Entity information:
INCOME TAXES
 
The domestic and foreign components of income (loss) before taxes for our operations for the years ended December 31, 2017, 2016 and 2015 are summarized below:
 
 
2017
 
2016
 
2015
Domestic
 
$
(5,942
)
 
$
(4,346
)
 
$
(16,167
)
Foreign
 
(9,342
)
 
(1,362
)
 
(9,922
)
 
 
 
 
 
 
 
Total loss before income taxes
 
$
(15,284
)
 
$
(5,708
)
 
$
(26,089
)

 
The components of the provision (benefit) for income taxes for the years ended December 31, 2017, 2016 and 2015 are as follows:
 
 
 
2017
 
2016
 
2015
Current - Federal
 
$
946

 
$
(888
)
 
$
(3,005
)
Current - State
 
91

 
55

 
55

Current - Foreign
 
3,088

 
1,914

 
1,557

 
 
 
 
 
 
 
Current income tax expense (benefit)
 
4,125

 
1,081

 
(1,393
)
 
 
 
 
 
 
 
Deferred - Federal
 
(393
)
 
—

 
1,149

Deferred - State
 
(5
)
 
—

 
217

Deferred - Foreign
 
(158
)
 
(284
)
 
(2,091
)
 
 
 
 
 
 
 
Deferred income tax benefit
 
(556
)
 
(284
)
 
(725
)
 
 
 
 
 
 
 
Income tax provision (benefit)
 
$
3,569

 
$
797

 
$
(2,118
)

 
Our deferred tax assets and liabilities at December 31, 2017 and 2016 consist of the following:
 
 
 
2017
 
2016
Deferred tax assets:
 
 

 
 

Net operating loss carryforward
 
$
10,144

 
$
9,764

Inventory differences
 
570

 
1,222

Equity compensation
 
591

 
688

Investment in subsidiaries
 
3,514

 
581

Restructuring
 
1,389

 
2,328

Purchased goodwill
 
3,331

 
—

Accrued employee compensation and benefits
 
979

 
841

Other, net
 
144

 
423

Gross deferred tax assets
 
20,662

 
15,847

Less valuation allowances
 
(18,063
)
 
(11,679
)
Total deferred tax assets
 
2,599

 
4,168

 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
Purchased intangible assets and goodwill
 
(2,644
)
 
(4,013
)
Depreciation and amortization
 
(267
)
 
(1,130
)
Other, net
 
(163
)
 
(473
)
Total deferred tax liabilities
 
(3,074
)
 
(5,616
)
 
 
 
 
 
Net deferred tax liabilities
 
$
(475
)
 
$
(1,448
)


As of December 31, 2017, we had loss carryforwards for tax purposes totaling approximately $76,063, comprised of $56,873 foreign and $19,190 domestic federal and state loss carryforwards, which will be available to offset future taxable income due to laws in certain foreign jurisdictions. If not used, the foreign tax loss carryforwards generally may be carried forward indefinitely or have at least a ten-year carryforward period. We have analyzed the foreign net operating losses and placed valuation allowances on those where we have determined the realization is not more likely than not to occur.

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Additionally, a three-year cumulative loss at a Consolidated Financial Statement level may be viewed as negative evidence impacting a jurisdiction that by itself is not in a three-year cumulative loss position. At December 31, 2017 and 2016, the Company is in a consolidated three-year cumulative loss position. Accordingly, we have evaluated the impact on all jurisdictions and have recorded a valuation allowance against the corresponding net deferred tax assets as of December 31, 2017 and 2016. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods if positive evidence such as current and expected future taxable income outweighs negative evidence.

A reconciliation of our income tax provision computed by applying the Federal statutory income tax rate of 35% to income before taxes is as follows:
 
 
2017
 
2016
 
2015
Statutory U.S. federal income tax
 
$
(5,350
)
 
$
(1,998
)
 
$
(9,131
)
U.S. state income tax, net of federal benefit
 
27

 
(158
)
 
(340
)
U.S. TCJA - net impact
 
4,435

 
—

 
—

Foreign rate differential
 
(1,728
)
 
164

 
692

Tax audit adjustments
 
426

 
—

 
—

Equity compensation
 
(52
)
 
339

 
224

Deemed repatriation of foreign earnings
 
—

 
—

 
810

Change in State Rate
 
278

 
—

 
—

Impairment of goodwill
 
239

 
—

 
498

Other
 
(94
)
 
97

 
(1,513
)
Change in valuation allowances
 
5,388

 
2,353

 
6,642

 
 
 
 
 
 
 
Provision for income taxes
 
$
3,569

 
$
797

 
$
(2,118
)

    
The Tax Cuts and Jobs Act ("TCJA") was enacted in December 2017. Among other things, the TCJA reduces the U.S. federal corporate tax rate from 35% to 21% beginning in 2018, requires companies to pay a one-time transition tax on previously unremitted earnings of non-U.S. subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. The SEC staff issued Staff Accounting Bulletin (SAB) 118, which provides guidance on accounting for enactment effects of the TCJA. SAB 118 provides a measurement period of up to one year from the TCJA’s enactment date for companies to complete their accounting under ASC 740. In accordance with SAB 118, to the extent that a company’s accounting for certain income tax effects of the TCJA is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in its financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the TCJA.
 
