NOTE 13— INCOME TAXES

The Company’s provision (benefit) for income taxes consists of the following for the years ended December 31, 2016, 2015 and 2014:

A reconciliation of the federal statutory rate of 35% to the effective tax rate for income (loss) before income taxes is as follows for the year ended December 31, 2016, 2015 and 2014:

Deferred income tax assets (liabilities) consisted of the following as of December 31, 2016 and 2015:

The Company's income before income taxes of $47,047 for the year ended December 31, 2016 includes a United States component of income before income taxes of $33,151 and a foreign component comprised of income before income taxes of $13,896. As of December 31, 2016, the Company had federal net operating loss carryforwards of $18,300, state net operating loss carryforwards of $19,800. The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2019 through December 31, 2029, the state net operating loss carryforwards will expire in tax years commencing in December 31, 2034 and the foreign tax credit carryforwards will expire in 2023.

The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income. As of December 31, 2016, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided a valuation allowance. The Company does not believe that it is more likely than not that the Company will be able to utilize the benefits related to foreign tax credits and capital loss carryforwards and has provided a full valuation allowance in the amount of $4,900 against these deferred tax assets.

At December 31, 2016, the Company had gross unrecognized tax benefits totaling $1,255 all of which would have an impact on the Company's effective income tax rate, if recognized. A reconciliation of the amounts of gross unrecognized tax benefits (before federal impact of state items), excluding interest and penalties, was as follows (in thousands):

The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain state and local, and foreign tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2013 to 2016.

At December 31, 2016, the Company believes it is reasonably possible that its gross liabilities for unrecognized tax benefits may decrease by approximately $662 within the next 12 months due to audit settlements and expiration of statute of limitations.

The Company had accrued $879 for interest and penalties relating to uncertain tax positions at December 31, 2016 all of which was included in income taxes payable. The Company recorded a benefit of $66 for interest and penalty expenses related to uncertain tax positions, which was included in provision for income taxes, for the year ended December 31, 2016.

At December 31, 2016, U.S. income taxes were not provided on $2,340 of undistributed earnings of the Company's foreign subsidiary because such earnings have been permanently reinvested in foreign operations. If these earnings were repatriated to the U.S., the Company would not expect to owe material U.S. income taxes due to the utilization of foreign tax credit carryovers.