NOTE K – INCOME TAXES

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

Income taxes recorded by us differ from the amounts computed by applying the statutory U.S. federal income tax rate to (loss) income before income taxes. The following schedule reconciles income tax provision (benefit) at the statutory rate and the actual income tax expense as reflected in the consolidated statements of operations and comprehensive (loss) income for the respective periods (in thousands):

In 2016, we continued to maintain our full valuation allowance on our deferred tax assets, as we have determined that we would not meet the criteria of “more likely than not” that our federal and state net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our assessment of both positive and negative evidence regarding realization of our deferred tax assets, in particular, the strong negative evidence associated with our cumulative loss over the past three years. As a result of the adoption of the guidance improving accounting for share based payments, we reduced our deferred tax assets as well as the offsetting valuation allowance by $3.4 million. See Note A – Summary of Significant Accounting Policies.

During 2015, we determined that we would not meet the criteria of “more likely than not” that our federal and state net operating losses and certain other deferred tax assets would be recoverable. This determination was based on our assessment of both positive and negative evidence regarding realization of our deferred tax assets, in particular, the strong negative evidence associated with our cumulative loss over the past three years. Accordingly, we recorded a valuation allowance against these items. The deferred tax assets consist of federal net operating losses, state net operating losses, tax credits, and other deferred tax assets, most of which expire between 2016 and 2036. As a result of recording the valuation allowance, we recognized deferred tax expense of $9.9 million for the year ended December 31, 2015. Income tax expense recorded in the future will be reduced or increased to the extent of offsetting decreases or increases to the valuation allowance.

During the year ended December 31, 2014, we determined that it would be more likely than not, that certain additional state net operating losses would also be recoverable. We maintained a valuation allowance against certain other deferred tax assets that we determined we would likely not utilize before expiration. Deferred tax assets that were still subject to a valuation allowance include certain state net operating losses, tax credits, capital loss carryforward and foreign net operating losses. As a result of the release of the valuation allowances we recognized a deferred tax benefit of $0.2 million during the year ended December 31, 2014. Additionally, the valuation allowance increased by $1.3 million due to a capital loss carryforward for the year ended December 31, 2014.

The components of our net deferred tax assets and liabilities are as follows (in thousands):

The decrease in deferred tax liabilities related to federal and state net operating loss carry forwards is primarily due to increasing the valuation allowance on net operating loss carryforwards. Net operating loss carryforwards available at December 31, 2016 expire as follows (in thousands):

We file U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitation. The 2002 through 2015 tax years generally remain subject to examination by federal and most state tax authorities. However, certain returns from years as early as 1998, in which net operating losses were generated, remain open for examination by the tax authorities.

As of December 31, 2016, we have evaluated liabilities for uncertain tax positions, and as a result have determined that there is no need for a liability for unrecognized tax benefits. As of December 31, 2015, we recorded a net decrease to the liability for unrecognized tax benefits of less than $0.1 million in income tax benefit. This amount is comprised of tax benefits recognized due to expiration of statute of limitations on certain prior period state tax matters and the corresponding accrual of estimated penalties and interest. Our total unrecognized tax benefits as of December 31, 2015 were less than $0.1 million including estimated penalties and interest.

The following table summarizes the activity related to our unrecognized tax benefits, net of federal benefit, and excludes interest and penalties (in thousands):