We recognize future tax assets and liabilities for each tax jurisdiction based on the difference between the financial reporting and tax bases of assets and liabilities using the enacted tax rates expected to be in effect when the taxes are paid or recovered. A valuation allowance is provided against net future tax assets for which we do not consider the realization of such assets to meet the required “more likely than not” standard.

Our future tax assets and liabilities at December 31, 2017 and 2016 include the following components:

The composition of our valuation allowance by tax jurisdiction is summarized as follows:

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act of 2017 (“TCJA”).  The passage of this legislation resulted in the change in the U.S. statutory rate from 35% to 21% beginning in January of 2018, the elimination of the corporate alternative minimum tax (“AMT”), the acceleration of depreciation for US tax purposes, limitations on deductibility of interest expense, the elimination of net operating loss carrybacks, and limitations on the use of future losses.  In accordance with ASC 740, Income Taxes, the impact of a change in tax law is recorded in the period of enactment.  Consequently, the Company has recorded a decrease to its net deferred tax assets of $12,414 with a corresponding net adjustment to the valuation allowance for the year ended December 31, 2017. Based on the Company's current interpretation and subject to the release of the related regulations and any future interpretive guidance, the Company believes the effects of the change in tax law incorporated herein are substantially complete.

The valuation allowance decreased $11,988 from the year ended December 31, 2016 to the year ended December 31, 2017. There was a decrease in the net deferred tax assets, primarily net operating loss carryforwards (“NOL's”), recognition of previous excess tax benefits pursuant to ASU 2016-09 and exploration spending on mineral properties. The decrease in net deferred tax assets resulted primarily from amortization of capitalized exploration costs, decrease in net deferred tax asset for share based compensation resulting from expirations and cancellations, and the decrease in US tax rate under the TJCA. Because we are unable to determine whether it is more likely than not that the net deferred tax assets will be realized, we continue to record a 100% valuation against the net deferred tax assets.

At December 31, 2017, we had U.S. NOL carryforwards of approximately $59,912, which expire from 2018 to 2037. As a result of the TCJA, US NOLs generated in years ending after 2017 have an indefinite carryforward rather than the previous 20 year carryforward. This does not affect losses incurred in years ended in 2017 or earlier. In addition, we had Canadian non-capital loss carryforwards of approximately $10,444, which expire from 2018 to 2037. As of December 31, 2017, there were Canadian capital loss carryforwards of $28. A full valuation allowance has been recorded against the tax effected US and Canadian loss carryforwards as we do not consider realization of such assets to meet the required 'more likely than not' standard.

Section 382 of the Internal Revenue Code could apply and limit our ability to utilize a portion of the U.S. NOL carryforwards. No Section 382 study has been completed; therefore, the actual usage of U.S. NOL carryforwards has not been determined.

For financial reporting purposes, income/(loss) from continuing operations before income taxes consists of the following components:

A reconciliation of expected income tax on net income at statutory rates is as follows:

We do not have any unrecognized income tax benefits. Should we incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of the interest expense and operating expense, respectively.

Rare Element and its wholly owned subsidiary, Rare Element Holdings Ltd., file income tax returns in the Canadian federal jurisdiction and provincial jurisdictions, and its wholly owned subsidiary, Rare Element Resources, Inc., files in the U.S. federal jurisdiction and various state jurisdictions. The years still open for audit are generally the current year plus the previous three. However, because we have NOLs carrying forward, certain items attributable to closed tax years are still subject to adjustment by applicable taxing authorities through an adjustment to tax losses carried forward to open years.