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Taxes | 12 Months Ended
--- | ---
Dec. 31, 2015
Income Tax Disclosure [Abstract] |
Taxes | Taxes Domestic income from continuing operations before taxes was $11,637,000 in 2015, $25,585,000 in 2014, and $20,146,000 in 2013. Foreign income from continuing operations before taxes was $115,325,000 in 2015, $106,171,000 in 2014, and $58,310,000 in 2013. Income tax expense on continuing operations consisted of the following (in thousands):
| Year Ended December 31,
| 2015 |  | 2014 |  | 2013
Current: |
Federal | $ | 16,430 |  |  | $ | 18,852 |  |  | $ | 5,935 |
State | 378 |  |  | 608 |  |  | 466 |
Foreign | 4,946 |  |  | 4,854 |  |  | 3,167 |
| 21,754 |  |  | 24,314 |  |  | 9,568 |
Deferred: |  |  |  |  |
Federal | (2,541 | ) |  | (2,569 | ) |  | 1,580 |
State | (165 | ) |  | 7 |  |  | 119 |
Foreign | 250 |  |  | (837 | ) |  | 6 |
| (2,456 | ) |  | (3,399 | ) |  | 1,705 |
| $ | 19,298 |  |  | $ | 20,915 |  |  | $ | 11,273 |
A reconciliation of the United States federal statutory corporate tax rate to the Company’s income tax expense on continuing operations, or effective tax rate, was as follows:
| Year Ended December 31,
| 2015 |  | 2014 |  | 2013
Income tax provision at federal statutory corporate tax rate | 35 | % |  | 35 | % |  | 35 | %
State income taxes, net of federal benefit | — |  |  | — |  |  | 1 |
Foreign tax rate differential | (19 | ) |  | (19 | ) |  | (19 | )
Tax credit | — |  |  | — |  |  | (1 | )
Discrete tax events | (2 | ) |  | (1 | ) |  | (3 | )
Other | 1 |  |  | 1 |  |  | 1 |
Income tax provision on continuing operations | 15 | % |  | 16 | % |  | 14 | %
The effective tax rate for 2015 included the impact of the following discrete tax events: (1) a decrease in tax expense of $1,105,000 from the final true-up of the prior year’s tax accrual upon filing the actual tax returns, (2) a decrease in tax expense of $975,000 from the expiration of statutes of limitations for certain reserves for income tax uncertainties, (3) a decrease in tax expense, net of reserves, of $910,000 from the retroactive application of the 2015 research and development tax credit passed by Congress in December 2015 and applied retroactively to January 1, 2015, and (4) an increase in tax expense of $65,000 from the write down of a deferred tax asset. Interest and penalties included in these amounts was a decrease to tax expense of $148,000. The effective tax rate for 2014 included the impact of the following discrete tax events: (1) a decrease in tax expense of $652,000 from the final true-up on the prior year’s tax accrual upon filing the actual tax returns, (2) a decrease in tax expense, net of reserves, of $645,000 from the retroactive application of the 2014 research and development tax credit passed by Congress in December 2014 and applied retroactively to January 1, 2014, (3) a decrease in tax expense of $418,000 from the closing of the Internal Revenue Service audit of the Company for tax years 2010 and 2011, and (4) a decrease in tax expense of $217,000 from the expiration of the statutes of limitations for certain reserves for income tax uncertainties. Interest and penalties included in these amounts was a decrease to tax expense of $46,000. The effective tax rate for 2013 included the impact of the following discrete tax events: (1) a decrease in tax expense of $1,790,000 from the expiration of statutes of limitations for certain reserves for income tax uncertainties, (2) a decrease in tax expense of $428,000 from the application of the 2012 research and development credit passed by Congress on January 1, 2013, and (3) an increase in tax expense of $267,000 from the final true-up of the prior year's tax accrual upon filing the actual tax returns. Interest and penalties included in these amounts was a decrease to tax expense of $854,000. The changes in the reserve for income taxes, excluding gross interest and penalties, were as follows (in thousands):
Balance of reserve for income taxes as of December 31, 2013 | $ | 4,408 |
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken in prior periods | (226 | )
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period | 1,095 |
Gross amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities | (15 | )
Gross amounts of decreases in unrecognized tax benefits as a result of the expiration of the applicable statutes of limitations | (135 | )
Balance of reserve for income taxes as of December 31, 2014 | 5,127 |
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken in prior periods | (56 | )
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period | 1,291 |
Gross amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities | — |
Gross amounts of decreases in unrecognized tax benefits as a result of the expiration of the applicable statutes of limitations | (1,066 | )
Balance of reserve for income taxes as of December 31, 2015 | $ | 5,296 |
