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Income taxes | 12 Months Ended
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Dec. 31, 2016
Income taxes [Abstract] |
Income taxes | 11. Income taxes Significant components of the provisions for income taxes attributable to operations consist of the following:
|  | Year ended December 31, |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
Current |  |  |  |  |  |  |  |  |
Federal |  | $ | 29,244 |  |  | $ | 38,957 |  |  | $ | 22,988 |
State |  |  | 2,331 |  |  |  | 2,221 |  |  |  | 959 |
International |  |  | 1,002 |  |  |  | 2,029 |  |  |  | 828 |
Total current |  |  | 32,577 |  |  |  | 43,207 |  |  |  | 24,775 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 9,979 |  |  |  | (119 | ) |  |  | 3,332 |
State |  |  | (272 | ) |  |  | (111 | ) |  |  | 209 |
International |  |  | (5,587 | ) |  |  | 1,323 |  |  |  | 1,612 |
Total deferred |  |  | 4,120 |  |  |  | 1,093 |  |  |  | 5,153 |
Total provision for income taxes |  | $ | 36,697 |  |  | $ | 44,300 |  |  | $ | 29,928 |
The Company's net deferred tax asset (liability) consists of the following:
|  | December 31, |
(in thousands) |  | 2016 |  |  | 2015 |
Federal losses carryforward |  | $ | 4,130 |  |  | $ | 5,394 |
State losses carryforward |  |  | 13,682 |  |  |  | 12,751 |
Research and development carryforward |  |  | 3,647 |  |  |  | 3,545 |
Scientific research and experimental development credit carryforward |  |  | 16,594 |  |  |  | 25,771 |
Intangible assets |  |  | - |  |  |  | 5,792 |
Stock compensation |  |  | 8,389 |  |  |  | 9,391 |
Foreign deferrals |  |  | 58,647 |  |  |  | 80,920 |
Inventory reserves |  |  | 2,273 |  |  |  | 3,754 |
Other |  |  | 5,569 |  |  |  | 8,484 |
Deferred tax asset |  |  | 112,931 |  |  |  | 155,802 |
Fixed assets |  |  | (30,728 | ) |  |  | (31,925 | )
Intangible assets |  |  | (5,882 | ) |  |  | (4,760 | )
Other |  |  | (16,047 | ) |  |  | (17,192 | )
Deferred tax liability |  |  | (52,657 | ) |  |  | (53,877 | )
Valuation allowance |  |  | (54,178 | ) |  |  | (90,639 | )
Net deferred tax (liabilities)/ asset |  | $ | 6,096 |  |  | $ | 11,286 |
As of December 31, 2016, the Company currently has approximately $11.8 million ($4.1 million tax effected) in net operating loss carryforwards along with $3.7 million in research and development tax credit carryforwards for U.S. federal tax purposes that will begin to expire in 2026 and 2023, respectively. The U.S. federal tax carryforwards are recorded with no valuation allowance. The Company has $255.1 million ($13.7 million tax effected) in state net operating loss carryforwards, primarily in Maryland, that will begin to expire in 2018. The U.S. state tax loss carryforwards are recorded with a valuation allowance of $191.7 million ($10.3 million tax effected). The Company has approximately $170.3 million ($43.9 million tax effected) in net operating losses from foreign jurisdictions (excluding Canada) that will have an indefinite life unless the foreign entities have a change in the nature or conduct of the business in the three years following a change in ownership. A valuation allowance in respect to these foreign losses has been recorded in the amount of $43.9 million. The Company has approximately $43.6 million ($11.7 million tax effected) in Canadian loss carryforwards which are recorded with no valuation allowance. The Company currently has approximately $0.5 million of Canadian federal scientific research and experimental development credit carryforwards that will begin to expire in 2027. In addition, the Company has approximately $16.1 million in Manitoba scientific research and experimental development credit carryforwards that will begin to expire in 2024. The use of any of these net operating losses and research and development tax credit carryforwards may be restricted due to changes in the Company's ownership. The provision for income taxes differs from the amount of taxes determined by applying the U.S. federal statutory rate to loss before provision for income taxes as a result of the following:
|  | Year ended December 31, |
(in thousands) |  | 2016 |  |  | 2015 |  |  | 2014 |
