Income Taxes

Components of the income tax expense (benefit) are as follows (in thousands):



	Year ended December 31,
	2016			2015			2014
Current:
Federal	$	442		$	3,944		$	19,150
State	(85		)	390			(13		)
Foreign	(526		)	1,841			242
Total current	(169		)	6,175			19,379
Deferred:
Federal	1,564			(2,628		)	(984		)
State	(112		)	(63		)	(1,147		)
Foreign	(46		)	(8		)	—
Total deferred	1,406			(2,699		)	(2,131		)
Income tax expense	$	1,237		$	3,476		$	17,248

The components of income before income taxes are as follows (in thousands):



	Year ended December 31,
	2016			2015		2014
United States	$	4,502		$	4,760	$	56,729
Foreign	(1,358		)	5,874		141
Income before income taxes	$	3,144		$	10,634	$	56,870

A reconciliation of the U.S. federal statutory tax rate to the effective income tax rate is as follows:



	Year ended December 31,
	2016		2015		2014
Federal statutory tax rate	35.0	%	35.0	%	35.0	%
State income taxes, net of federal benefit	(5.3	)	2.0		(2.0	)
Non-U.S. income taxed at different rates	1.2		(4.4	)	—
Return to accrual adjustments	(2.3	)	(3.8	)	(0.2	)
Change in valuation allowance	0.3		0.1		—
Domestic production activities deduction	—		—		(3.0	)
Net operating loss carryback adjustment	10.0		1.4		—
Other	0.4		2.4		0.5
Effective income tax rate	39.3	%	32.7	%	30.3	%

Fluctuations in effective tax rates have historically been impacted by permanent tax differences with no associated income tax impact and changes in state apportionment factors, including the effect on state deferred tax assets and liabilities. Changes in the effective tax rate also included the benefit of non-U.S. income taxed at lower rates during 2015, and the Company not qualifying for the domestic production activities deduction during 2016 and 2015. The benefit of operating in foreign tax jurisdictions is primarily derived from operations in Canada.

Deferred income taxes reflect the tax effect of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and the value reported for income tax purposes, at the enacted tax rates expected to be in effect when the differences reverse. The components of deferred tax assets and liabilities are as follows (in thousands):



	December 31,
	2016			2015
Deferred tax assets:
Net operating loss carryforwards	$	21,212		$	15,210
Allowance for doubtful accounts	1,582			432
Inventory valuation reserves	2,205			3,734
Equity compensation	3,161			4,250
Goodwill	10,788			6,869
Accrued compensation	80			73
Foreign tax credit carryforward	2,365			865
Other	76			67
Total gross deferred tax assets	41,469			31,500
Valuation allowance	(1,053		)	(1,093		)
Total deferred tax assets, net	40,416			30,407
Deferred tax liabilities:
Property and equipment	(7,264		)	(12,876		)
Intangible assets	(13,375		)	(18,249		)
Convertible debt	(2,010		)	(3,011		)
Unearned revenue	(4,535		)	—
Prepaid insurance and other	(338		)	(216		)
Total gross deferred tax liabilities	(27,522		)	(34,352		)
Net deferred tax assets (liabilities)	$	12,894		$	(3,945	)

Deferred taxes are presented in the balance sheets as follows (in thousands):



	December 31,
	2016			2015
Current deferred tax assets	$	52		$	2,649
Non-current deferred tax assets	16,215			17,229
Current deferred tax liabilities	(3,373		)	—
Non-current deferred tax liabilities	—			(23,823		)
Net deferred tax (liabilities) assets	$	12,894		$	(3,945	)

As of December 31, 2016, the Company had U.S. net operating loss carryforwards of $55.4 million, expiring in various amounts in 2028 through 2035. The ability to utilize net operating losses and other tax attributes could be subject to a significant limitation if the Company were to undergo an “ownership change” for purposes of Section 382 of the Tax Code.

During 2014 and 2015, the Company’s corporate organizational structure required the filing of two separate consolidated U.S. Federal income tax returns. Taxable income of one group (“Group A”) could not be offset by tax attributes, including net operating losses of the other group (“Group B”). During the year ended December 31, 2015, the Company restructured its legal entities such that there is only one U.S. tax filing group filing a single U.S. consolidated federal income tax return beginning in 2016.

The Company considers all available evidence, both positive and negative, to determine whether a valuation allowance is necessary for deferred tax assets. The Company considers cumulative losses in recent years as significant negative evidence. The Company considers recent years to mean the current year plus the two preceding years. As of December 31, 2016, the Company maintains a valuation allowance of $1.1 million for deferred tax assets in certain state jurisdictions.

The Company has not calculated U.S. taxes on unremitted earnings of certain non-U.S. subsidiaries due to the Company’s intent to reinvest the unremitted earnings of the non-U.S. subsidiaries. At December 31, 2016, the Company had approximately $1.2 million in unremitted earnings outside the U.S. which were not included for U.S. tax purposes. U.S. income tax liability would be incurred if these funds were remitted to the U.S. It is not practicable to estimate the amount of the deferred tax liability on such unremitted earnings.

The Company has performed an evaluation and concluded there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The evaluation was performed for the tax years which remain subject to examination by tax jurisdictions as of December 31, 2016, which are the years ended December 31, 2013 through December 31, 2016 for U.S. federal taxes and the years ended December 31, 2012 through December 31, 2016 for state tax jurisdictions.

At December 31, 2016, the Company had no unrecognized tax benefits.

In January 2017, the Internal Revenue Service notified the Company that it will examine the Company’s federal tax returns for the year ended December 31, 2014. No adjustments have been asserted and management believes that sustained adjustments, if any, would not have a material effect on the Company’s financial position, results of operations or liquidity.