(7) Income Taxes



The components of loss from continuing operations before income taxes are as follows (in thousands):





The components of income tax benefit (provision) are as follows (in thousands):





A reconciliation of the U.S. statutory federal tax rate of 35% to the consolidated effective tax rate is as follows (in thousands):





On December 22, 2017, U.S. Tax Reform was signed into law making significant changes to the Internal Revenue Code.  Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 and the transition of U.S. international taxation from a worldwide tax system to a modified territorial system.  As a result, we recorded a provisional income tax benefit of $76.5 million during the fourth quarter of 2017.  The provisional amount related primarily to the remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future.  Additional work is necessary for a more detailed analysis of our deferred tax assets and liabilities.  Any subsequent adjustments to the provisional amount will be reported as component of income tax expense (benefit) in the reporting period in which any such adjustments are determined. 



The tax effects of temporary differences that give rise to significant components of deferred income tax assets and liabilities are as follows (in thousands):





At December 31, 2017, the Company had $135.5 million in U.S. net operating loss carryforwards, which are available to reduce future taxable income.  The expiration date for utilization of the U.S. loss carryforwards is 2037.  At December 31, 2017, the Company also had various state net operating loss carryforwards with expiration dates from 2018 to 2037.    A net deferred tax asset of $24.5 million reflects the expected future tax benefit for the state loss carryforwards.  At December 31, 2017, the Company also had a U.S. foreign tax credit carryforward of $55.9 million with expiration dates from 2021 to 2027.    



The net deferred tax assets reflect management’s estimate of the amount that will be realized from future profitability and the reversal of taxable temporary differences that can be predicted with reasonable certainty.  A valuation allowance has been recognized on a portion of the state net operating loss carryforward deferred tax asset.  After considering all available evidence at December 31, 2017, the Company determined that it was more likely than not that a portion of the carryforward would not be realized.  Accordingly, the Company increased deferred income tax expense by an additional $2.0 million of the valuation allowance.

The Company has not provided income tax expense on earnings of its foreign subsidiaries, since the Company has reinvested or expects to reinvest undistributed earnings outside the U.S. indefinitely.  At December 31, 2017, the Company’s foreign subsidiaries had an overall accumulated deficit in earnings.  The Company does not intend to repatriate the earnings of its profitable foreign subsidiaries.  The Company has not provided U.S. income taxes for such earnings, except to the extent that such earnings were previously subject to U.S. income taxes.  These earnings could become subject to U.S. income tax if repatriated.  It is not practicable to estimate the amount of taxes that might be payable on such undistributed earnings.



The U.S. Tax Reform imposes a tax on post-1986 earnings of non-U.S. affiliates that have not been repatriated for purposes of US federal income tax, with those earnings taxed at rates of 15.5% for earnings reflected by cash and cash equivalent items and 8% for other assets. The cash tax effects of this deemed repatriation can be remitted in installments over an eight-year period. We estimate the impact of this tax will not be material to our financial position.



The Company files income tax returns in the U.S., including federal and various state filings, and certain foreign jurisdictions.  The number of years that are open under the statute of limitations and subject to audit varies depending on the tax jurisdiction.  The Company remains subject to U.S. federal tax examinations for years after 2012.



The Company had unrecognized tax benefits of $30.7 million, $29.9 million and $29.7 million as of December 31, 2017,  2016 and 2015, respectively, all of which would impact the Company’s effective tax rate if recognized. 



The activity in unrecognized tax benefits is as follows (in thousands):





The Company recorded $2.2  million, $2.5 million and $1.0 million of interest and penalties for 2017, 2016 and 2015, respectively, classified as a component of income tax expense in the consolidated statements of operations.  The amounts in the table above include cumulative accrued interest and penalties of $9.7  million, $7.4 million and $4.6 million at December 31, 2017, 2016 and 2015, respectively, which are included in other non-current liabilities on the consolidated balance sheets.