13.  Income Taxes

The income before provision for income taxes consisted of (in thousands):

The provision for income taxes consists of the following (in thousands):

For the year ended April 30, 2017, the Company recognized a tax benefit related to a current year domestic pretax loss compared to a provision for taxes in in the prior year related to domestic pretax income. The Company intends to carry back the fiscal 2017 domestic loss for a refund of taxes paid in prior years.

The following table reconciles the reported income tax expense with the amount computed using the federal statutory income tax rate (in thousands):

The effective tax rate was impacted favorably by a U.S. tax deduction relating to the realization of the excess tax basis in common shares of FEI-Asia as the Company made an election to treat FEI-Asia as a disregarded entity. The effective tax rate was also impacted unfavorably by unrecognized tax benefits, a state tax rate change, and losses incurred at the Company’s foreign subsidiaries for which it receives no tax benefit.

The components of deferred taxes are as follows (in thousands):

The components of the deferred tax asset were as follows (in thousands):

*This amount consists of $3,138 included in current assets in deferred and prepaid income taxes and $7,702 included in non-current assets in deferred income taxes.

A valuation allowance is provided when it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. We consider the level of historical income, scheduled reversal of temporary differences, tax planning strategies and projected future taxable income in determining whether a valuation allowance is warranted. The valuation allowance of $3.3 million as of April 30, 2017, is intended to provide for uncertainty regarding the ultimate realization of U.S. state investment tax credit carryovers, capital loss assets and foreign net operating loss carryovers. Based on these considerations, we believe it is more likely than not that we will realize the benefit of the net deferred tax asset of $11.9 million as of April 30, 2017, which is net of the valuation allowance.

The consolidated valuation allowance excluding discontinued operations increased by approximately $2.3 million during the year ended April 30, 2017.  The change consists of a $2.3 million deferred tax provision related to a capital loss asset, investment tax credits and a foreign net operating loss.

At April 30, 2017, the Company has available approximately $.9 million in net operating losses available to offset future income of certain of its foreign subsidiaries.  These loss carryforwards have no expiration date.  As a result of the acquisition of FEI-Elcom, the Company has a federal net operating loss carryforward of $4.4 million which may be applied in annually limited amounts to offset future U.S.-sourced taxable income over the next 14 years. As of April 30, 2017, the Company has state investment tax credits of $1 million.   The state investment tax credit expires beginning in 2023 through 2032.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, is as follows:

The entire amount reflected in the table above at April 30, 2017, if recognized, would reduce our effective tax rate. As of April 30, 2017 and 2016, the Company had $21,000 and $0, respectively, accrued for the payment of interest and penalties.  For the fiscal years ended April 30, 2017 and 2016, the Company recognized interest and penalties of $21,000 and $0, respectively. It is difficult to predict or estimate the change in the Company’s unrecognized tax benefits over the next twelve months as a result of the progression of ongoing tax audits or other events.  The Company believes, however, that it is reasonably possible that decreases in unrecognized tax benefits of up to $.2 million may be recognized during the next twelve months.

The Company is subject to taxation in the U.S. and various state, local and foreign jurisdictions. The Company is no longer subject to examination of its federal income tax returns by the Internal Revenue Service for fiscal years 2013 and prior. In June 2017, the Company received notification from the Internal Revenue Service that it is seeking to review its tax return for the year ended April 30, 2016. The Company is no longer subject to examination by the taxing authorities in its foreign jurisdictions for fiscal 2013 and prior. Net operating losses generated by domestic and foreign entities in closed years and utilized in open years are subject to adjustment by the tax authorities.