(14) Income Taxes

Income before income taxes for the years ended June 30, 2016, 2015 and 2014, was taxed under the following jurisdictions (in thousands):


	2016		2015		2014
U.S.	$	1,785	$	11,431	$	2,556
Non-U.S.		437,781		424,485		428,522
	$	439,566	$	435,916	$	431,078

The provision for income taxes is presented below (in thousands):


		2016		2015		2014
Current:	Federal	$	24,325	$	28,429	$	18,931
	State		5,805		695		1,334
	Non-U.S.		58,023		50,892		55,675
			88,153		80,016		75,940
Deferred:	Federal		5,640		(4,269)		(420)
	State		(1,644)		(180)		(81)
	Non-U.S.		(4,992)		7,463		10,366
			(996)		3,014		9,865
Provision for income taxes		$	87,157	$	83,030	$	85,805

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. federal income tax rate of 35% to pretax income as a result of the following (in thousands):


	2016		2015		2014
Taxes computed at statutory U.S. rate	$	153,848	$	152,570	$	150,877
Increase (decrease) in income taxes resulting from:
State income taxes, net of U.S. tax benefit		2,573		348		794
Research and development credit		(5,138)		(4,821)		(5,395)
Tax effect of dividends		80,754		56,219		87,764
Change in valuation allowance		(5,882)		(614)		5,894
Effect of non-U.S. tax rates		(91,124)		(87,721)		(83,135)
Foreign tax credits		(44,835)		(36,725)		(73,975)
Stock-based compensation expense		(8,170)		3,158		3,431
Other		5,131		616		(450)
	$	87,157	$	83,030	$	85,805

We classify deferred tax assets and liabilities as current or non-current according to the related asset or liability’s classification. The components of our deferred tax assets and liabilities at June 30, 2016 and 2015 are as follows (in thousands):


	2016		2015
Deferred tax assets:
Employee liabilities	$	15,514	$	11,663
Inventories		9,714		8,822
Provision for warranties		4,081		2,722
Provision for doubtful debts		3,708		3,779
Net operating loss carryforwards		33,881		13,262
Capital loss carryover		2,109		1,805
Stock-based compensation expense		15,460		18,173
Other		4,655		5,446
		89,122		65,672
Less valuation allowance		(10,807)		(14,647)
Deferred tax assets		78,315		51,025
Deferred tax liabilities:
Unrealized foreign exchange gains		(1,016)		(512)
Property, plant and equipment		(4,383)		(2,291)
Goodwill and other intangibles		(26,481)		(8,214)
Deferred tax liabilities		(31,880)		(11,017)
Net deferred tax asset	$	46,435	$	40,008

We reported the net deferred tax assets and liabilities in our consolidated balance sheets at June 30, 2016 and 2015 as follows (in thousands):


	2016		2015
Non-current deferred tax asset		55,496		46,380
Non-current deferred tax liability		(9,061)		(6,372)
Net deferred tax asset	$	46,435	$	40,008

As of June 30, 2016, we had $112.8 million of U.S. federal and state net operating loss carryforwards and $80.1 million of non-U.S. net operating loss carryforwards, which expire in various years through 2021 or carry forward indefinitely.

The valuation allowance at June 30, 2016 relates to a provision for uncertainty of the utilization of net operating loss carryforwards of $8.5 million and capital loss and other items of $2.3 million. We believe that it is more likely than not that the benefits of deferred tax assets, net of any valuation allowance, will be realized.

A substantial portion of our manufacturing operations and administrative functions in Malaysia and Singapore operate under various tax holidays and tax incentive programs that will expire in whole or in part at various dates through June 30, 2020. The end of certain tax holidays may be extended if specific conditions are met. The net impact of these tax holidays and tax incentive programs increased our net earnings by $19.2 million ($0.14 per diluted share) for the year ended June 30, 2016 and $18.9 million ($0.13 per diluted share) for the year ended June 30, 2015.

At June 30, 2016, applicable U.S. federal income taxes and foreign withholding taxes have not been provided on the accumulated earnings of foreign subsidiaries that are expected to be permanently reinvested. The total amount of these undistributed earnings at June 30, 2016 amounted to approximately $1.2 billion. If these earnings had not been permanently reinvested, deferred taxes of approximately $286 million would have been recognized in the consolidated financial statements.

In accounting for uncertainty in income taxes, we recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (that is, a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for annual periods.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statements of income. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.

Based on all known facts and circumstances and current tax law, we believe the total amount of unrecognized tax benefits on June 30, 2016, is not material to our results of operations, financial condition or cash flows, and if recognized, would not have a material impact on our effective tax rate.