Entity information:
INCOME TAXES
U.S. and foreign earnings (loss) before income taxes and noncontrolling interests are as follows:
 
Years Ended December 31,
 
2017
 
2016
 
2015
 
(In thousands)
U.S. 
$
(52,606
)
 
$
(248,433
)
 
$
79,656

Foreign
119,564

 
167,348

 
63,234

     Total
$
66,958

 
$
(81,085
)
 
$
142,890


The components of the (benefit) provision for income taxes are as follows:
 
Years Ended December 31,
 
2017
 
2016
 
2015
 
(In thousands)
Current income tax (benefit) provision:
 
 
 
 
 
Federal
$
(31,844
)
 
$
23,343

 
$
67,505

State
1,964

 
3,662

 
7,785

Foreign
24,108

 
27,242

 
14,012

     Current income tax (benefit) provision
(5,772
)
 
54,247

 
89,302

Deferred income tax (benefit) provision:
 
 
 
 
 
Federal
(255,477
)
 
(100,798
)
 
(50,254
)
State
(28,364
)
 
(9,518
)
 
(3,727
)
Foreign
(1,437
)
 
(8,865
)
 
(5,805
)
     Deferred income tax (benefit) provision
(285,278
)
 
(119,181
)
 
(59,786
)
     Income tax (benefit) provision
$
(291,050
)
 
$
(64,934
)
 
$
29,516


The deferred tax asset for net operating losses ("NOLs") was increased by $361.8 million for the year ended December 31, 2017 for excess tax deductions attributable to stock-based compensation. The related income tax benefit was recorded as a component of the deferred income tax benefit. The current income tax payable was reduced by $51.8 million and $56.4 million for the years ended December 31, 2016 and 2015, respectively, for excess tax deductions attributable to stock-based compensation. For the years ended December 31, 2016 and 2015, the related income tax benefits were recorded as increases to additional paid-in capital.
Income taxes receivable (payable) and deferred tax assets (liabilities) are included in the following captions in the accompanying consolidated balance sheet at December 31, 2017 and 2016:
 
December 31,
 
2017
 
2016
 
(In thousands)
Income taxes receivable (payable):
 
 
 
Other current assets
$
33,239

 
$
41,352

Other non-current assets
1,949

 
1,615

Accrued expenses and other current liabilities
(11,798
)
 
(5,788
)
Income taxes payable
(25,624
)
 
(33,528
)
     Net income taxes (payable) receivable
$
(2,234
)
 
$
3,651

 
 
 
 
Deferred tax assets (liabilities):
 
 
 
Other non-current assets
$
66,321

 
$
2,511

Deferred income taxes
(35,070
)
 
(228,798
)
     Net deferred tax assets (liabilities)
$
31,251

 
$
(226,287
)

The tax effects of cumulative temporary differences that give rise to significant deferred tax assets and deferred tax liabilities are presented below. The valuation allowance relates to deferred tax assets for which it is more likely than not that the tax benefit will not be realized.
 
December 31,
 
2017
 
2016
 
(In thousands)
Deferred tax assets:
 
 
 
Accrued expenses
$
22,234

 
$
40,273

NOL carryforwards
292,812

 
63,948

Tax credit carryforwards
78,715

 
11,570

Stock-based compensation
77,976

 
87,914

Equity method investments
12,066

 
17,455

Intangible and other assets
—

 
13,708

Other
30,265

 
30,044

     Total deferred tax assets
514,068

 
264,912

Less valuation allowance
(132,598
)
 
(88,170
)
     Net deferred tax assets
381,470

 
176,742

Deferred tax liabilities:
 
 
 
Investment in subsidiaries
(247,167
)
 
(385,474
)
Intangible and other assets
(87,811
)
 
—

Other
(15,241
)
 
(17,555
)
     Total deferred tax liabilities
(350,219
)
 
(403,029
)
     Net deferred tax assets (liabilities)
$
31,251

 
$
(226,287
)

