INCOME TAXES

The following table reflects income from continuing operations by location, the provision for income taxes and the effective tax rate for fiscal 2014, 2013, and 2012:



	Fiscal
(dollar amounts in thousands)	2014			2013			2012
United States operations	$	7,700		$	(4,340	)	$	(6,111	)
Foreign operations	69,433			71,008			180,362
Income from operations before tax	77,133			66,668			174,251
Provision for income taxes	14,145			7,310			13,671
Net income	$	62,988		$	59,358		$	160,580
Effective tax rate	18.3		%	11.0		%	7.8		%

The following table reflects the provision for income taxes from continuing operations for fiscal 2014, 2013, and 2012:



	Fiscal
(in thousands)	2014		2013			2012
Current:
Federal	$	843	$	(212	)	$	4,103
State	78		291			942
Foreign	5,534		1,732			5,497
Deferred:
Federal	5,474		985			4,169
State	5		5			48
Foreign	2,211		4,509			(1,088		)
Provision for income taxes	$	14,145	$	7,310		$	13,671

The following table reflects the difference between the provision for income taxes and the amount computed by applying the statutory federal income tax rate for fiscal 2014, 2013, and 2012:



	Fiscal
(in thousands)	2014			2013			2012
Computed income tax expense based on U.S. statutory rate	$	26,997		$	23,334		$	60,988
Effect of earnings of foreign subsidiaries subject to different tax rates	(9,763		)	(11,193		)	(30,067		)
Benefits from foreign approved enterprise zones	(17,423		)	(9,626		)	(22,138		)
Dividend income	8,190			—			—
Effect of permanent items	(298		)	664			152
Changes in valuation allowance	(1,820		)	1,429			1,261
Foreign operations (withholding taxes, deferred taxes on unremitted earnings, US taxation of foreign earnings)	5,906			1,789			12,604
Reserve for uncertain tax positions	131			683			(7,626		)
State income tax expense	2,241			(734		)	(394		)
Other, net	(16		)	964			(1,109		)
Provision for income taxes	$	14,145		$	7,310		$	13,671

Income tax expense for the current year includes approximately $1.2 million, $0.3 million and $3.0 million of taxes payable for deemed distributions from earnings for the years ended September 27, 2014, September 28, 2013 and September 29, 2012, respectively.

Undistributed earnings of certain foreign subsidiaries for which taxes have not been provided were approximately $460.5 million as of September 27, 2014. Such undistributed earnings are considered to be indefinitely reinvested in foreign operations. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

Undistributed earnings of approximately $89.6 million are not considered to be indefinitely reinvested in foreign operations. As of September 27, 2014, the Company has provided a deferred tax liability of approximately $18.2 million for withholding taxes associated with future repatriation of earnings for certain subsidiaries.

The following table reflects the net deferred tax balance, composed of the tax effects of cumulative temporary differences for fiscal 2014 and 2013:



	Fiscal
(in thousands)	2014			2013
Inventory reserves	$	692		$	1,127
Other accruals and reserves	3,713			3,349
Net operating loss carryforwards	666			779
Valuation allowance	(780		)	(768		)
Total short-term deferred tax asset	$	4,291		$	4,487

Total short-term deferred tax liability	106			221
Net short-term deferred tax asset	$	4,185		$	4,266

Domestic tax credit carryforwards	$	688		$	1,611
Net operating loss carryforwards	27,361			28,138
Stock options	703			1,299
Other	400			926
	29,152			31,974
Valuation allowance	(23,844		)	(25,676		)
Total long-term deferred tax asset (1)	$	5,308		$	6,298

Repatriation of foreign earnings, including foreign withholding taxes	$	43,204		$	41,322
Depreciable assets	3,013			1,887
Prepaid expenses and other	300			—
Total long-term deferred tax liability	$	46,517		$	43,209
Net long-term deferred tax liability	$	41,209		$	36,911
Total net deferred tax liability	$	37,024		$	32,645


(1)	Included in other assets on the Consolidated Balance Sheets are deferred tax assets of $3.8 million and $3.8 million as of September 27, 2014 and September 28, 2013, respectively.