The Company’s reserve for income taxes, including gross interest and penalties, was $5,858,000 as of December 31, 2015, which included $4,830,000 classified as a non-current liability and $1,028,000 recorded as a reduction to non-current deferred tax assets. The Company's reserve for income taxes, including gross interest and penalties, was $5,651,000 as of December 31, 2014, which included $4,623,000 classified as a non-current liability and $1,028,000 recorded as a reduction to non-current deferred tax assets. The amount of gross interest and penalties included in these balances was $562,000 and $524,000 as of December 31, 2015 and December 31, 2014, respectively. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period, less $701,000 and $664,000, as of December 31, 2015 and December 31, 2014, respectively, that would be recorded through additional paid-in capital. As a result of the expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released, which would decrease income tax expense by approximately $750,000 to $850,000 over the next twelve months. The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Japan, and within the United States, Massachusetts and California. Within the United States, the tax years 2012 through 2014 remain open to examination by the Internal Revenue Service, while the tax years 2011 through 2014 remain open to various state taxing authorities, and the tax years 2011 through 2014 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates. In 2011, the Company finalized an Advanced Pricing Agreement (APA) with Japan that will cover tax years 2006 through 2011, with a requested extension to 2012. The Company has concluded negotiations for an APA between Japan and Ireland that will cover tax years 2014 through 2018 with retroactive application to 2013. The Company believes it is adequately reserved for these open years. Deferred tax assets and liabilities consisted of the following (in thousands):
| December 31,
| 2015 |  | 2014
Current deferred tax assets: |  |  |
Inventory and revenue related | $ | 2,985 |  |  | $ | 4,911 |
Bonuses, commissions, and other compensation | 2,500 |  |  | 2,280 |
Other | 1,619 |  |  | 1,794 |
Net current deferred tax assets | $ | 7,104 |  |  | $ | 8,985 |
Non-current deferred tax assets: |  |  |
Stock-based compensation expense | $ | 13,895 |  |  | $ | 10,290 |
Federal and state tax credit carryforwards | 5,091 |  |  | 4,547 |
Depreciation | 2,328 |  |  | 1,945 |
Other | 2,556 |  |  | 2,583 |
Gross non-current deferred tax assets | 23,870 |  |  | 19,365 |
Non-current deferred tax liabilities: |  |  |
Nondeductible intangible assets | (1,198 | ) |  | (2,430 | )
Gross non-current deferred tax liabilities | (1,198 | ) |  | (2,430 | )
Valuation allowance | (3,259 | ) |  | (2,483 | )
Net non-current deferred tax assets | $ | 19,413 |  |  | $ | 14,452 |
Current deferred tax liabilities: |  |  |
Other | $ | (319 | ) |  | $ | — |
Net current deferred tax liabilities | $ | (319 | ) |  | $ | — |
In 2015, the Company recorded a valuation allowance of $776,000 for state research and development tax credits that were not considered to be realizable. Should these credits be utilized in a future period, the reserve associated with these credits would be reversed in the period when it is determined that the credits can be utilized to offset future state income tax liabilities. In addition, the Company had $6,119,000 of state research and development tax credit carryforwards, net of federal tax, as of December 31, 2015, which will begin to expire in 2017. The Company recorded certain intangible assets as a result of the acquisition of DVT Corporation in 2005. The amortization of these intangible assets is not deductible for U.S. tax purposes. A deferred tax liability was established to reflect the federal and state liability associated with not deducting the acquisition-related amortization expenses. The balance of this liability was $1,198,000 as of December 31, 2015. While the deferred tax assets, net of valuation allowance, are not assured of realization, management has evaluated the realizability of these deferred tax assets and has determined that it is more likely than not that these assets will be realized. In reaching this conclusion, we have evaluated certain relevant criteria including the Company’s historical profitability, current projections of future profitability, and the lives of tax credits, net operating losses, and other carryforwards. Should the Company fail to generate sufficient pre-tax profits in future periods, we may be required to establish valuation allowances against these deferred tax assets, resulting in a charge to current operations in the period of determination. The Company does not provide U.S. income taxes on its foreign subsidiaries’ undistributed earnings, as they are deemed to be permanently reinvested outside the United States. Upon repatriation, the Company would provide the appropriate U.S. income taxes on these earnings, net of applicable foreign tax credits. It is not practicable to determine the income tax liability that might be incurred if the earnings were to be distributed. The Company recorded $354,000 of other income in 2013 upon the expiration of the statutes of limitations relating to tax holidays, during which time the Company collected value-added taxes from customers that were not required to be remitted to the government authority. On July 6, 2015, the Company completed the sale of its Surface Inspection Systems Division (SISD). A pre-tax gain of $125,357,000 and associated income tax expense of $47,175,000 was recorded in 2015. Cash paid for income taxes totaled $58,280,000 in 2015, $17,549,000 in 2014, and $8,831,000 in 2013. The 2015 income tax payments included remittances related to the sale of SISD.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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