In fiscal the provision for income taxes had an effective tax rate of as compared to in fiscal and in fiscal The fiscal and tax rates reflected higher income generated in certain foreign jurisdictions with lower taxes rates. The higher tax rate in fiscal was caused by an out-of-period adjustment of of pretax income and the recording of valuation allowances for net operating losses generated in foreign jurisdictions.

 

     Income before income tax consisted of the following (in thousands):

     Our provision for income taxes consisted of the following (in thousands):

 

 

     The reconciliation of our effective tax rate to the U.S. statutory federal income tax rate was as follows:

 

     The significant components of net deferred income tax assets were as follows (in thousands):

 

The authoritative guidance provided by FASB requires deferred tax assets and liabilities to be recognized for temporary differences between the tax basis and financial reporting basis of assets and liabilities, computed at the expected tax rates for the periods in which the assets or liabilities will be realized, as well as for the expected tax benefit of net operating loss and tax credit carryforwards. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowances recorded against net deferred tax assets. Our management evaluates the recoverability of these net deferred tax assets in accordance with the authoritative guidance provided by FASB. Our ability to utilize the deferred tax assets and the continuing need for a related valuation allowance are being monitored on an ongoing basis. During fiscal we recorded certain adjustments on valuation allowances, tax contingency reserves and other temporary items. The impact of these adjustments is discussed further in this note.

 

Under the Tax Reform Act of the amounts of and benefits from net operating loss carryforwards and tax credit carryforwards be impaired or limited in certain circumstances. Events that restrict utilization of net operating loss and credit carryforwards include, but are limited to, certain ownership change limitations and continuity of business requirements, as defined in Internal Revenue Code Section and similar state provisions. Current utilization of carryforwards is restricted by an annual limitation, which results in the expiration of net operating loss carryforwards and credit carryforwards before they can be utilized.

 

In aggregate, the valuation allowances in fiscal increased by million as compared to fiscal while it decreased by in fiscal when compared to fiscal The increase in valuation allowances in fiscal primarily related to recoverability of certain research and development tax credits as well as an increase in net operating loss in a foreign jurisdiction.

 

At we had U.S. net operating loss carryforwards of approximately million, all of which are subject to the limitations under Section of the U.S. tax code resulting from a change in ownership. These carryforwards will expire, if utilized, from fiscal to for U.S. tax purposes. of the U.S. net operating loss carryforwards include stock option deductions arising from our equity incentive plans. As of we had net operating loss carryforwards for foreign income tax purposes of approximately million offset by a corresponding valuation allowance of million.

 

At the end of fiscal we had  million of gross unrecognizable tax benefits, all of which would affect our effective tax rate if recognized. The million has been classified under “Other long term liabilities” on our consolidated balance sheet. Our liability decreased by from the prior year, primarily due to the expiration of statutes of limitation. We do anticipate any unrecognizable tax benefits in the next months that would result in a material change to our financial position.

 

We include interest and penalties in the financial statements as a component of income tax expense. We had of accrued interest and penalties at which included of interest and penalties reversed for the year ended net of of interest and penalties accrued and of interest and penalties reversed.

 

The aggregate changes in the balance of gross unrecognizable tax benefits were as follows (in thousands):

 

In addition to the above, our valuation allowances included uncertain tax positions relating to the realizability of net operating losses at certain foreign jurisdictions and certain domestic state tax credits aggregating to million at At our valuation allowances included uncertain tax positions relating to the realizability of net operating losses at certain foreign jurisdictions of million.

 

 

 

We conduct business globally and, as a result, we file income tax returns in various jurisdictions throughout the world including the U.S. federal and various U.S. state jurisdictions as well as with various foreign jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world. We remain subject to U.S. federal examination for years from and forward by virtue of the tax attributes carrying forward from those years. We also remain subject to examination in most jurisdictions for all years since

 

The Protecting Americans from Tax Hikes Act of or the Act, was signed into law on The Act contains a number of provisions including, most notably, a permanent extension of the U.S. federal research tax credit. The Company’s tax provision for fiscal reflects the benefit of the U.S. federal research credit.