13.	Income taxes

Income from continuing operations before provision for income taxes consisted of:

	Year Ended December 31,
(U.S. Dollars in thousands)	2014			2013			2012

U.S.	$	17,532		$	(3,546	)	$	56,210
Non-U.S.		(5,076	)		(7,057	)		12,855
Total income (loss) before taxes	$	12,456		$	(10,603	)	$	69,065

The provision for (benefit from) income taxes on continuing operations in the accompanying consolidated statements of operations consists of the following:

	Year Ended December 31,
(U.S. Dollars in thousands)	2014			2013			2012
U.S.
Current	$	5,067		$	2,465		$	16,982
Deferred		2,825			4,013			2,675
Total U.S		7,892			6,478			19,657
Non-U.S.
Current		18,186			2,308			3,191
Deferred		(9,878	)		(1,184	)		1,096
		8,308			1,124			4,287
Total tax expense	$	16,200		$	7,602		$	23,944

Deferred income taxes are provided primarily for net operating loss carryforwards and for temporary differences resulting from items that are recognized in different years for financial statement and income tax reporting purposes. The deferred tax assets and liabilities are as follows:

(U.S. Dollars in thousands)	2014			2013
Intangible assets and goodwill	$	4,067		$	4,798
Inventories and related reserves		19,525			20,769
Deferred revenue and cost of goods sold		10,826			11,577
Other accruals and reserves		5,371			4,778
Accrued compensation		5,004			3,942
Allowance for doubtful accounts		2,094			2,040
Accrued interest		17,555			18,063
Net operating loss carryforwards		34,514			34,979
Other, net		1,202			893
		100,158			101,839
Valuation allowance		(37,438	)		(31,772	)
Deferred tax asset	$	62,720		$	70,067
Withholding taxes		(229	)		(13,026	)
Property, plant and equipment		(6,766	)		(7,674	)
Deferred tax liability		(6,995	)		(20,700	)
Net deferred tax assets	$	55,725		$	49,367

Reported as:
Current deferred tax assets		37,413			39,999
Non-current deferred tax assets		18,541			22,394
Current deferred tax liability		—			—
Non-current deferred tax liability		(229	)		(13,026	)
Net deferred tax assets	$	55,725		$	49,367

The valuation allowance as of December 31, 2014 and 2013 was $37.4 million and $31.8 million, respectively. The net increase in the valuation allowance of $5.6 million during the year principally relates to certain current period foreign losses without benefit. The valuation allowance is attributable to net operating loss carryforwards and certain temporary differences in certain foreign jurisdictions, for which it is more likely than not some portion or all of the deferred tax asset will not be realized.

The Company has state net operating loss carryforwards of approximately $14.0 million that will begin to expire in 2015. The Company has net operating losses in foreign taxing jurisdictions of approximately $133.7 million, the majority of which relate to the Company’s Netherlands operations and begin to expire in 2015. The Company has provided a valuation allowance against a significant portion of these net operating loss carryforwards since it does not believe that it is more likely than not that this deferred tax asset can be realized prior to expiration.

The rate reconciliation for continuing operations presented below is based on the U.S. federal income tax rate, rather than the parent company’s country of domicile tax rate. Management believes, given the large proportion of taxable income earned in the United States, such disclosure is more meaningful.

(U.S. Dollars in thousands, except percentages)	2014						2013						2012
	Amount			Percent			Amount			Percent			Amount			Percent
Statutory U.S. federal income tax rate	$	4,360			35.0	%	$	(3,711	)		35.0	%	$	24,179			35.0	%
State taxes, net of federal benefit		1,439			11.6			2,039			(19.2	)		2,536			3.7
Foreign rate differential, including withholding taxes		2,738			21.9			1,162			(11.0	)		(10	)		(0.0	)
Valuation allowance		8,672			69.6			3,913			(36.9	)		6,189			9.0
Italian subsidiary intangible asset		(2,546	)		(20.4	)		(2,288	)		21.6			(2,214	)		(3.2	)
Goodwill impairment		—			—			6,452			(60.9	)		—			—
Domestic manufacturing deduction		(377	)		(3.0	)		(233	)		2.2			(1,567	)		(2.3	)
Settlement of U.S. Government resolutions		—			—			—			—			(1,260	)		(1.8	)
Italian audit settlement		1,048			8.4			—			—			—			—
Other, net		866			7.0			268			(2.5	)		(3,909	)		(5.7	)
Income tax expense/effective rate	$	16,200			130.1	%	$	7,602			(71.7	)%	$	23,944			34.7	%

On January 2, 2013 the American Taxpayer Relief Act of 2012 (“ACT”) was enacted. The ACT provides tax relief for business by reinstating certain tax benefits and credits retroactively to January 1, 2012. There are several provisions of the Act that impact the Company, most notably the extension of the Research and Development credit. Income tax accounting rules require tax law changes to be recognized in the period of the enactment; as such the Company recognized a tax benefit of $0.3 million in its provision for income taxes in the first quarter of 2013.

The Company’s unrecognized tax benefit was $15.6 million and $0.7 million for the years ended December 31, 2014 and 2013, respectively. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in income tax expense. The Company had approximately $0.5 million accrued for payment of interest and penalties as of December 31, 2014 and 2013.

The entire amount of unrecognized tax benefits, including interest, would favorably impact the Company’s effective tax rate if recognized. As of December 31, 2014, the Company does not expect the amount of unrecognized tax benefits to change significantly over the next twelve months.

A reconciliation of the gross unrecognized tax benefits (excluding interest and penalties) for the years ended December 31, 2014 and December 31, 2013 follows:

(U.S. Dollars in thousands)	2014			2013
Balance as of January 1,	$	723		$	1,189
Additions for current year tax positions		14,794			183
Increases (decreases) for prior year tax positions		145			(12	)
Settlements of prior year tax positions		—			(560	)
Expiration of statutes		(65	)		(77	)
Balance as of December 31,	$	15,597		$	723

The Company files a consolidated income tax return in the U.S. federal jurisdiction, the U.K., Italy and numerous consolidated and separate income tax returns in many state and other foreign jurisdictions. The statute of limitations with respect to federal tax authorities is closed for years prior to December 31, 2011. The statute of limitations for the various state tax filings is closed in most instances for the years prior to December 31, 2010. The statute of limitations with respect to the major foreign tax filing jurisdictions is closed for years prior to December 31, 2009.

The Company’s current intention is to indefinitely reinvest the total amount of its unremitted foreign earnings (residing outside Curaçao) in the local jurisdiction to the extent they are generated and available. As an entity incorporated in Curaçao, “foreign subsidiaries” refers to both U.S. and non-U.S. subsidiaries. Furthermore, only income sourced in the U.S. is subject to U.S. income tax. Unremitted foreign earnings increased from $329.7 million at December 31, 2013 to $374.1 million at December 31, 2014. The $374.1 million includes $391.1 million in U.S subsidiaries. It is not practicable to determine the amounts of net additional income tax that may be payable if such earnings were repatriated.

Total cash and cash equivalents at December 31, 2014 were $71.2 million, of which $34.4 million is restricted under the senior secured credit agreement for use in the U.S. and is therefore classified as restricted cash on the balance sheet. The Company’s U.S. business generates sufficient cash flow and has borrowing capacity in the United States to fund its U.S. operations. Cash and cash equivalents of $36.8 million at December 31, 2014 held by non-U.S. subsidiaries is indefinitely reinvested for use in non-U.S. operations.