In connection with our initial analysis of the impact of the enactment of the TCJA, the Company recorded net tax expense of $946 in the fourth quarter of 2017. For various reasons that are discussed more fully below, including the issuance of additional technical and interpretive guidance, we have not completed accounting for the income tax effects of certain elements of the TCJA. However, we were able to make reasonable estimates of the TCJA’s effects and, as such, recorded provisional amounts related to the transition tax and the remeasurement of deferred tax assets and liabilities.

The transition tax is a tax on previously untaxed accumulated and current earnings and profits (E&P) of certain of the Company’s non-U.S. subsidiaries. To determine the amount of the transition tax, we must determine, in addition to other factors, the amount of post-1986 E&P of the relevant subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. E&P is similar to retained earnings of the subsidiary, but requires other adjustments to conform to U.S. tax rules. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. We were able to make a reasonable estimate of the transition tax and recorded a provisional obligation and additional income tax expense of $946 in the fourth quarter of 2017, which the Company expects to elect to pay over eight years. As of December 31, 2017, we reflected $75 and $871 in current accrued income taxes and other long term liabilities, respectively. However, the Company is continuing to gather additional information and will consider additional technical guidance to more precisely compute and account for the amount of the transition tax in the measurement period. This amount may change when we finalize the calculation of post-1986 foreign E&P previously deferred from U.S. federal taxation, finalize the calculation of non-U.S. income taxes paid on such earnings, and finalize our determination on the impact of the deemed repatriation of foreign earnings on 2017 taxable income.

In addition to the transition tax, the TCJA introduced a territorial tax system, which will be effective beginning in 2018. The territorial tax system may impact the Company’s overall global capital and legal entity structure, working capital, and repatriation plan on a go-forward basis. In light of the territorial tax system, and other new international provisions within the TCJA that are effective beginning in 2018, the Company is currently analyzing its global capital and legal entity structure, working capital requirements, and repatriation plans. We have not completed our full analysis with respect to the impact of the TCJA on our indefinite reinvestment assertion, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to the territorial tax system and our indefinite reinvestment assertion were recorded. Further, it is impracticable for the Company to estimate any future tax costs for any unrecognized deferred tax liabilities associated with its indefinite reinvestment assertion as of December 31, 2017, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when a repatriation, sale, or liquidation occurs, or other factors. If there are any changes to our indefinite reinvestment assertion as a result of finalizing our assessment of the TCJA, the Company will adjust its provisional estimates, record, and disclose any tax impacts in the appropriate period, pursuant to SAB 118.

We remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21% under the TCJA. As our U.S. deferred tax assets are fully offset by a valuation allowance, there was no net additional tax impact related to deferred tax assets and liabilities recognized in the fourth quarter of 2017. We are still analyzing certain aspects of the TCJA, considering additional technical guidance, and refining our calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. This includes, but is not limited to, the impacts of changes to Code Section 162(m) on our deferred tax assets related to compensation, and the potential impacts of the global intangible low-taxed income (“GILTI”) provision within the TCJA on deferred tax assets and liabilities.

We have not completed our full analysis with respect to the GILTI provision within the TCJA, and we are not yet able to make reasonable estimates of its related effects. Therefore, no provisional adjustments relative to GILTI were recorded. Currently, we have not yet elected a policy as to whether we will recognize deferred taxes for basis differences expected to reverse as GILTI or whether we will account for GILTI as period costs if and when incurred. The Company is currently evaluating other elements of the TCJA for which the Company was not yet able to make reasonable estimates of the enactment impact and for which it would continue accounting for them in accordance with ASC 740 on the basis of the tax laws in effect before the TCJA.
     
DMC files income tax returns in the U.S. federal jurisdiction, as well as various U.S. state and foreign jurisdictions. In the U.S., tax audits for the years 2012 through 2015 were closed during the second quarter of 2017, and no adjustments to the Company's tax provisions were proposed. In the spring of 2016, German tax authorities commenced an examination of the tax returns of our German tax authorities for the 2011 through 2014 tax years. During 2017, German tax authorities proposed and we agreed to a settlement. The key provisions of the settlement resulted in increases to income related to various issues related to transfer pricing. We recorded an additional $251 in income tax expense and $41 of interest to reflect these adjustments and the impact of these adjustments on 2015 and 2016 taxes.

Most of DMC’s state tax returns remain open to examination for the tax years 2013 through 2017. DMC’s foreign tax returns generally remain open to examination for the tax years 2013 through 2017, depending on jurisdiction.
 
At December 31, 2017 and 2016, the balance of unrecognized tax benefits was zero. We recognize interest and penalties related to uncertain tax positions in operating expense. As of December 31, 2017 and 2016, our accrual for interest and penalties related to uncertain tax positions was zero.