NOTE 19. INCOME TAXES

Income Tax Provision

The components of our income tax provision are summarized as follows (in thousands):

	Year Ended March 31,
	2017			2016			2015
Continuing operations:
Current:
Federal	$	16,629		$	13,204		$	12,065
State		2,237			1,562			1,657
Foreign		841			1,290			64
Total current income tax provision		19,707			16,056			13,786
Deferred:
Federal		(1,126	)		178			(1,363	)
State		(192	)		(128	)		(158	)
Foreign		(56	)		(33	)		(26	)
Total deferred income tax provision (benefit)		(1,374	)		17			(1,547	)
Total income tax provision - continuing operations	$	18,333		$	16,073		$	12,239
Discontinued operations and gain on sale of discontinued operations:
Current:
Federal	$	(35	)	$	(835	)	$	5,923
State		(3	)		(69	)		458
Total current income tax provision (benefit)		(38	)		(904	)		6,381
Deferred:
Federal		—			1,146			(2,258	)
State		—			95			(175	)
Total deferred income tax (benefit)		—			1,241			(2,433	)
Total income tax provision (benefit) - discontinued operations and gain on sale of discontinued operations	$	(38	)	$	337		$	3,948

The components of our income before income tax provision are summarized as follows (in thousands):

	Year Ended March 31,
	2017			2016		2015
Continuing operations:
United States	$	48,069		$	43,885	$	33,489
Foreign		3,043			3,262		(447	)
Total - continuing operations	$	51,112		$	47,147	$	33,042
Discontinued operations:
United States	$	(101	)	$	893	$	10,475

The income tax provision from continuing operations differs from the amount computed by applying the federal statutory income tax rate (35 percent) to income from continuing operations before income tax provision as follows (in thousands):

	Year Ended March 31,
	2017			2016			2015
Continuing operations:
Income taxes at federal income tax rate	$	17,889		$	16,502		$	11,565
State income taxes, net of federal benefits		1,284			917			787
Non-deductible compensation		549			543			880
Research and development tax credits		(410	)		(607	)		(383	)
Tax-exempt interest income		(1	)		(2	)		(6	)
Qualified production activities income benefit		(910	)		(761	)		(866	)
Other		(68	)		(519	)		262
Total income tax provision from continuing operations	$	18,333		$	16,073		$	12,239

During fiscal 2017, 2016 and 2015, we recognized $24,000, $1.6 million and $0.9 million, respectively, of tax deductions related to share-based compensation, on a consolidated basis, in excess of recognized share-based compensation expense (“excess benefits”) that was recorded to shareholders’ equity. We record excess benefits to shareholders’ equity when the benefits result in a reduction in cash paid for income taxes.

Our policy is to reinvest earnings of our foreign subsidiaries unless such earnings are subject to U.S. taxation. As of March 31, 2017, there are no earnings that have not been subject to U.S. taxation.

Unrecognized Tax Benefits

During fiscal 2017, we did not recognize any interest and penalties related to unrecognized tax benefits. We file income tax returns in the U.S. federal jurisdiction, Germany, United Kingdom, Hong Kong and various state jurisdictions. The statute of limitations is three years for federal and four years for California. Our federal income tax returns are subject to examination for fiscal years 2014 through 2017. Our California income tax returns are subject to examination for fiscal years 2013 through 2017, with the exception of California tax credit carryovers. To the extent there is a research and development tax credit available for carryover to future years, the statute of limitations with respect to the tax credit begins in the year utilized. As a result of the timing for the utilization of California tax credit carryovers, our California research and development tax credits are subject to examination for fiscal years 2011 through 2017. We are subject to examination in Germany for fiscal years 2014 through 2017, in the United Kingdom for fiscal years 2013 through 2017 and in Hong Kong for fiscal year 2017.

Deferred Tax Assets and Liabilities

The following table presents the breakdown between current and non-current net deferred tax assets (liabilities) (in thousands):

	March 31,
	2017			2016
Deferred tax assets, current	$	5,644		$	4,810
Deferred tax assets, non-current		4,392			3,903
Deferred tax liabilities, non-current		(234	)		(384	)
Total net deferred tax assets	$	9,802		$	8,329

Significant components of our deferred tax assets (liabilities) are as follows (in thousands):

	March 31,
	2017			2016
Deferred tax assets:
Research and development tax credit carryforwards	$	917		$	830
Capitalized research and development		45			76
Inventory reserves		598			623
Deferred revenue from extended maintenance agreements		1,074			1,446
Warranty reserves		1,659			1,217
Accrued payroll and other accrued expenses		1,715			1,553
Share-based compensation		4,753			3,822
Alternative minimum tax credits		24			24
Tax on deferred intercompany profit		1,221			601
Other		696			665
Total deferred tax assets		12,702			10,857
Deferred tax liabilities:
Depreciation		(2,518	)		(2,135	)
Other		(382	)		(393	)
Total deferred tax liabilities		(2,900	)		(2,528	)
Net deferred tax assets	$	9,802		$	8,329

A valuation allowance against deferred tax assets is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. As of March 31, 2017, 2016 and 2015, we did not have a valuation allowance.

As of March 31, 2017, we had no federal or California net operating loss carryforwards. As of March 31, 2017, our California research and development tax credit carryforwards were $1.4 million. The California research and development tax credit will carryforward indefinitely.