Income Taxes

The following table provides details of income taxes for the three and nine months ended September 30, 2015 and 2014 (in thousands, except percentages):



	Three months ended						Nine months ended
	September 30,						September 30,
	2015			2014			2015			2014
Income (loss) before provision for income taxes	$	1,336		$	(313	)	$	928		$	(5,865	)
Provision for income taxes	450			727			1,390			1,659
Effective tax rate	34		%	(232		)%	150		%	(28		)%

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 of $0.5 million and $1.4 million on our pre-tax income of $1.3 million and $0.9 million for the three and nine months ended September 30, 2015, respectively, is due to income tax associated with our foreign subsidiaries that do not benefit from our federal net operating loss carryforwards.

During the nine months ended September 30, 2015, management determined that it no longer met the criteria for indefinite reinvestment of the undistributed earnings of its foreign subsidiaries. As a result, the Company recorded a provision for deferred taxes related to foreign earnings in the amount of $8.7 million and a corresponding reduction in the deferred tax valuation allowance of $8.7 million; the change had no impact on the Company's effective income tax rate for the period ended September 30, 2015.

As of December 31, 2014, MRV had federal, state, and foreign net operating loss ("NOLs") carryforwards available of $179.7 million, $100.7 million, and $97.3 million, respectively. Additionally, the Company had capital loss carryforwards of $110.5 million and $24.0 million for federal and state tax purposes, respectively as of December 31, 2014. The capital loss carry-forwards, which were generated by the sale of Source Photonics, expire at the end of 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 carryforwards 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 December 31, 2014 and September 30, 2015, the Company has recorded a valuation allowance against its net deferred tax asset which includes its US federal and state NOLs.