Note 6: Income Taxes

The income tax provision consisted of the following (in thousands):

	Year Ended December 31,
	2014		2013		2012
Current portion:
Federal	$	—	$	—	$	(5	)
State		3		2		3
Foreign		104		69		112

	$	107	$	71	$	110

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company's deferred tax assets and liabilities were (in thousands):

	December 31,
	2014			2013
Deferred tax assets:
Federal and state loss carryforwards	$	50,057		$	39,455
Reserves, accruals and other		587			372
Depreciation and amortization		1,497			1,797
Deferred stock-based compensation		3,589			3,793
Research and development credit carryforwards		11,351			9,512
Foreign tax and other credits		1,241			1,326

Total deferred tax assets		68,322			56,255
Deferred tax liabilities:
Acquired intangible assets and other		1,537			1,618
Less: Valuation allowance		(66,785	)		(54,637	)

Net deferred tax assets	$	—		$	—

The valuation allowance increased by $12.1 million and $10.9 million for the years ended December 31, 2014 and December 31, 2013, respectively.

As of December 31, 2014, the Company had net operating loss carryforwards of approximately $133.4 million for federal income tax purposes and approximately $98.4 million for state income tax purposes. These losses are available to reduce future taxable income and expire at various times from 2015 through 2034. Approximately $5.7 million of federal net operating loss carryforwards and $4.8 million of state net operating loss carryforwards are related to excess tax benefits from stock-based compensation and will be charged to additional paid-in capital as realized.

The Company also had federal research and development tax credit carryforwards of approximately $7.3 million, which will begin expiring in 2018, and California research and development credits of approximately $6.2 million, which do not have an expiration date. The Company had foreign tax credits available for federal income tax purposes of approximately $1.0 million which will begin to expire in 2015.

The Company considers its undistributed earnings of its foreign subsidiary permanently reinvested in foreign operations and has not provided for U.S. income taxes on such earnings. As of December 31, 2014, the Company's unremitted earnings from its foreign subsidiary were $0.8 million. The determination of the unrecognized deferred U.S. income tax liability, if any, is not practicable.

Utilization of the Company's net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss and tax credit carryforwards before utilization. Management does not believe it is likely that utilization will in fact be significantly limited due to ownership change limitation provisions.

A reconciliation of income taxes provided at the federal statutory rate (35%) to actual income tax provision follows (in thousands):

	Year Ended December 31,
	2014			2013			2012
Income tax benefit computed at U.S. statutory rate	$	(11,401	)	$	(8,653	)	$	(9,626	)
State income tax (net of federal benefit)		3			2			2
Foreign income tax at rate different from U.S. statutory rate		(12	)		(11	)		(13	)
Research and development credits		(1,614	)		(1,196	)		(691	)
Stock-based compensation		130			91			252
Amortization of intangible assets		(100	)		(100	)		(100	)
Valuation allowance changes affecting tax provision		13,027			9,915			10,526
Other		74			23			(240	)

Income tax provision	$	107		$	71		$	110

The domestic and foreign components of (loss) income before income tax provision were (in thousands):

	Year Ended December 31,
	2014			2013			2012
U.S.	$	(32,735	)	$	(24,906	)	$	(27,737	)
Non-U.S.		160			183			233

	$	(32,575	)	$	(24,723	)	$	(27,504	)