8. Income Taxes

Income taxes from continuing operations in the accompanying consolidated statements of income for the fiscal years ended September 30 are as follows (in thousands):

	2016		2015		2014
Current provision:
Federal	$	6,550	$	6,065	$	6,470
State and foreign		152		136		147
Total current provision		6,702		6,201		6,617
Deferred provision (benefit):
Federal		169		58		(347	)
State and foreign		92		35		(5	)
Total deferred provision (benefit)		261		93		(352	)
Total provision	$	6,963	$	6,294	$	6,265

The reconciliation of the difference between amounts calculated at the statutory U.S. federal tax rate of 35% for the fiscal years ended September 30 and the Company’s effective tax rate from continuing operations is as follows (in thousands):

	2016			2015			2014
Amount at statutory U.S. federal income tax rate	$	5,932		$	6,385		$	6,465
Change because of the following items:
State income taxes, net of federal benefit		142			67			118
Stock-based compensation		(607	)		16			21
Valuation allowance change		(2,500	)		348			120
Tax reserve change		258			34			(121	)
Federal manufacturing deduction		(280	)		(268	)		(235	)
Federal research and development credit		(571	)		(74	)		(67	)
Gain on strategic investment and corporate subsidiary		2,630			—			—
Foreign rate differential		622			—			—
Acquisition-related transaction costs		768			—			—
Contingent consideration accretion		522			—			—
Other		47			(214	)		(36	)
Income tax provision	$	6,963		$	6,294		$	6,265

The federal research and development tax credit for fiscal 2016, 2015 and 2014 includes the benefit generated for the periods from October 1, 2015 to December 31, 2015, October 1, 2014 to December 31, 2014 and October 1, 2013 to December 31, 2013, respectively, prior to the expiration of the benefit in each period. During fiscal 2016, the Company monetized $7.5 million of capital losses realized in prior years by accelerating built-in gains in the Company’s IVD subsidiary. For tax purposes, this resulted in an increase in the Company’s tax basis in the IVD subsidiary and a $2.6 million reduction in both deferred tax assets and the valuation allowance as of September 30, 2016.

The Company recorded an income tax benefit from discontinued operations of $0.1 million in fiscal 2014 associated with the sale of discontinued operations assets completed in fiscal 2012.

As discussed in Note 2, the Company adopted new accounting guidance for stock-based compensation during the fourth quarter of fiscal 2016. Amendments related to accounting for excess tax benefits have been adopted prospectively, effective October 1, 2015, resulting in recognition of excess tax benefits against income tax expenses in the consolidated statement of income rather than additional paid-in capital of $0.6 million for the year ended September 30, 2016. During fiscal 2015 and 2014, excess tax benefits totaling $0.4 million and $0.2 million, respectively, were recorded in additional paid-in capital.

The components of deferred income taxes consisted of the following as of September 30 and result from differences in the recognition of transactions for income tax and financial reporting purposes (in thousands):

	2016			2015
Depreciable assets	$	(2,257	)	$	1,618
Deferred revenue		80			96
Accruals and reserves		1,153			835
Stock-based compensation		3,113			4,194
Impaired strategic investments		2,701			4,186
Capital loss carryforward		63			1,456
NOL carryforward		3,324			—
Federal and state R&D credit		110
Other		587			586
Valuation allowance		(3,847	)		(5,721	)
Total deferred tax assets		5,027			7,250
Less current deferred tax assets		—			(546	)
Noncurrent deferred tax assets	$	5,027		$	6,704

As of September 30, 2016 and 2015, the Company recorded a deferred tax asset valuation allowance of $3.9 million and $5.7 million, respectively. The valuation allowance is primarily related to other-than-temporary impairment losses on strategic investments, state R&D credit carryforwards, and net operating loss carryforwards of Creagh Medical.

Unrecognized tax benefits are the differences between a tax position taken, or expected to be taken in a tax return, and the benefit recognized for accounting purposes pursuant to accounting guidance. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):

	2016			2015			2014
Beginning of fiscal year	$	1,248		$	1,216		$	1,300
Increases in tax positions for prior years		77			50			43
Decreases in tax positions for prior years		(21	)		(10	)		(1	)
Increases in tax positions for current year		365			146			149
Lapse of the statute of limitations		(161	)		(154	)		(275	)
End of fiscal year	$	1,508		$	1,248		$	1,216

The total amount of unrecognized tax benefits excluding interest and penalties that, if recognized, would affect the effective tax rate as of September 30, 2016, 2015 and 2014, respectively, are $1.2 million, $0.9 million and $1.0 million. Currently, the Company does not expect the liability for unrecognized tax benefits to change significantly in the next 12 months and has classified the above balances on the consolidated balance sheets in other long-term liabilities. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense. As of September 30, 2016, 2015 and 2014, a gross balance of $0.6 million, $0.6 million and $0.7 million, respectively, has been accrued related to the unrecognized tax benefits balance for interest and penalties.

The Company files income tax returns, including returns for its subsidiaries, in the U.S. federal jurisdiction and in various state jurisdictions as well as several non-U.S. jurisdictions. Uncertain tax positions are related to tax years that remain subject to examination. The Internal Revenue Service (“IRS”) completed an examination of the Company’s U.S. income tax return for fiscal 2012 in the fourth quarter of fiscal 2014 with a payment made associated with a timing adjustment. U.S. income tax returns for years prior to fiscal 2013 are no longer subject to examination by federal tax authorities. For tax returns for state and local jurisdictions, the Company is no longer subject to examination for tax years generally before fiscal 2006. For tax returns for non-U.S. jurisdictions, the Company is no longer subject to income tax examination for years prior to 2011. Additionally, the Company has been indemnified of liability for any taxes relating to Creagh Medical and NorMedix for periods prior to the respective acquisition dates, pursuant to the terms of the related share purchase agreements. As of September 30, 2016 and 2015 there were no undistributed earnings in foreign subsidiaries.