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INCOME TAXES | 12 Months Ended
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Dec. 31, 2016
Income Tax Disclosure [Abstract] |
INCOME TAXES |
| 5. | INCOME TAXES
We made provisions for income taxes in the years ended December 31, 2016 and 2014 of $2.1 million and $2.7 million, respectively. We recorded a benefit from income taxes of $0.5 million in the year ended December 31, 2015. The components of the provision for income taxes are as follows (in thousands):
|  | Year ended December 31,
|  | 2016 |  | 2015 |  | 2014
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 1,807 |  |  | $ | (807 | ) |  | $ | 1,976 |
State |  |  | 410 |  |  |  | 280 |  |  |  | 589 |
|  |  | 2,217 |  |  |  | (527 | ) |  |  | 2,565 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (120 | ) |  |  | (16 | ) |  |  | 93 |
State |  |  | (12 | ) |  |  | 7 |  |  |  | 14 |
|  |  | (132 | ) |  |  | (9 | ) |  |  | 107 |
Provision for (benefit from) income taxes |  | $ | 2,085 |  |  | $ | (536 | ) |  | $ | 2,672 |
A reconciliation of the U.S. federal statutory rate to the effective tax rate is as follows:
|  | Year ended December 31,
|  | 2016 |  | 2015 |  | 2014
Federal statutory rate |  |  | 34 | % |  |  | 34 | % |  |  | 34 | %
State rate, net of federal benefit |  |  | 5 |  |  |  | 5 |  |  |  | 5 |
Tax credits |  |  | (4 | ) |  |  | (4 | ) |  |  | (1 | )
Permanent adjustments |  |  | (1 | ) |  |  | (2 | ) |  |  | (1 | )
Reversal of reserve |  |  | - |  |  |  | (47 | ) |  |  | - |
Other |  |  | - |  |  |  | 1 |  |  |  | - |
Effective tax rate |  |  | 34 | % |  |  | (13 | %) |  |  | 37 | %
Total income tax expense for the year ended December 31, 2016 was $2.1 million. Income tax expense in 2016 was based on the U.S. statutory rate of 34%, increased by state income taxes, and reduced by permanent adjustments and research tax credits. We recorded a benefit from income taxes of $0.5 million for the year ended December 31, 2015. The benefit from income taxes was the result of a $1.9 million tax benefit from the reversal of a reserve for uncertain tax positions, which was partially offset by $1.4 million of income taxes on pre-tax income based on the U.S. statutory rate of 34%, increased by state income taxes, and reduced by research tax credits and permanent adjustments. As previously reported, the Internal Revenue Service (“IRS”) commenced an examination of our tax return for the year ended December 31, 2012 in September 2014. In July 2015, the IRS notified us that it had completed its examination and that it had no changes to our reported tax. As a result of the completion of the IRS examination, we determined that the $1.9 million reserve for uncertain tax positions we had established on federal research and development credits in 2012 was no longer required. We reversed the reserve in 2015. Total income tax expense for the year ended December 31, 2014 was $2.7 million, all of which was included in continuing operations. Income tax expense for 2014 was based on the U.S. statutory rate of 34%, increased by state income taxes, and reduced by Federal research tax credits and permanent adjustments. As of December 31, 2016 and 2015, we had deferred tax assets for which we had recorded no valuation allowance. The principal components of deferred tax assets were as follows at December 31 (in thousands):
|  | 2016 |  | 2015
Depreciation |  | $ | 435 |  |  | $ | 394 |
Stock compensation |  |  | 225 |  |  |  | 256 |
Capitalized research and development costs |  |  | - |  |  |  | 39 |
Other |  |  | 418 |  |  |  | 310 |
Total |  |  | 1,078 |  |  |  | 999 |
Less valuation allowance |  |  | (-) |  |  |  | (-) |
Deferred tax assets, net |  | $ | 1,078 |  |  | $ | 999 |
We will continue to assess the level of valuation allowance required in future periods. Should evidence regarding the realizability of tax assets change at a future point in time, the valuation allowance will be adjusted accordingly. A rollforward of the uncertain tax position related to our research and development tax credits is as follows (in thousands):
Uncertain tax positions at December 31, 2013 |  | $ | 2,945 |
Increase due to positions taken in prior periods |  |  | - |
Uncertain tax positions at December 31, 2014 |  |  | 2,945 |
Decrease due to completion of IRS examination |  |  | (1,913 | )
Uncertain tax positions at December 31, 2015 |  |  | 1,032 |
Increase due to positions taken in prior periods |  |  | - |
Uncertain tax positions at December 31, 2016 |  | $ | 1,032 |
Uncertain tax positions of $0.7 million will impact our tax rate if realized. The difference between this amount and the total uncertain tax positions in the table above is the federal tax effect on state tax credits. In addition to deferred tax assets carried on our balance sheet, we also had net federal research and development credit carryforwards available at December 31, 2016 of $4.8 million. These credits were not recorded as tax assets as they relate to excess stock compensation deductions that may not be recorded as tax assets under current generally accepted accounting principles until the amounts have been utilized to reduce our tax liability. To the extent that these assets were used to reduce taxes in 2016, 2015, and 2014, the benefits were recorded as a reduction to additional paid-in capital. In 2016, 2015 and 2014, we recorded tax benefits to additional paid-in capital of $0.7 million, $0.6 million, and $1.2 million, respectively. As noted in Recent Accounting Pronouncements in Note 2, our tax credit carryforwards will be subject to a new accounting standard in 2017, which will change the way we account for them beginning in the first quarter of 2017. Our policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2016, we had no accrued interest or penalties related to uncertain tax positions. The tax years from 2013 through 2016 are subject to examination by the IRS and the tax years 2000 through 2016 are subject to examination by state tax authorities.

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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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