Income Taxes

The components of the income tax provision (benefit) are as follows (in thousands):



	Year Ended September 30,
	2013			2012			2011
Current income tax provision (benefit):
Federal	$	15		$	15		$	16
State	70			213			1,356
Foreign	681			(1,374		)	858
Total current income tax provision (benefit)	766			(1,146		)	2,230
Deferred income tax (benefit):
Federal	(2,523		)	(118,432		)	—
State	(90		)	(291		)	—
Foreign	(323		)	(3,413		)	(276		)
Total deferred income tax (benefit)	(2,936		)	(122,136		)	(276		)
Income tax provision (benefit)	$	(2,170	)	$	(123,282	)	$	1,954

The components of income (loss) before income taxes and equity in earnings of joint ventures are as follows (in thousands):



	Year Ended September 30,
	2013			2012		2011
Domestic	$	(6,968	)	$	2,204	$	111,053
Foreign	206			9,216		16,523
	$	(6,762	)	$	11,420	$	127,576

The differences between the income tax provision (benefit) and income taxes computed using the applicable U.S. statutory federal tax rate is as follows (in thousands):



	Year Ended September 30,
	2013			2012			2011
Income tax provision computed at federal statutory rate	$	(1,535	)	$	4,728		$	45,736
State income taxes, net of federal benefit	(8		)	260			1,848
Foreign income taxed at different rates	493			(832		)	(1,546		)
Dividends	115			956			(219		)
Change in deferred tax asset valuation allowance	523			(125,479		)	(42,608		)
Reduction in uncertain tax positions	(1,022		)	(3,732		)	(3,719		)
Nondeductible compensation	474			1,339			295
Tax credits generated	(2,002		)	(1,195		)	(1,179		)
Travel and entertainment	124			139			119
Merger costs	251			—			315
Other	417			534			2,912
Income tax provision (benefit)	$	(2,170	)	$	(123,282	)	$	1,954

The Company has not provided for U.S. income taxes on the unremitted earnings of certain foreign subsidiaries as these earnings are considered to be indefinitely reinvested. These earnings amounted to approximately $17.5 million at September 30, 2013. It is not practicable to compute the estimated deferred tax liability on these earnings.

The significant components of the net deferred tax assets and liabilities are as follows (in thousands):



	September 30,
	2013			2012
Accruals and reserves not currently deductible	$	11,050		$	10,489
Federal, state and foreign tax credits	20,084			18,963
Other assets	1,859			1,655
Net operating loss carryforwards	101,717			101,713
Inventory reserves and valuation	9,052			8,790
Deferred tax assets	143,762			141,610
Depreciation and intangible amortization	12,208			5,418
Deferred tax liabilities	12,208			5,418
Valuation allowance	(16,509		)	(16,035		)
Net deferred tax asset	$	115,045		$	120,157

Management has considered the weight of all available evidence in determining whether a valuation allowance is required against its deferred tax assets at September 30, 2013. After consideration of both positive and negative evidence management has concluded that it is more likely than not that a substantial portion of its deferred tax assets will be realized. The positive evidence considered was three year U.S. historical cumulative profitability, projected future taxable income and length of carry-forward periods of net operating losses and tax credits. The primary negative evidence considered is the volatile semiconductor industry in which the Company operates.

The Company recorded a tax benefit of $121.8 million resulting from the reduction in the valuation allowance during the fiscal year ended September 30, 2012. The Company has continued to maintain a valuation allowance in the U.S. against certain tax credits and state net operating losses due to the uncertainty of their realization based on long-term Company forecasts and the expiration dates on these attributes. The Company has also continued to maintain a valuation allowance in certain jurisdictions that have not generated historical cumulative profitability.

If future operating results of the U.S. or these foreign jurisdictions deviate from expectations, it is reasonably possible that there could be a further change in the valuation allowance in the future. A change in the valuation allowance, in whole or in part, would result in a non-cash income tax expense or benefit during the period of change.

As of September 30, 2013, the Company had federal, state and foreign net operating loss carryforwards of approximately $242.0 million, $122.2 million and $37.3 million, respectively, and federal and state research and development tax credit carryforwards of approximately $24.0 million available to reduce future tax liabilities, which expire at various dates through 2033. The net operating loss carryforward includes excess deductions related to stock compensation in the amount of $11.7 million which have not been recognized for financial statement purposes. The benefits of these tax deductions will be credited to additional paid-in capital upon being realized.

The Company has performed studies to determine if there are any annual limitations on the federal net operating losses under section 382 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). As a result of these studies, the Company has determined that ownership changes have occurred primarily in connection with acquisitions when the Company has issued stock to the sellers, as well as ownership changes in the subsidiaries acquired by the Company. Certain limitations have been calculated and the benefits of the net operating losses that will expire before utilization have not been recorded as deferred tax assets in the financial statements. The Company's U.S. net operating losses expire at various dates through 2030.

A reconciliation of the beginning and ending amount of the consolidated liability for unrecognized income tax benefits during the fiscal years ended September 30, 2013, 2012 and 2011 is as follows (in thousands):



	Unrecognized Tax Benefit			Interest and Penalties			Total
Balance at October 1, 2010	$	12,816		$	2,152		$	14,968
Additions for tax positions of prior years	184			447			631
Additions for tax positions related to current year	242			—			242
Reductions from lapses in statutes of limitations	(961		)	—			(961		)
Reductions from settlements with taxing authorities	(3,392		)	(610		)	(4,002		)
Foreign exchange rate adjustment	122			—			122
Balance at September 30, 2011	9,011			1,989			11,000
Additions for tax positions of prior years	242			247			489
Reductions from lapses in statutes of limitations	(3,125		)	(607		)	(3,732		)
Foreign exchange rate adjustment	(167		)	15			(152		)
Balance at September 30, 2012	5,961			1,644			7,605
Additions for tax positions of prior years	—			228			228
Additions for tax positions related to acquired entities	116			—			116
Reductions from lapses in statutes of limitations	(944		)	(78		)	(1,022		)
Foreign exchange rate adjustment	14			—			14
Balance at September 30, 2013	$	5,147		$	1,794		$	6,941

As of September 30, 2013 all of the Company's unrecognized tax benefits, if recognized, would affect the effective tax rate. The Company recognizes interest related to unrecognized benefits as a component of tax expense, of which $0.2 million, $0.2 million and $0.4 million was recognized for the years ended September 30, 2013, 2012 and 2011, respectively.

The Company is subject to U.S. federal income tax and various state, local and international income taxes in various jurisdictions. The amount of income taxes paid is subject to the Company's interpretation of applicable tax laws in the jurisdictions in which it files. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The statute of limitations lapsed on several uncertain tax positions in the foreign jurisdictions related to transfer pricing and income tax withholding during fiscal year 2013 that resulted in a $1.0 million reduction in gross unrecognized tax benefits that impacted the effective tax rate. The Company is subject to income tax audits in various global jurisdictions in which it operates. In the Company's U.S. and international jurisdictions, the years that may be examined vary, with the earliest tax year being 2007. Based on the outcome of these examinations, or the expiration of statutes of limitations for specific jurisdictions, it is reasonably possible that the related unrecognized tax benefits could change from those recorded in the Company's statement of financial position. The Company currently anticipates that it is reasonably possible that the unrecognized tax benefit will be reduced by approximately $1.3 million during the next twelve months primarily as the result of statutes of limitations expiring.