Entity information:
Income Taxes
The components of income tax expense (benefit) consist of the following (in thousands):
 
Fiscal Years Ended
 
April 30, 2017
 
May 1, 2016
 
May 3, 2015
Current:
 
 
 
 
 
Federal
$
—

 
$
—

 
$
—

State
532

 
(9
)
 
209

Foreign
14,850

 
4,575

 
8,814

 
15,382

 
4,566

 
9,023

Deferred:
 
 
 
 
 
Federal
(102,305
)
 
—

 
(607
)
State
(1,008
)
 
—

 
(14
)
Foreign
1,779

 
(4,928
)
 
393

 
(101,534
)
 
(4,928
)
 
(228
)
Provision for (benefit from) income taxes
$
(86,152
)
 
$
(362
)
 
$
8,795


Income (loss) before income taxes consists of the following (in thousands):
 
Fiscal Years Ended
 
April 30, 2017
 
May 1, 2016
 
May 3, 2015
U.S.
$
96,648

 
$
(2,579
)
 
$
(29,300
)
Foreign
66,546

 
37,410

 
49,982

 
$
163,194

 
$
34,831

 
$
20,682



A reconciliation of the income tax provision at the federal statutory rate and the effective rate is as follows:
 
Fiscal Years Ended
 
April 30, 2017
 
May 1, 2016
 
May 3, 2015
Expected income tax provision (benefit) at U.S. federal statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
Foreign rate differential
(5.0
)
 
(40.5
)
 
(46.9
)
Share-based compensation expense
0.7

 
14.1

 
29.6

Non-deductible transaction costs
—

 
0.1

 
0.5

Valuation allowance
(83.0
)
 
(2.5
)
 
49.1

Other permanent adjustments
0.7

 
4.4

 
—

Research and development credits
(2.3
)
 
(12.6
)
 
(15.0
)
Other
1.0

 
1.0

 
(9.8
)
 
(52.9
)%
 
(1.0
)%
 
42.5
 %


The components of deferred taxes consist of the following (in thousands):

As of
 
April 30, 2017
 
May 1, 2016
Deferred tax assets:
 
 
 
Inventory adjustments
$
9,161

 
$
10,740

Accruals and reserves
12,731

 
14,890

Tax credits
38,092

 
34,094

Net operating loss carryforwards
106,297

 
100,193

Gain/loss on investments under equity or cost method
814

 
8,522

Depreciation and amortization
8,462

 
3,498

Purchase accounting for intangible assets
2,707

 
7,137

Capital loss carryforward
7,183

 
189

Acquired intangibles
4,343

 
6,298

Stock compensation
9,345

 
9,162

Total deferred tax assets
199,135

 
194,723

Valuation allowance
(30,804
)
 
(162,892
)
Net deferred tax assets
168,331

 
31,831

Deferred tax liabilities:
 
 
 
Acquired intangibles
(2,360
)
 
(3,613
)
Debt discount
(43,796
)
 
(10,774
)
Depreciation and amortization
(16,233
)
 
(13,037
)
Total deferred tax liabilities
(62,389
)
 
(27,424
)
Total net deferred tax assets (liabilities)
$
105,942

 
$
4,407

 
 
 
 
Reported as:
 
 
 
Deferred tax assets
$
107,225

 
$
4,845

Deferred tax liabilities
(1,283
)
 
