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Income Taxes | 12 Months Ended
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Jan. 02, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | 12. Income Taxes Income before (benefit from) provision for income taxes was comprised of the following:
|  | FY 2015 Year Ended January 2, 2016 |  |  | FY 2014 Year Ended January 3, 2015 |  |  | FY 2013 Year Ended December 28, 2013 |
United States |  | $ | 291 |  |  | $ | 1,332 |  |  | $ | 2,262 |
Foreign |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 291 |  |  | $ | 1,332 |  |  | $ | 2,262 |
The (benefit from) provision for income taxes includes:
|  | FY 2015 Year Ended January 2, 2016 |  |  | FY 2014 Year Ended January 3, 2015 |  |  | FY 2013 Year Ended December 28, 2013 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (4 | ) |  | $ | 54 |  |  | $ | 11 |
State |  |  | 30 |  |  |  | 16 |  |  |  | 20 |
|  |  | 26 |  |  |  | 70 |  |  |  | 31 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (12 | ) |  |  | (7,862 | ) |  |  | — |
State |  |  | (197 | ) |  |  | (914 | ) |  |  | — |
|  |  | (209 | ) |  |  | (8,776 | ) |  |  | — |
(Benefit from) provision for income taxes |  | $ | (183 | ) |  | $ | (8,706 | ) |  | $ | 31 |
Our effective tax rate differs from the statutory federal income tax rate as shown in the following schedule:
|  | FY 2015 Year Ended January 2, 2016 |  |  | FY 2014 Year Ended January 3, 2015 |  |  | FY 2013 Year Ended December 28, 2013 |
Income tax provision at statutory rate |  |  | 34.0 | % |  |  | 34.0 | % |  |  | 34.0 | %
State income taxes, net of federal benefit |  |  | (70.8 | )% |  |  | (68.0 | )% |  |  | (13.3 | )%
Permanent differences |  |  | 12.0 | % |  |  | (1.1 | )% |  |  | (17.0 | )%
Research and development credits |  |  | (34.8 | )% |  |  | (2.6 | )% |  |  | 0.0 | %
Change in valuation allowance |  |  | — |  |  |  | (613.5 | )% |  |  | (2.3 | )%
Other |  |  | (3.3 | )% |  |  | (2.4 | )% |  |  | 0.0 | %
Effective tax rate |  |  | (62.9 | )% |  |  | (653.6 | )% |  |  | 1.4 | %
The tax effect of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets are presented below (in thousands):
|  | FY 2015 January 2, 2016 |  |  | FY 2014 January 3, 2015 |
Net operating losses |  | $ | 4,135 |  |  | $ | 4,278 |
Research and development credits |  |  | 1,820 |  |  |  | 1,575 |
Accruals and reserves |  | $ | 1,823 |  |  | $ | 1,681 |
Deferred revenue |  |  | 120 |  |  |  | 113 |
Property and equipment |  |  | 399 |  |  |  | 439 |
Intangible assets |  |  | 792 |  |  |  | 825 |
Stock compensation |  |  | 613 |  |  |  | 676 |
Other tax credits |  |  | 89 |  |  |  | 94 |
Net deferred tax asset |  | $ | 9,791 |  |  | $ | 9,681 |
Valuation allowance |  |  | (806 | ) |  |  | (905 | )
Net deferred tax assets |  | $ | 8,985 |  |  | $ | 8,776 |
Our accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of our deferred tax assets. Assessing the realizability of deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. Our management forecasts taxable income by considering all available positive and negative evidence including our history of operating income or losses and our financial plans and estimates which are used to manage the business. These assumptions require significant judgment about future taxable income. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced. As of January 2, 2016, our management determined, based on our recent history of earnings coupled with our forecasted profitability that it is more-likely-than-not that all of our federal and the majority of our state deferred tax assets will be realized in the foreseeable future. As of January 2, 2016, we had federal and state net operating loss (“NOL”) carryforwards of $12.7 million and $14.5 million, respectively. Of the total NOL carryforwards, $2.6 million for federal and $2.3 million for states, relate to windfall stock option deductions which, when realized, will be credited to equity. The federal NOL will begin to expire in 2032 and the state NOL will begin to expire in 2020, in each case if not used. In December 2015, Congress passed a tax extenders package, Protecting Americans from Tax Hikes (PATH) Act of 2015, and permanently extended the federal R&D credit. As of January 2, 2016, we had federal and state R&D credit carryforwards of approximately $1.4 million and $2.1 million, respectively, available to offset future tax liabilities. The federal credits will begin expiring in 2026 if not used. The state R&D credits do not expire. The above NOL and research and development credits are subject to IRC sections 382 and 383. In the event of a change in ownership as defined by these code sections, the usage of the above mentioned NOL’s and credits may be limited. In November 2015, the FASB issued ASU 2015-17 to simplify the presentation of deferred income taxes. This standard requires that deferred tax liabilities and assets be classified as noncurrent on the consolidated balance sheet. It is effective for interim and annual periods beginning after December 15, 2016, but early adoption is permitted. Management elected to prospectively adopt this standard in the beginning of the fourth quarter of fiscal 2015. Prior periods in our consolidated financial statements were not retrospectively adjusted. The adoption of this guidance had no impact on our consolidated statements of operations. We account for uncertain tax positions in accordance with ASC 740. ASC 740 seeks to reduce the diversity in practice associated with certain aspects of measurement and recognition in accounting for income taxes. ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax provision that an entity takes or expects to take in a tax return. Additionally, ASC 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. Under ASC 740, an entity may only recognize or continue to recognize tax positions that meet a "more likely than not" threshold. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. There were no accrued interest and penalties during the year ended January 2, 2016. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
|  | FY 2015 Year Ended January 2, 2016 |  |  | FY 2014 Year Ended January 3, 2015 |  |  | FY 2013 Year Ended December 28, 2013 |
Balance at the beginning of the year |  | $ | 861 |  |  | $ | 1,027 |  |  | $ | 954 |
Additions based upon tax positions related to the current year |  |  | 73 |  |  |  | 53 |  |  |  | 48 |
Additions based upon tax positions related to the prior year |  |  | — |  |  |  | 51 |  |  |  | 25 |
Reductions based upon tax positions related to the prior year |  |  | 3 |  |  |  | (270 | ) |  |  | — |
Balance at the end of the year |  | $ | 937 |  |  | $ | 861 |  |  | $ | 1,027 |
Recognition of the unrecognized tax benefits of $937 thousand as of January 2, 2016 would affect our effective tax rate. We do not anticipate any material change in our unrecognized tax benefits of $937 thousand over the next twelve months. The unrecognized tax benefits may change during the next year for items that arise in the ordinary course of business. We file U.S. federal and state returns. The tax years 2009 to 2015 remain open in several jurisdictions, none of which have individual significance.

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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=6907707&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=6907707&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=6907707&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=6907707&loc=d3e32537-109319 + Details
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