Income tax expense is summarized as follows:

 

Actual income tax expense differs from that obtained by applying the statutory federal income tax rate of to income before income taxes as follows:

 

Consolidated U.S. (loss) before income taxes was million, million, and million, for the fiscal years ended and respectively. The corresponding income before income taxes for foreign operations was million, million, and million for the fiscal years ended and respectively.

 

The Company files U.S. federal, state, and foreign tax returns that are subject to audit by various tax authorities. The Company is currently under audit in:

U.S. income and foreign withholding taxes have not been recorded on permanently reinvested earnings of our foreign subsidiaries. These permanently reinvested earnings are approximately million at It is not practicable for the Company to determine the amount of the related unrecognized deferred income tax liability. Such earnings would become taxable upon the sale or liquidation of these subsidiaries or upon the remittance of dividends.

 

Deferred income taxes reflect the net effects of the temporary differences between the carrying amounts 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 are as follows:

The Company reviews its net deferred tax assets by jurisdiction on a quarterly basis to determine whether a valuation allowance is necessary based on the more-likely-than-not standard. During the quarter of the fiscal year ended management considered all available positive and negative evidence to determine whether, based on the weight of that evidence, a valuation allowance was needed. Management assessed historic, current and future financial projections by jurisdiction to draw its conclusion. For the U.S. federal jurisdiction, the positive evidence was outweighed by the U.S. -year cumulative loss, a fiscal projected loss, and future earmarked investment necessary to transition the business to cloud. Management concluded that the weight of this negative evidence warranted placing a full valuation allowance on all its U.S. federal net deferred tax assets. The majority of QAD’s state deferred tax assets are California research and development tax credits. This jurisdiction was analyzed separately because QAD’s California return is filed on a worldwide basis. A significant decrease in current and forecast income both within and outside the US, along with a recent significant drop in the California apportionment percentage, led management to conclude that a full valuation allowance on QAD’s state deferred tax assets was also necessary. In total, a full valuation allowance of million was placed against QAD’s U.S. federal and state net deferred tax assets. If and when the Company’s operating performance improves on a sustained basis, the conclusion regarding the need for a valuation allowance could change, resulting in the reversal of some or all of the valuation allowance in the future. At and the valuation allowance attributable to deferred tax assets was million and million, respectively.

 

The Company has gross net operating loss carryforwards of million and tax credit carryforwards of million as of The majority of the Company’s net operating loss carryforwards do not expire, the remaining begin to expire in fiscal year The majority of the Company’s tax credits carryforwards do not expire, the remaining begin to expire in fiscal year

 

During the fiscal year ended the Company increased its reserves for uncertain tax positions by million. Interest and penalties on accrued but unpaid taxes are classified in the Consolidated Statements of Operations and Comprehensive (Loss) Income as income tax expense. The liability for unrecognized tax benefits that be recognized in the next months is classified as short-term in the Company’s Consolidated Balance Sheet while the remainder is classified as long-term.

 

The following table reconciles the gross amounts of unrecognized tax benefits at the beginning and end of the period:

 

All of the unrecognized tax benefits included in the balance sheet at would impact the effective tax rate on income from continuing operations, if recognized.

 

The total amount of interest recognized in the Consolidated Statement of Operations and Comprehensive (Loss) Income for unpaid taxes was for the year ended The total amount of interest and penalties recognized in the Consolidated Balance Sheet at was million.

 

The Company files U.S. federal, state, and foreign income tax returns in jurisdictions with varying statute of limitations. The years that be subject to examination will vary by jurisdiction. Below is a list of our material jurisdictions and the years open for audit as of fiscal