Entity information:
Income Taxes
The sources of income (loss) before income taxes are as follows (in thousands):
 
Years Ended December 31,
 
2017
 
2016
 
2015
Domestic
$
(12,487
)
 
$
(41,246
)
 
$
21,065

Foreign
(16,866
)
 
(19,060
)
 
(42,175
)
Total
$
(29,353
)
 
$
(60,306
)
 
$
(21,110
)


Components of income taxes are as follows (in thousands):
 
Years Ended December 31,
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
Federal
$
(166
)
 
$
—

 
$
(4,715
)
State and local
116

 
28

 
41

Foreign
5,494

 
5,574

 
1,274

Deferred:
 
 
 
 
 
Federal
(1,263
)
 
—

 
2,726

Foreign
(4,157
)
 
(1,181
)
 
4,718

Total income tax expense
$
24

 
$
4,421

 
$
4,044


A reconciliation of the expected income tax expense on income (loss) before income taxes using the statutory federal income tax rate of 35% for 2017, 2016 and 2015 to income tax expense follows (in thousands):
 
Years Ended December 31,
 
2017
 
2016
 
2015
Expected income tax expense at 35%
$
(10,274
)
 
$
(21,107
)
 
$
(7,389
)
Foreign tax rate differential
(2,914
)
 
5,932

 
1,769

Foreign tax differences
(5,610
)
 
(4,828
)
 
4,104

State and local taxes
116

 
28

 
41

Nondeductible expenses
4,308

 
(259
)
 
578

Change in U.S. tax rate
77,410

 
—

 
—

Expired Capital Loss
1,114

 
1,321

 
15,950

Valuation allowance:
 
 
 
 
 
Valuation allowance on expiring capital losses
(1,114
)
 
(1,321
)
 
(15,950
)
Valuation allowance on operations
(63,012
)
 
24,655

 
4,941

Total income tax expense
$
24

 
$
4,421

 
$
4,044


As a result of passage of the Tax Cut and Jobs Act (the “Act”) on December 22, 2017, the Company’s U.S. deferred tax assets, liabilities, and associated valuation allowance as of December 31, 2017 have been re-measured at the new U.S. federal tax rate of 21%. The tax effects of the cumulative temporary differences resulting in the net deferred income tax asset (liability) are as follows (in thousands):
 
December 31,
 
2017
 
2016
Non-current deferred:
 
 
 
Deferred income tax assets:
 
 
 
Accrued expenses
$
1,976

 
$
2,994

Allowance Accounts
2,960

 
4,861

Net operating loss carryforward
87,705

 
98,896

Capital loss carryforward
—

 
1,114

Equity method investment
35,292

 
58,820

Original issue discount
9,624

 
17,924

Basis in identified intangibles
9,408

 
15,286

Tax credit carryforwards
6,929

 
7,051

Contingency accrual
788

 
—

Other
4,035

 
10,755

Total non-current deferred income tax asset
158,717

 
217,701

Valuation allowance
(153,463
)
 
(217,589
)
Net non-current deferred income tax asset
5,254

 
112

Deferred income tax liabilities:
 
 
 
Other
—

 
(1,240
)
Unbilled receivables
(3,501
)
 
(1,908
)
Basis in property, plant and equipment
—

 
(531
)
Total net non-current deferred income tax asset (liability)
$
1,753

 
$
(3,567
)

During 2013, the Company established a valuation allowance on the substantial majority of U.S. net deferred tax assets due to the significant charges taken during the year and the related inability to rely on projections of future income. As of December 31, 2017, the Company has a valuation allowance on substantially all net U.S. deferred tax assets. The valuation allowance was released in 2017 with respect to refundable U.S. alternative minimum tax (“AMT”) credits that will be realized as a result of provisions in the Act. The valuation allowance was calculated in accordance with the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires that a valuation allowance be established or maintained when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. The Company will continue to record a valuation allowance for the substantial majority of its deferred tax assets until there is sufficient evidence to warrant reversal.
At December 31, 2017, the Company had U.S. net operating loss carryforwards of approximately $238.0 million, expiring in 2034, and net operating loss carryforwards outside of the U.S. of approximately $134.7 million, the majority of which expire beyond 2025.
As of December 31, 2017, the Company has approximately $0.4 million of unrecognized tax benefits and does not expect to recognize any significant increases in unrecognized tax benefits during the next twelve-month period. Interest and penalties, if any, related to unrecognized tax benefits are recorded in income tax expense. During 2017, 2016 and 2015, the aggregate changes in the Company’s total gross amount of unrecognized tax benefits are summarized as follows (in thousands):
 
Years Ended December 31,
 
2017
 
2016
 
2015
Beginning balance
$
1,299

 
$
1,250

 
$
1,957

Increases in unrecognized tax benefits – current year positions
59

 
49

 
75

Decreases in unrecognized tax benefits – prior year position
(911
)
 
—

 
(782
)
Ending balance
$
447

 
$
1,299

 
$
1,250


The Company’s U.S. federal tax returns for 2014 and subsequent years remain subject to examination by tax authorities. In the Company’s foreign tax jurisdictions, tax returns for 2013 and subsequent years generally remain open to examination.
As of December 31, 2017, the Company considered the outside book-over-tax basis difference in its foreign subsidiaries to be in the amount of approximately $92.2 million. United States income taxes have not been provided on this basis difference as it is the Company’s intention to reinvest the undistributed earnings of its foreign subsidiaries to the extent they cannot be remitted to the United States without incurring incremental tax as provided in the Act. Additionally, the Company had no impact in the U.S. with respect to the one-time deemed repatriation of net foreign subsidiary earnings under the Act, as a result of the allocation of foreign subsidiary deficits against positive earnings.