7.    Income Taxes

(Loss) income before income taxes consists of the following (in thousands):

 

		Year Ended December 31,
		2015				2014				2013
Domestic		$	(8,771	)		$	(489	)		$	(4,091	)
Foreign			6,642				4,867				10,817
(Loss) income before income taxes		$	(2,129	)		$	4,378			$	6,726

As of December 31, 2015, the Company does not maintain accumulated earnings and profits in the foreign jurisdictions that it currently does business. The company has repatriated current earnings from its foreign subsidiaries to the United States in 2014 and 2015. To the extent the Company has positive accumulated foreign earnings in the future, we will further assess our global business needs and decide whether or not it will permanently reinvest those earnings.

 

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

 

		Year Ended December 31,
		2015				2014				2013
Current:
Federal		$	(9	)		$	134			$	(20	)
State			14				323				(2	)
Foreign			—				531				—
Total current			5				988				(22	)
Deferred:
Federal			—				—				—
State			—				—				—
Foreign			—				—				44
Total deferred			—				—				44
Provision for income taxes		$	5			$	988			$	22

The reconciliation of the federal statutory rate to Juniper’s effective tax rate is as follows:

 

		2015				2014				2013
Federal income tax rate			34.0	%			34.0	%			34.0	%
Foreign rate differential			106.1	%			(31.6	)%			(53.9	)%
State tax, net of federal benefit			(2.4	)			77.8				8.5
Permanent Items:
Change in fair value of redeemable warrants			—				—				—
Change in fair market value of stock warrants			—				(3.0	)			(4.0	)
Incentive stock options			(10.4	)			2.4				—
Dividend from foreign subsidiary			(55.9	)			54.9				—
Subpart F inclusion			—				—				8.9
Acquisition costs capitalized			—				—				3.3
Amortization of technical rights			16.4				(8.0	)			(5.2	)
Deferred adjustments			4.8				2.6				(6.0	)
Discrete prior year New Jersey liability			—				7.3				—
Other			(0.5	)			0.8				1.1
Effect of permanent differences			(45.5	)			57.0				(1.9	)
Effective income tax rate			92.1				137.2				(13.3	)
Change in valuation allowance			(92.3	)			(114.6	)			13.6
Effective income tax rate			(0.2	)%			22.6	%			0.3	%

The Company follows the provisions of FASB ASC 740, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB No. 109.” FASB ASC 740 provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements in accordance with ASC 740-20. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of FASB ASC 740 and in subsequent periods. Juniper recognizes interest and penalties, if any, related to uncertain tax positions in general and administrative expenses. No uncertain tax positions or interest and penalties related to uncertain tax positions were accrued at December 31, 2015.

The Company operates in multiple countries. Accordingly, separate tax filings are required based on jurisdiction. Due to the separate tax filings of our U.S. and U.K jurisdictions, we have evaluated the need for a valuation allowance on a separate jurisdiction basis. As of December 31, 2015, we continue to maintain a full valuation allowance against all net deferred tax assets.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. Management believes it is more likely than not that the results of future operations will not generate sufficient taxable income in the U.S. and the U.K., in order to realize the full benefits of the deferred tax assets in the respective jurisdictions.

As of December 31, 2015, the Company has U.S. tax net operating loss carryforwards of approximately $157 million, which expire through 2035. The Company also has unused tax credits of approximately $1.9 million, which expire at various dates through 2035. Utilization of the tax net operating loss carryforwards may be limited in any year due to limitations in the Internal Revenue Code. U.S. net operating loss carryforwards include no excess tax benefits from the exercise of share based awards due to the full valuation allowance that remains on the net domestic deferred tax assets. As of December 31, 2015, the Company had U.K. tax net operating loss carryforwards of approximately $15 million, which will not expire.

The Company files federal income tax returns as well as multiple state, local and foreign jurisdiction tax returns. Tax years ended December 31, 2013 or later remain subject to examination by the IRS. State and local jurisdiction tax returns remain subject to examination for tax years ended December 31, 2013 or later.

As of December 31, 2015, the Company’s open tax years subject to audit are 2013, 2014 and 2015. The Internal Revenue Service has concluded their audit of the 2011 and 2012 tax years. There were no material findings resulting from their audit.

The components of Juniper’s net deferred tax assets and liabilities are as follows (in thousands):

 

		December 31, 2015				December 31, 2014
Share based awards compensation		$	1,502			$	1,085
Allowance for returns			—				—
Inventory reserve			—				—
Book accumulated depreciation net of tax			(1,386	)			(1,475	)
Other deferred revenue			249				335
Patents			1,396				1,290
Federal net operating loss			53,700				52,050
State net operating loss			912				1,133
Foreign losses			2,929				2,368
R&D credit carryover			1,723				1,723
Write-up of intangibles			(337	)			(443	)
Other			162				201
Net deferred tax assets			60,850				58,267
Less: valuation allowance:
Federal			(60,850	)			(58,267	)
Deferred tax asset		$	—			$	—