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Non-Operating Income and Expenses
Interestexpense,net. Our interest expense, net is generated primarily from interest expense due to outstanding debt and the recognition of the interest portion of a loss on
extinguishment of debt of $1.6 million in connection with the December 31, 2013 reorganization of Ziff Davis, Inc. into Ziff Davis, LLC and the Company's acquisition of all of the
minority holders' equity interests in Ziff Davis, Inc., and interest earned on cash, cash equivalents and short-term and long-term investments. Interest expense, net was $42.5 million ,
$31.2 million , and $21.3 million for the years ended December 31, 2015 , 2014 and 2013, respectively. The increase from 2014 to 2015 and 2013 to 2014 was primarily due to
additional interest expense following the June 2014 issuance of the Convertible Notes.
Other expense (income), net . Our other expense (income), net is generated primarily from miscellaneous items, gain or losses on currency exchange and the sale of
investments. Other expense (income), net was $0.0 million , $(0.2) million , and $11.5 million for the years ended December 31, 2015 , 2014 and 2013 , respectively. The decrease
from 2014 to 2015 is primarily due to lower miscellaneous income. The decrease from 2013 to 2014 is primarily due to the recognition of the other expense portion of a loss on
extinguishment of debt of $12.9 million in connection with the December 31, 2013 reorganization of Ziff Davis, Inc. into Ziff Davis, LLC and the Company's acquisition of all of the
minority holders' equity interests in Ziff Davis, Inc.
Income Taxes
Our effective tax rate is based on pre-tax income, statutory tax rates, tax regulations (including those related to transfer pricing) and different tax rates in the various
jurisdictions in which we operate. The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize. When necessary, we establish
valuation allowances to reduce our deferred tax assets to an amount that will more likely than not be realized.
As of December 31, 2015 , we had federal net operating loss carryforwards (“NOLs”) of $17.4 million after considering substantial restrictions on the utilization of these
NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). We estimate that all of the above-mentioned federal
NOLs will be available for use before their expiration. These NOLs expire through the year 2031. As of December 31, 2015 and 2014, the Company has foreign tax credits of $14.0
million and $11.1 million , respectively. The Company has provided a valuation allowance on the foreign tax credits of $14.0 million and $11.1 million , respectively, as the weight
of available evidence does not support full utilization of these credits. The foreign tax credits expire through the year 2025. In addition, as of December 31, 2015 and 2014, we had
available unrecognized state research and development tax credits of $3.7 million and $2.0 million, respectively, which last indefinitely. As of December 31, 2015 and 2014, we also
had state enterprise zone tax credits of $0.6 and $0.9 million, respectively. The state enterprise zone credits expire through the year 2025. We estimate that all of the state enterprise
zone credits will be available for use before their expiration.
Income tax expense amounted to $23.3 million , $29.8 million and $35.2 million for the years ended December 31, 2015 , 2014 and 2013, respectively. Our effective tax
rates for 2015, 2014 and 2013 were 15% , 19% and 25% , respectively.
The decrease in our annual effective income tax rate from 2014 to 2015 was primarily attributable to the following:
1. the reversal of uncertain income tax positions during 2015;
2. an increase during 2015 in the portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the U.S.; partially offset by:
3. an increase during 2015 in the valuation allowance for foreign tax credit carryforwards
The decrease in our annual effective income tax rate from 2013 to 2014 was primarily attributable to the following:
1. a reversal of uncertain income tax positions during 2014;
2. a decrease during 2014 in reorganization costs not deductible for tax purposes; partially offset by:
3. a decrease during 2014 in the portion of our income being taxed in foreign jurisdictions and subject to lower tax rates than in the U.S.
In order to provide additional understanding in connection with our foreign taxes, the following represents the statutory and effective tax rate by significant foreign country:
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