At December 31, 2017, the Company has federal and state NOLs of $850.2 million and $859.4 million, respectively. The federal NOLs, if not utilized, will expire at various times between 2023 and 2037, and the state NOLs, if not utilized, will expire at various times between 2018 and 2037. Federal and state NOLs of $586.8 million and $496.0 million, respectively, can be used against future taxable income without restriction and the remaining NOLs will be subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable state law. At December 31, 2017, the Company has foreign NOLs of $378.2 million available to offset future income. Of these foreign NOLs, $355.4 million can be carried forward indefinitely and $22.8 million will expire at various times between 2018 and 2037. During 2017, the Company recognized tax benefits related to NOLs of $257.7 million. Included in this amount is $79.2 million of tax benefits of acquired attributes which was recorded as a reduction in goodwill. At December 31, 2017, the Company has federal and state capital losses of $11.3 million and $30.9 million, respectively. If not utilized, the capital losses will expire between 2020 and 2021. Utilization of capital losses will be limited to the Company's ability to generate future capital gains.
At December 31, 2017, the Company has tax credit carryforwards of $87.6 million. Of this amount, $49.3 million relates to credits for foreign taxes, of which $41.8 million was generated from the provisional Transition Tax calculation (described below), $31.1 million relates to credits for research activities and $7.2 million relates to various other credits. Of these credit carryforwards, $15.2 million can be carried forward indefinitely and $72.4 million will expire between 2018 and 2037.
The Company regularly assesses the realizability of deferred tax assets considering all available evidence including, to the extent applicable, the nature, frequency and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience. As of December 31, 2017, the Company has a gross deferred tax asset of $130.0 million that the Company expects to fully utilize on a more likely than not basis.
During 2017, the Company's valuation allowance increased by $44.4 million primarily due to the establishment of foreign NOLs related to a recent acquisition. At December 31, 2017, the Company has a valuation allowance of $132.6 million related to the portion of tax loss carryforwards, foreign tax credits and other items for which it is more likely than not that the tax benefit will not be realized.
A reconciliation of the income tax (benefit) provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:
 
Years Ended December 31,
 
2017
 
2016
 
2015
 
(In thousands)
Income tax (benefit) provision at the federal statutory rate of 35%
$
23,435

 
$
(28,446
)
 
$
50,006

Transition tax
62,667

 
—

 
—

Stock-based compensation
(358,901
)
 
3,998

 
1,787

Foreign income taxed at a different statutory tax rate
(14,725
)
 
(27,115
)
 
(10,382
)
State income taxes, net of effect of federal tax benefit
86

 
(3,880
)
 
2,208

Realization of certain deferred tax assets
(3,133
)
 
—

 
(22,440
)
Non-taxable sale and non-deductible goodwill associated with ShoeBuy
—

 
(13,142
)
 
4,920

Goodwill impairment of Publishing
—

 
10,649

 
—

Research credit
(5,304
)
 
(2,231
)
 
(2,354
)
Non-deductible impairments for certain cost method investments
2,669

 
3,489

 
2,341

Deferred tax adjustment for enacted changes in tax laws and rates
705

 
(4,594
)
 
—

Other, net
1,451

 
(3,662
)
 
3,430

     Income tax (benefit) provision
$
(291,050
)
 
$
(64,934
)
 
$
29,516


A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows:
 
December 31,
 
2017
 
2016
 
2015
 
(In thousands)
Balance at January 1
$
38,372

 
$
40,808

 
$
30,386

Additions based on tax positions related to the current year
2,050

 
2,033

 
4,227

Additions for tax positions of prior years
1,994

 
2,676

 
14,467

Reductions for tax positions of prior years
(3,761
)
 
(743
)
 
(1,556
)
Settlements
—

 
(5,107
)
 
—

Expiration of applicable statutes of limitations
(1,923
)
 
(1,295
)
 