As of September 27, 2014, the Company has foreign net operating loss carryforwards of $80.6 million, domestic state net operating loss carryforwards of $177.8 million, domestic federal net operating loss carryforwards of $6.9 million, and tax credit carryforwards of $0.7 million that will reduce future taxable income. These carryforwards can be utilized in the future, prior to expiration of certain carryforwards in fiscal years 2015 through 2033 with the exception of certain credits and foreign net operating losses that have no expiration date. Pennsylvania tax law limits the time during which carryforwards may be applied against future taxes and also limits the utilization of domestic state net operating loss carryforwards to as little as $3.0 million annually, but recent tax law changes may increase this amount in future years.

The Company continues to evaluate the realizability of all of its net deferred tax assets at each reporting date and records a benefit for deferred tax assets to the extent it has deferred tax liabilities that provide a source of income to benefit the deferred tax asset. As a result of this analysis, the Company continues to maintain a valuation allowance against a majority of its state deferred tax assets as the realization of these assets is not more likely than not given uncertainty of future earnings in these jurisdictions.

The beginning and ending balances of the Company's unrecognized tax benefits are reconciled below for fiscal 2014, 2013, and 2012:



	Fiscal
(in thousands)	2014			2013			2012
Unrecognized tax benefit, beginning of year	$	6,869		$	6,186		$	13,702
Additions for tax positions, current year	—			—			—
Additions for tax positions, prior year	717			2,485			110
Reductions for tax positions, prior year	(394		)	(1,802		)	(7,626		)
Unrecognized tax benefit, end of year	$	7,192		$	6,869		$	6,186

If recognized, the $7.2 million of unrecognized tax benefit as of September 27, 2014 would impact the Company's effective tax rate.

In fiscal 2013, the Company recognized a benefit of $1.7 million related to the reversal of a reserve for uncertain tax positions based on administrative practices in a foreign jurisdiction and an additional $0.1 million related to a position effectively settled upon audit in a different foreign jurisdiction. The Company has also taken a position on a tax return in a foreign jurisdiction that does meet the recognition and measurement criteria under ASC 740 and as a result it has provided a reserve for uncertain tax position of $2.1 million.

During the fourth quarter of fiscal 2012, the Company reached a favorable settlement with the tax authorities of a foreign jurisdiction. As a result, the previously recorded current liability of $7.5 million was no longer necessary and an income tax benefit was recognized in fiscal 2012.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense. There were no additional accruals of interest expense on various uncertain tax positions during fiscal 2014 for matters involving jurisdictions where interest is not assessed.

It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain unrecognized tax positions will increase or decrease during the next 12 months; however, the Company does not expect the change to have a material effect on its results of operations or its financial position.

The Company files U.S. federal income tax return, as well as income tax returns in various state and foreign jurisdictions. For the U.S. federal income tax returns and most state tax returns, tax years following fiscal 2001 remain subject to examination as a result of the generation of net operating loss carry-forwards. The statutes of limitations with respect to the foreign jurisdictions in which the Company files vary from jurisdiction to jurisdiction and range from 4 to 6 years.

As a result of committing to certain capital investments and employment levels, income from operations in Singapore and Malaysia is subject to reduced tax rates, and in some cases income from operations in Malaysia is wholly exempt from taxes. In connection with Singapore operations, the Company has been granted a decreased effective tax rate of five percent in that jurisdiction until February 1, 2020 subject to the fulfillment of certain continuing conditions. In fiscal 2014, 2013, and 2012, the preferential rate reduced income tax expense by approximately $17.4 million or $0.23 per share, $9.6 million or $0.13 per share and $22.1 million or $0.30 per share, respectively.