US |  | $ | 63,330 |  |  | $ | 117,385 |  |  | $ | 76,909 |
International |  |  | 35,891 |  |  |  | 18,331 |  |  |  | 7,285 |
Earnings before taxes on income |  |  | 99,221 |  |  |  | 135,716 |  |  |  | 84,194 |
Federal tax at statutory rates |  | $ | 34,738 |  |  | $ | 47,475 |  |  | $ | 29,468 |
State taxes, net of federal benefit |  |  | 529 |  |  |  | 852 |  |  |  | 650 |
Impact of foreign operations |  |  | (9,937 | ) |  |  | (1,640 | ) |  |  | (1,176 | )
Change in valuation allowance |  |  | 10,458 |  |  |  | (950 | ) |  |  | 1,091 |
Effect of foreign rates |  |  | (720 | ) |  |  | - |  |  |  | - |
Tax credits |  |  | (1,572 | ) |  |  | (2,088 | ) |  |  | (1,743 | )
Other differences |  |  | 1,823 |  |  |  | 733 |  |  |  | 126 |
Permanent differences |  |  | 1,378 |  |  |  | (82 | ) |  |  | 1,512 |
Provision for income taxes |  | $ | 36,697 |  |  | $ | 44,300 |  |  | $ | 29,928 |
The effective annual tax rate for the years ended December 31, 2016, 2015 and 2014 was 37%, 33% and 36%, respectively. The increase in the effective annual tax rate in 2016 is primarily related to tax on the sale, within the Company's consolidated group, of assets from Canadian subsidiaries to U.S. subsidiaries in preparation of the spin-off of Aptevo, and a valuation allowance charge recorded in its continuing operations related to Aptevo deferred tax assets prior to the distribution. The Company determined that upon spin-off, the deferred tax assets of Aptevo would be unrealizable. The increase in the effective annual tax rate as a result of the above was partially offset by a release of valuation allowances associated with Canadian Scientific Research and Experimental Development tax credits. Finally, the Company had a shift in the jurisdictional mix of earnings in the current year which contributed to the change in the effective annual tax rate. The Company recognizes interest in interest expense and recognizes potential penalties related to unrecognized tax benefits in selling, general and administrative expense. Of the total unrecognized tax benefits recorded at December 31, 2016 and 2015, $0.5 million and $0.3 million, respectively, is classified as a current liability and $1.3 million and $1.1 million, respectively, is classified as a non-current liability on the balance sheet. The table below presents the gross unrecognized tax benefits activity for 2016, 2015 and 2014:
(in thousands) |  |  |
Gross unrecognized tax benefits at December 31, 2013 |  | $ | 1,121 |
Increases for tax positions for prior years |  |  | 150 |
Decreases for tax positions for prior years |  |  | - |
Increases for tax positions for current year |  |  | 102 |
Settlements |  |  | - |
Lapse of statute of limitations |  |  | (125 | )
Gross unrecognized tax benefits at December 31, 2014 |  |  | 1,248 |
Increases for tax positions for prior years |  |  | 150 |
Decreases for tax positions for prior years |  |  | - |
Increases for tax positions for current year |  |  | 59 |
Settlements |  |  | - |
Lapse of statute of limitations |  |  | - |
Gross unrecognized tax benefits at December 31, 2015 |  |  | 1,457 |
Increases for tax positions for prior years |  |  | 5 |
Decreases for tax positions for prior years |  |  | - |
Increases for tax positions for current year |  |  | 299 |
Settlements |  |  | - |
Lapse of statute of limitations |  |  | - |
Gross unrecognized tax benefits at December 31, 2016 |  | $ | 1,761 |
When resolved, substantially all of these reserves would impact the effective tax rate. The Company's federal and state income tax returns for the tax years 2011 to 2015 remain open to examination. The Company's tax returns in the United Kingdom remain open to examination for the tax years 2007 to 2015, and tax returns in Germany remain open indefinitely. The Company's tax returns for Canada remains open to examination for the tax years 2009 to 2015. As of December 31, 2016, the Company's 2011 and 2012 federal income tax returns are under audit.

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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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