foreign taxing jurisdictions. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations. The Company’s policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. There were no accrued interest or penalties associated with uncertain tax positions as of March 31, 2017 and 2016.