(6,716
)
Balance at December 31
$
36,732

 
$
38,372

 
$
40,808


The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Included in the income tax provision for the years ended December 31, 2017, 2016 and 2015 is a $0.1 million benefit, $0.4 million expense and $0.1 million expense, respectively, net of related deferred taxes of less than $0.1 million, $0.2 million and less than $0.1 million, respectively, for interest on unrecognized tax benefits. At December 31, 2017 and 2016, the Company has accrued $3.0 million and $2.6 million, respectively, for the payment of interest. At both December 31, 2017 and 2016, the Company has accrued $1.7 million for penalties.
The Company is routinely under audit by federal, state, local and foreign authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service is currently auditing the Company’s federal income tax returns for the years ended December 31, 2010 through 2012. The statute of limitations for the years 2010 through 2012 has been extended to June 30, 2019, and the statute of limitations for the year 2013 has been extended to June 30, 2018. Various other jurisdictions are open to examination for tax years beginning with 2009. Income taxes payable include reserves considered sufficient to pay assessments that may result from examination of prior year tax returns. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. Although management currently believes changes to reserves from period to period and differences between amounts paid, if any, upon resolution of issues raised in audits and amounts previously provided will not have a material impact on the liquidity, results of operations, or financial condition of the Company, these matters are subject to inherent uncertainties and management’s view of these matters may change in the future.
At December 31, 2017 and 2016, unrecognized tax benefits, including interest and penalties, were $39.7 million and $41.0 million, respectively. If unrecognized tax benefits at December 31, 2017 are subsequently recognized, $37.2 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2016 was $37.7 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by $13.2 million by December 31, 2018, due to expirations of statutes of limitations; $12.9 million of which would reduce the income tax provision.
On December 22, 2017, the U.S. enacted the Tax Act. The Tax Act subjects to U.S. taxation certain previously deferred earnings of foreign subsidiaries as of December 31, 2017 (“Transition Tax”) and implements a number of changes that take effect on January 1, 2018, including but not limited to, a reduction of the U.S. federal corporate tax rate from 35% to 21% and a new minimum tax on GILTI earned by foreign subsidiaries. The Company’s income tax provision for the year ended December 31, 2017 includes an expense of $63.8 million related to the Tax Act, of which, $62.7 million relates to the Transition Tax and $1.1 million relates to the remeasurement of U.S. net deferred tax assets due to the reduction in the corporate income tax rate. The Company has sufficient current year NOLs to offset the taxable income resulting from the Transition Tax and, therefore, will not be required to pay the one-time Transition Tax.
The Transition Tax on deemed repatriated foreign earnings is a tax on previously untaxed accumulated and current earnings and profits ("E&P") of the Company's foreign subsidiaries. To determine the amount of the Transition Tax, the Company must determine, among other factors, the amount of post-1986 E&P of its foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings. The Company was able to make a reasonable estimate of the Transition Tax and has recorded a provisional Transition Tax expense of $62.7 million. Any adjustment of the Company's provisional tax expense will be reflected as a change in estimate in its results in the period in which the change in estimate is made in accordance with Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act. The Company is continuing to gather additional information to more precisely compute the amount of the Transition Tax and expects to finalize its calculation prior to the filing of its U.S. federal tax return, which is due on October 15, 2018. The additional information includes, but is not limited to, the allocation and sourcing of income and deductions in 2017 for purposes of calculating the utilization of foreign tax credits. In addition, our estimates may also be impacted and adjusted as the law is clarified and additional guidance is issued at the federal and state levels.
As of December 31, 2017, the Company has $452.2 million in foreign cash of which approximately $420.2 million can be repatriated without any significant tax consequences as it has been substantially subjected to U.S. income tax under the Transition Tax imposed by the Tax Act. The Company has not provided for approximately $7.9 million of deferred taxes for the $101.2 million of the foreign cash earnings that is indefinitely reinvested outside the U.S. The Company reassess its intention to remit or permanently reinvest these cash earnings each reporting period; any required adjustment to the income tax provision would be reflected in the period that the Company changes this judgment.