Entity information:
NOTE 19. INCOME TAXES
 
Income Tax Provision
 
The components of our income tax provision are summarized as follows (in thousands):
 
Year Ended March 31,
2017
2016
2015
Continuing operations:
 
 
 
 
 
 
 
 
 
Current:
 
 
 
 
 
 
 
 
 
Federal
$
16,629
 
$
13,204
 
$
12,065
 
State
 
2,237
 
 
1,562
 
 
1,657
 
Foreign
 
841
 
 
1,290
 
 
64
 
Total current income tax provision
 
19,707
 
 
16,056
 
 
13,786
 
Deferred:
 
 
 
 
 
 
 
 
 
Federal
 
(1,126
)
 
178
 
 
(1,363
)
State
 
(192
)
 
(128
)
 
(158
)
Foreign
 
(56
)
 
(33
)
 
(26
)
Total deferred income tax provision (benefit)
 
(1,374
)
 
17
 
 
(1,547
)
Total income tax provision - continuing operations
$
18,333
 
$
16,073
 
$
12,239
 
Discontinued operations and gain on sale of discontinued operations:
 
 
 
 
 
 
 
 
 
Current:
 
 
 
 
 
 
 
 
 
Federal
$
(35
)
$
(835
)
$
5,923
 
State
 
(3
)
 
(69
)
 
458
 
Total current income tax provision (benefit)
 
(38
)
 
(904
)
 
6,381
 
Deferred:
 
 
 
 
 
 
 
 
 
Federal
 
—
 
 
1,146
 
 
(2,258
)
State
 
—
 
 
95
 
 
(175
)
Total deferred income tax (benefit)
 
—
 
 
1,241
 
 
(2,433
)
Total income tax provision (benefit) - discontinued operations and gain on sale of discontinued operations
$
(38
)
$
337
 
$
3,948
 
 
The components of our income before income tax provision are summarized as follows (in thousands):
 
Year Ended March 31,
2017
2016
2015
Continuing operations:
 
 
 
 
 
 
 
 
 
United States
$
48,069
 
$
43,885
 
$
33,489
 
Foreign
 
3,043
 
 
3,262
 
 
(447
)
Total - continuing operations
$
51,112
 
$
47,147
 
$
33,042
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
United States
$
(101
)
$
893
 
$
10,475
 
 
The income tax provision from continuing operations differs from the amount computed by applying the federal statutory income tax rate (35 percent) to income from continuing operations before income tax provision as follows (in thousands):
 
Year Ended March 31,
2017
2016
2015
Continuing operations:
 
 
 
 
 
 
 
 
 
Income taxes at federal income tax rate
$
17,889
 
$
16,502
 
$
11,565
 
State income taxes, net of federal benefits
 
1,284
 
 
917
 
 
787
 
Non-deductible compensation
 
549
 
 
543
 
 
880
 
Research and development tax credits
 
(410
)
 
(607
)
 
(383
)
Tax-exempt interest income
 
(1
)
 
(2
)
 
(6
)
Qualified production activities income benefit
 
(910
)
 
(761
)
 
(866
)
Other
 
(68
)
 
(519
)
 
262
 
Total income tax provision from continuing operations
$
18,333
 
$
16,073
 
$
12,239
 
 
During fiscal 2017, 2016 and 2015, we recognized $24,000, $1.6 million and $0.9 million, respectively, of tax deductions related to share-based compensation, on a consolidated basis, in excess of recognized share-based compensation expense (“excess benefits”) that was recorded to shareholders’ equity. We record excess benefits to shareholders’ equity when the benefits result in a reduction in cash paid for income taxes.
 
Our policy is to reinvest earnings of our foreign subsidiaries unless such earnings are subject to U.S. taxation. As of March 31, 2017, there are no earnings that have not been subject to U.S. taxation.
 
Unrecognized Tax Benefits
 
During fiscal 2017, we did not recognize any interest and penalties related to unrecognized tax benefits. We file income tax returns in the U.S. federal jurisdiction, Germany, United Kingdom, Hong Kong and various state jurisdictions. The statute of limitations is three years for federal and four years for California. Our federal income tax returns are subject to examination for fiscal years 2014 through 2017. Our California income tax returns are subject to examination for fiscal years 2013 through 2017, with the exception of California tax credit carryovers. To the extent there is a research and development tax credit available for carryover to future years, the statute of limitations with respect to the tax credit begins in the year utilized. As a result of the timing for the utilization of California tax credit carryovers, our California research and development tax credits are subject to examination for fiscal years 2011 through 2017. We are subject to examination in Germany for fiscal years 2014 through 2017, in the United Kingdom for fiscal years 2013 through 2017 and in Hong Kong for fiscal year 2017.
 
Deferred Tax Assets and Liabilities
 
The following table presents the breakdown between current and non-current net deferred tax assets (liabilities) (in thousands):
 
March 31,
2017
2016
Deferred tax assets, current
$
5,644
 
$
4,810
 
Deferred tax assets, non-current
 
4,392
 
 
3,903
 
Deferred tax liabilities, non-current
 
(234
)
 
(384
)
Total net deferred tax assets
$
9,802
 
$
8,329
 
 
Significant components of our deferred tax assets (liabilities) are as follows (in thousands):
 
March 31,
2017
2016
Deferred tax assets:
 
 
 
 
 
 
Research and development tax credit carryforwards
$
917
 
$
830
 
Capitalized research and development
 
45
 
 
76
 
Inventory reserves
 
598
 
 
623
 
Deferred revenue from extended maintenance agreements
 
1,074
 
 
1,446
 
Warranty reserves
 
1,659
 
 
1,217
 
Accrued payroll and other accrued expenses
 
1,715
 
 
1,553
 
Share-based compensation
 
4,753
 
 
3,822
 
Alternative minimum tax credits
 
24
 
 
24
 
Tax on deferred intercompany profit
 
1,221
 
 
601
 
Other
 
696
 
 
665
 
Total deferred tax assets
 
12,702
 
 
10,857
 
Deferred tax liabilities:
 
 
 
 
 
 
Depreciation
 
(2,518
)
 
(2,135
)
Other
 
(382
)
 
(393
)
Total deferred tax liabilities
 
(2,900
)
 
(2,528
)
Net deferred tax assets
$
9,802
 
$
8,329
 
 
A valuation allowance against deferred tax assets is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. As of March 31, 2017, 2016 and 2015, we did not have a valuation allowance.
 
As of March 31, 2017, we had no federal or California net operating loss carryforwards. As of March 31, 2017, our California research and development tax credit carryforwards were $1.4 million. The California research and development tax credit will carryforward indefinitely.