Income Taxes

The Company's consolidated world-wide effective tax rate reflects the tax benefits of conducting operating activities in certain foreign jurisdictions where earnings are taxed at rates lower than U.S. statutory rates and where certain components of the Company's income are exempt from taxation. Furthermore, the Company's world-wide product development operations and intellectual property ownership have been centralized into our India and Singapore subsidiaries. Our operations in India benefit from a tax holiday, which affects various operating facilities in that country. The Company has many facilities in India with each one having a different tax holiday expiration date between 2015 and 2018. As such a significant component of the income generated by our India operations, other than passive interest income, is not taxed. After the expiration of the full tax holiday all of the income generated by our India operations will be taxed at 50% of the normal 33.99% corporate tax rate for a period of five years. The Company also has a relatively low income tax rate in Singapore wherein our operations are taxed at a 10% tax rate as a result of concessions granted by the local Singapore Economic Development Board for the benefit of in-country intellectual property owners. The concessionary 10% income tax rate will expire after Q2 2015, at which time our Singapore operations will be subject to the prevailing corporate tax rate in Singapore, which is currently 17%, unless the Company reaches a subsequent agreement to extend the incentive period and the then applicable concessionary rate or possibly secure a lower concessionary tax rate. The Company believes the concessionary rate of 10% will be extended soon.

The Company recognized total income tax expense in the amount of $2.40 million for the three months ended March 31, 2015. The Company's interim period income tax provisions are based on a calculated estimate of the effective income tax rate expected to be applicable to the corresponding annual period, after eliminating discrete items unique to the respective interim period being reported. The Company's interim period tax provision, exclusive of discrete items, for the three month period during 2015 reflects an effective tax rate of 11.43%, as compared to the 12.01%, also exclusive of discrete items, for the same period during 2014. The effective rate decreased slightly due to less taxable income from jurisdictions with higher tax rates.

At March 31, 2015, the Company had remaining available domestic net operating loss (“NOL”) carry-forwards of approximately $41.2 million which are available to offset future U.S. federal and certain state income taxes. In addition the Company has approximately $41.4 million of NOL's available in the United Kingdom related to the 2013 acquisition of Qatarlyst to offset future taxable income in that country. There is currently a full valuation allowance set up against 100% of these NOL’s in the United Kingdom. The Company reviews its NOL positions to validate that all NOL carry-forwards will be utilized before they begin to expire in 2020.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions in which it conducts operations or had nexus. With the exception of NOL carry forwards, the Company is no longer subject to U.S. federal or state tax examinations by tax authorities for years before 2013. Regarding our foreign operations as of December 31, 2014, the tax years that remain open and possibly subject to examination by the tax authorities in those jurisdictions are Australia (2008 to 2013), Singapore and Brazil (2008 to 2013), New Zealand (2010 to 2013), and India (2009 to 2013).

Accounting for Uncertainty in Income Taxes—The Company has applied the FASB’s accounting guidance on accounting for uncertain income tax positions. As of March 31, 2015 the Company’s Condensed Consolidated Balance Sheet includes a liability of $3.11 million for unrecognized tax benefits which is included in other long term liabilities before applying the offset provision required by the application of Notice 2013-11. During the three months ended March 31, 2015 there was $87 thousand in additions to this liability reserve. A reconciliation of the beginning and ending amounts of the Company’s liability reserves for unrecognized tax benefits is as follows:



	March 31, 2015		December 31, 2014
	(in thousands)
Beginning Balance	$	3,020	$	12,742
Additions for tax positions related to current year	—		451
Additions for tax positions of prior years	87		9,348
Reductions for tax position of prior years	—		(19,521		)
Ending Balance	$	3,107	$	3,020

The Company recognizes interest accrued and penalties related to unrecognized tax benefits as part of income tax expense. As of March 31, 2015 and December 31, 2014 approximately $767 thousand and $680 thousand, respectively, of estimated interest and penalties is included in other long term liabilities in the accompanying Condensed Consolidated Balance Sheet, and is part of the balance of the liability for unrecognized tax benefits in the above table.

The Company has applied the new provisions under FAS update No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists. Under these provisions, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward in most cases. This provision has been applied and $929 thousand and $1.14 million of unrecognized tax benefits have been applied against NOL carryforward amounts as of March 31, 2015 and December 31, 2014, respectively.