(438
)
Total net deferred tax assets (liabilities)
$
105,942

 
$
4,407



Realization of deferred tax assets is dependent upon future taxable earnings in related tax jurisdictions. In the past, due to U.S. operating losses in previous years and continuing U.S. earnings volatility which did not allow sustainable profitability, management had established and maintained a full valuation allowance for the U.S. deferred tax assets. During the fourth quarter of fiscal 2017, the Company assessed that it is more likely than not that it will realize the majority of the U.S. deferred tax assets, except for deferred tax assets related to California research and development credits and capital losses. The positive evidence as of April 30, 2017 that outweighed the negative evidence to release the valuation allowance included the fiscal 2017 and three year cumulative profitability driven by strong demand of certain new generation products, availability of resources to expand manufacturing capacity, and forecasted U.S. operating profits in the future periods. Accordingly, during the fourth quarter of fiscal 2017, the Company released $103.3 million of valuation allowance on these deferred tax assets. The remaining valuation allowance relates to deferred tax assets, for which management believes it is not more likely than not to be realized in future periods. The Company's valuation allowance increased/(decreased) from the prior year by approximately $(132.1) million, $(1.5) million and $7.7 million in fiscal 2017, 2016 and 2015, respectively.

As of April 30, 2017, the Company had federal, state and foreign net operating loss carryforwards of approximately $276.8 million, $13.2 million and $34.3 million, respectively, and federal and state tax credit carryforwards of approximately $34.3 million and $26.8 million, respectively. With the exception of California R&D credit, which can be carried forward indefinitely, the net operating loss and tax credit carryforwards will expire at various dates beginning in fiscal 2020 through 2037, if not utilized. Utilization of the Company's U.S. net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations set forth in Internal Revenue Code Section 382 and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credit carryforwards before utilization.

The Company's manufacturing operations in Malaysia operate under a tax holiday which will expire at the beginning of the second quarter of fiscal 2022. In fiscal 2017, the aggregate dollar and per share effect of the tax holiday was $6.1 million and $0.05 per share, respectively. As of April 30, 2017, there was no provision for U.S. income taxes for undistributed earnings of the Company's foreign subsidiaries as it is currently the Company's intention to reinvest these earnings indefinitely in operations outside the United States. The cumulative amount of foreign earnings to be permanently re-invested as of April 30, 2017 was approximately $349.8 million. The Company believes it is not practicable to determine the Company's tax liability that may arise in the event of a future repatriation. If repatriated, these earnings could result in a tax expense at the current U.S. federal statutory tax rate of 35%, subject to available net operating losses and other factors. Tax on undistributed earnings may also be reduced by foreign tax credits that may be generated in connection with the repatriation of earnings.

A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits is as follows (in thousands):
 
Fiscal Years Ended
 
April 30, 2017
 
May 1, 2016
 
May 3, 2015
 
 
 
 
 
 
Beginning balance
$
16,411

 
$
14,653

 
$
13,432

Additions for tax positions related to current year
1,675

 
1,331

 
975

Additions for tax positions related to prior years
3,372

 
902

 
246

Reductions for tax positions related to prior years (lapse of statute of limitations)
—

 
(475
)
 
—

Ending balance
$
21,458

 
$
16,411

 
$
14,653


Excluding the effects of recorded valuation allowances for deferred tax assets, $16.7 million of the unrecognized tax benefits would favorably impact the effective tax rate in future periods if recognized.

It is the Company's belief that no significant changes in the unrecognized tax benefit positions will occur within 12 months from April 30, 2017.

The Company records interest and penalties, if any, related to unrecognized tax benefits in income tax expense. As of April 30, 2017 and May 1, 2016, the Company had accrued $822,000 and zero, respectively, for interest and penalties related to uncertain tax positions.

The Company and its subsidiaries are subject to taxation in various state jurisdictions as well as the U.S. The Company's U.S. federal and state income tax returns are generally not subject to examination by the tax authorities for tax years before fiscal 2009. For all federal and state net operating loss and credit carryovers, the statute of limitations does not begin until the carryover items are utilized. The taxing authorities can examine the validity of the carryover items and if necessary, adjustments may be made to the carryover items. The Company's Malaysia, Singapore, China, Australia, Israel, and Sweden income tax returns are generally not subject to examination by the tax authorities for tax years before 2011, 2012, 2011, 2011, 2005 and 2010, respectively. The Company's Australia subsidiary is under audit for tax year 2011 and after. The Company's Israel subsidiary received a tax assessment from Israel Tax Authority (ITA) for tax years 2005 to 2007. The Company has filed an appeal and anticipates no material tax liability.