Income Taxes

The (benefit) provision for income taxes from continuing operations consists of the following for the fiscal years indicated:



	Fiscal Year
	2015			2014			2013
Current
Federal	$	—		$	—		$	(13,124,000	)
State	50,000			50,000			12,000
Foreign	—			—			(34,000		)
Total current provision (benefit)	50,000			50,000			(13,146,000		)
Deferred
Federal	(5,356,000		)	(9,554,000		)	(3,616,000		)
State	(62,000		)	(1,709,000		)	644,000
Foreign	188,000			411,000			(565,000		)
Change in valuation allowance	5,155,000			10,622,000			3,750,000
Total deferred (benefit) provision	(75,000		)	(230,000		)	213,000
Total (benefit) provision for income taxes	$	(25,000	)	$	(180,000	)	$	(12,933,000	)

Net operating losses were not utilized in 2015, 2014 and 2013 to offset federal and state taxes.

The actual income tax (benefit) provision reported from operations are different than those which would have been computed by applying the federal statutory tax rate to loss before income tax (benefit) provision. A reconciliation of income tax (benefit) provision from continuing operations as computed at the U.S. federal statutory income tax rate to the provision for income tax benefit is as follows:



	Fiscal Year
	2015			2014			2013
Tax provision at federal statutory rates	$	(5,187,000	)	$	(9,964,000	)	$	(13,322,000	)
State tax liability	33,000			33,000			8,000
Foreign deferred	153,000			371,000			(644,000		)
Foreign withholding	(75,000		)	(196,000		)	308,000
Outside basis in KTC and Kowon, net	(180,000		)	(394,000		)	(202,000		)
Nondeductible expenses	(402,000		)	(21,000		)	306,000
Increase in net state operating loss carryforwards	(158,000		)	(177,000		)	(2,868,000		)
Utilization of net operating losses for U.K. research and development refund	719,000			1,089,000			—
Provision to tax return adjustments and state tax rate change	264,000			(516,000		)	(33,000		)
Tax credits	(501,000		)	(610,000		)	(390,000		)
Non-deductible 162M compensation limitations	40,000			196,000			558,000
Non-deductible equity compensation	(34,000		)	(687,000		)	(418,000		)
Other, net	148,000			74,000			14,000
Change in valuation allowance	5,155,000			10,622,000			3,750,000
	$	(25,000	)	$	(180,000	)	$	(12,933,000	)

Pretax foreign losses from continuing operations were approximately $(968,000), $(2,588,000) and $(4,966,000) for fiscal years 2015, 2014 and 2013, respectively. The Company has made the decision to close Kowon and accordingly reflected a liability for unremitted earnings.

The benefit for income taxes for the fiscal year ended 2015 of $25,000 represents the net of state and foreign withholding tax.

Deferred income taxes are provided to recognize the effect of temporary differences between tax and financial reporting. Deferred income tax assets and liabilities consist of the following:



	Fiscal Year
	2015			2014
Deferred tax liability:
Foreign withholding liability	$	(1,207,000	)	$	(1,282,000	)
Foreign unremitted earnings	(2,701,000		)	(2,882,000		)
Deferred tax assets:
Federal net operating loss carryforwards	28,984,000			22,758,000
State net operating loss carryforwards	1,913,000			1,689,000
Foreign net operating loss carryforwards	2,430,000			2,612,000
Equity awards	2,249,000			2,508,000
Tax credits	6,768,000			6,267,000
Equipment	1,113,000			1,024,000
Investments	3,240,000			5,279,000
Other	3,667,000			3,253,000
Net deferred tax assets	46,456,000			41,226,000
Valuation allowance	(47,663,000		)	(42,508,000		)
	$	(1,207,000	)	$	(1,282,000	)

As of December 26, 2015, the Company has available for tax purposes federal net operating loss carryforwards (NOLs) of $82.8 million expiring through 2035. The Company has recognized a full valuation allowance on its net deferred tax assets as the Company has concluded that such assets are not more likely than not to be realized. The $5.2 million increase in valuation allowance during fiscal year 2015 was primarily due to an increase in net operating loss carryforwards. The 10.6 million increase in valuation allowance during fiscal year 2014 was primarily due to net operating losses generated of $21.4 million and the sale of III-V assets. The Company has not historically recorded, nor does it intend to record the tax benefits from stock awards until realized. Unrecorded benefits from stock awards approximated $10.3 million at December 26, 2015.

The Company has suspended operations and terminated the majority of employees at its Korean subsidiary, Kowon. The assets, primarily buildings and land, have been put up for sale. It is more likely than not that the Company's share of the net book value of its Korean investment would be repatriated to the U.S. resulting in a Korean withholding tax of $1.2 million. As a result of the Company no longer being permanently reinvested in Korea, a deferred tax liability for the unremitted earnings in the Korean subsidiary has been booked for $2.7 million.

In September 2013, the U.S. Department of the Treasury and the Internal Revenue Service released final regulations relating to guidance on applying tax rules to amounts paid to acquire, produce or improve tangible personal property as well as rules for materials and supplies. The Company is currently assessing these rules and the impacts to the financial statements, if any.

The Company’s income tax returns have not been examined by the Internal Revenue Service and are subject to examination for all years since 2001. State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes remains subject to examination by various states for a period of up to one year after formal notification to the states.

International jurisdictions have statutes of limitations generally ranging from three to seven years after filing of the respective return. Years still open to examination by tax authorities in major jurisdictions include Korea (2007 onward), Japan (2007 onward), Hong Kong (2009 onward) and United Kingdom (2012 onward). The Company is not currently under examination in these jurisdictions.