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Taxes | 12 Months Ended
--- | ---
Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Taxes | Taxes Domestic income from continuing operations before taxes was $23,939,000 in 2016, $11,637,000 in 2015, and $25,585,000 in 2014. Foreign income from continuing operations before taxes was $144,856,000 in 2016, $115,325,000 in 2015, and $106,171,000 in 2014. Income tax expense on continuing operations consisted of the following (in thousands):
| Year Ended December 31,
| 2016 |  | 2015 |  | 2014
Current: |
Federal | $ | 14,459 |  |  | $ | 16,430 |  |  | $ | 18,852 |
State | (617 | ) |  | 378 |  |  | 608 |
Foreign | 8,149 |  |  | 4,946 |  |  | 4,854 |
| 21,991 |  |  | 21,754 |  |  | 24,314 |
Deferred: |  |  |  |  |
Federal | (3,031 | ) |  | (2,541 | ) |  | (2,569 | )
State | 1,066 |  |  | (165 | ) |  | 7 |
Foreign | (1,058 | ) |  | 250 |  |  | (837 | )
| (3,023 | ) |  | (2,456 | ) |  | (3,399 | )
| $ | 18,968 |  |  | $ | 19,298 |  |  | $ | 20,915 |
The Company records income tax expense on undistributed earnings that the Company does not intend to be indefinitely reinvested outside of the U.S. Substantially all of the Company’s undistributed international earnings intended to be indefinitely reinvested outside of the U.S. were generated by subsidiaries organized in Ireland, which has a statutory tax rate of 12.5%. As of December 31, 2016, U.S. income tax expense had not been recorded on a cumulative total of $498,238,000 of such earnings. The amount of unrecognized deferred tax liability related to these temporary differences is estimated to be $151,966,000. As of December 31, 2016 and December 31, 2015, respectively,$437,691,000 and $352,621,000, of the Company’s cash, cash equivalents and investments were held by foreign subsidiaries and are generally denominated in U.S. dollars. Amounts held by foreign subsidiaries are generally subject to U.S. income taxation on repatriation to the U.S. A reconciliation of the U.S. 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,
| 2016 |  | 2015 |  | 2014
Income tax provision at federal statutory corporate tax rate | 35 | % |  | 35 | % |  | 35 | %
State income taxes, net of federal benefit | 1 |  |  | — |  |  | — |
Foreign tax rate differential | (17 | ) |  | (19 | ) |  | (19 | )
Tax credit | (1 | ) |  | — |  |  | — |
Discrete tax benefit related to employee stock option exercises | (7 | ) |  | — |  |  | — |
Other discrete tax events | — |  |  | (2 | ) |  | (1 | )
Other | — |  |  | 1 |  |  | 1 |
Income tax provision on continuing operations | 11 | % |  | 15 | % |  | 16 | %
The majority of income earned outside of the United States is permanently reinvested to provide funds for international expansion. The Company is tax resident in numerous jurisdictions around the world and has identified its major jurisdictions as the United States, Ireland, and China. The statutory tax rate is 12.5% in Ireland and 25% in China. International rights to certain of the Company’s intellectual property are held by a subsidiary whose legal jurisdiction does not tax this income, resulting in a foreign effective tax rate lower than the above mentioned statutory rates. These differences result in a decrease in the effective tax rate by 17, 19, and 19 percentage points in 2016, 2015, and 2014, respectively. In 2016, the Company adopted Accounting Standards Update 2016-09, "Improvements to Employee Share-Based Payment Accounting," which was issued by the Financial Accounting Standards Board in March 2016. This Update requires excess tax benefits to be recognized as an income tax benefit in the income statement. Previous guidance required excess tax benefits to be recognized as additional paid-in-capital in shareholders' equity on the balance sheet. This provision is required to be applied prospectively and therefore, prior periods were not restated. As a result of this change, income tax expense was reduced by $11,889,000, resulting in a seven percentage point decrease in the effective tax rate. Additionally, this Update also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows. In order to improve comparability, the Company applied this provision of the amendment retrospectively. In 2015 and 2014, the Company reclassified a tax benefit of $9,964,000 and $7,871,000, respectively, from cash flows provided by financing activities to cash flows provided by operating activities on the consolidated statement of cash flows. Interest and penalties included in income tax expense was $92,000 and $34,000 in 2016 and 2015, respectively. 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, 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 |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in prior periods | 11 |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period | 1,235 |
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 | (823 | )
Balance of reserve for income taxes as of December 31, 2016 | $ | 5,719 |
The Company’s reserve for income taxes, including gross interest and penalties, was $6,389,000 as of December 31, 2016, which included $5,361,000 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 $5,858,000 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 amount of gross interest and penalties included in these balances was $670,000 and $562,000 as of December 31, 2016 and December 31, 2015, 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. 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 $950,000 to $1,050,000 over the next twelve months. The Company has defined its major tax jurisdictions as the United States, Ireland, and China, and within the United States, Massachusetts and California. Within the United States, the tax years 2013 through 2016 remain open to examination by the Internal Revenue Service and various state taxing authorities. The tax years 2012 through 2016 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,
| 2016 |  | 2015
Non-current deferred tax assets: |  |  |
Stock-based compensation expense | $ | 15,365 |  |  | $ | 13,895 |
Federal and state tax credit carryforwards | 5,154 |  |  | 5,091 |
Inventory and revenue related | 2,919 |  |  | 2,985 |
Depreciation | 2,882 |  |  | 2,328 |
Bonuses, commissions, and other compensation | 2,483 |  |  | 2,500 |
Other | 3,714 |  |  | 4,175 |
Gross non-current deferred tax assets | 32,517 |  |  | 30,974 |
Non-current deferred tax liabilities: |  |  |
Nondeductible intangible assets | (379 | ) |  | (1,198 | )
Gross non-current deferred tax liabilities | (379 | ) |  | (1,198 | )
Valuation allowance | (4,116 | ) |  | (3,259 | )
Net non-current deferred tax assets | $ | 28,022 |  |  | $ | 26,517 |
Non-current deferred tax liabilities: |  |  |
Other | $ | — |  |  | $ | (319 | )
Net non-current deferred tax liabilities | $ | — |  |  | $ | (319 | )
In 2016, the Company adopted Accounting Standards Update 2015-17, "Income Taxes - Balance Sheet Classification of Deferred Taxes." This Update requires that deferred tax assets and liabilities be classified as non-current in a classified balance sheet. In order to improve comparability, the Company applied the amendments in this Update retrospectively to all periods presented. As of December 31, 2015, the Company reclassified current deferred income tax assets and liabilities of $7,104,000 and $319,000, respectively, to non-current on the Consolidated Balance Sheets. 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 $379,000 as of December 31, 2016. In 2016, the Company recorded a valuation allowance of $857,000 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 $6,181,000 of state research and development tax credit carryforwards, net of federal tax, as of December 31, 2016, which will begin to expire in 2019. 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. 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 $20,748,000 in 2016, $58,280,000 in 2015, and $17,549,000 in 2014. 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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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