Income Taxes

The following table provides details of income taxes (in thousands, except percentages):



	Three months ended						Six months ended
	June 30,						June 30,
	2014			2013			2014			2013
Loss before provision for income taxes	$	(1,586	)	$	(878	)	$	(5,552	)	$	(5,006	)
Provision for income taxes	681			115			932			421
Effective tax rate	(43		)%	(13		)%	(17		)%	(8		)%

The effective tax rate fluctuates based on the amount of pre-tax income or loss generated in the various jurisdictions where we conduct operations and pay income tax. The income tax expense on an operating loss of $1.6 million in the second quarter of 2014 is due to income tax associated with our foreign subsidiaries that do not benefit from our federal net operating loss carryforwards and from the accrual of an income tax liability including interest and penalties of $0.3 million on a settlement of a tax audit of a foreign subsidiary. The interest and penalties related to the income tax liability are recognized in the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included in the income tax liability in the consolidated balance sheet.

As of December 31, 2013, we had net operating losses ("NOLs") of $172.3 million, $93.1 million, and $95.8 million for federal, state, and foreign income tax purposes, respectively. Additionally, the Company has capital loss carryforwards of $110.5 million and $24.0 million for federal and state tax purposes, respectively. The capital loss carry forwards, which were generated by the sale of Source Photonics, expire in 2015. Under the Internal Revenue Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change NOLs, capital loss carry forwards and other pre-change tax attributes to offset its post-change income may be limited. An ownership change is generally defined as a greater than 50% change in its equity ownership by value over a three-year period. We may experience an ownership change in the future as a result of subsequent shifts in our stock ownership. If we were to trigger an ownership change in the future, our ability to use any NOLs and capital loss carry forwards existing at that time could be limited. As of June 30, 2014, the US federal and state NOLs had a full valuation allowance.