Entity information:
Income Taxes
Total income taxes were allocated as follows (in thousands):
 
Year Ended November 30,
 
2017
 
2016
 
2015
Income tax expense
$
147,340

 
$
14,566

 
$
18,898

Stockholders’ equity, compensation expense for tax purposes less than amounts recognized for financial reporting purposes
—

 
4,186

 
5,935


The provision for income tax expense consists of the following components (in thousands):
 
Year Ended November 30,
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
U.S. Federal
$
147,065

 
$
27,473

 
$
(45,007
)
U.S. state and local
30,611

 
6,196

 
(28,260
)
Foreign
12,910

 
(5,090
)
 
3,369

Total current
190,586

 
28,579

 
(69,898
)
Deferred:
 
 
 
 
 
U.S. Federal
(53,157
)
 
(11,249
)
 
74,085

U.S. state and local
1,760

 
(4,819
)
 
22,811

Foreign
8,151

 
2,055

 
(8,100
)
Total deferred
(43,246
)
 
(14,013
)
 
88,796

Total income tax expense
$
147,340

 
$
14,566

 
$
18,898


The following table presents the U.S. and non-U.S. components of income before income tax expense (in thousands):
 
Year Ended November 30,
 
2017
 
2016
 
2015
U.S.
$
403,445

 
$
34,178

 
$
82,515

Non-U.S. (1)
101,479

 
(4,206
)
 
31,712

Income before income tax expense
$
504,924

 
$
29,972

 
$
114,227

(1)
For purposes of this table, non-U.S. income is defined as income generated from operations located outside the U.S.
Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate of 35% to earnings before income taxes as a result of the following (dollars in thousands):
 
Year Ended November 30,
 
2017
 
2016
 
2015
 
Amount
 
Percent
 
Amount
 
Percent
 
Amount
 
Percent
Computed expected income taxes
$
176,724

 
35.0
 %
 
$
10,490

 
35.0
 %
 
$
39,979

 
35.0
 %
Increase (decrease) in income taxes resulting from:
 
 
 
 
 
 
 
 
 
 
 
State and city income taxes, net of Federal income tax benefit
21,041

 
4.2

 
124

 
0.5

 
(3,542
)
 
(3.1
)
International operations (including foreign rate differential)
(11,577
)
 
(2.3
)
 
(3,404
)
 
(11.4
)
 
(11,474
)
 
(10.0
)
Tax exempt income
(3,850
)
 
(0.8
)
 
(4,640
)
 
(15.5
)
 
(6,789
)
 
(5.9
)
Foreign tax credits
(32,974
)
 
(6.5
)
 
—

 
—

 
(7,240
)
 
(6.3
)
Non-deductible Jefferies Bache wind down costs
—

 
—

 
—

 
—

 
3,225

 
2.8

Meals and entertainment
4,129

 
0.8

 
4,640

 
15.5

 
5,232

 
4.6

Excess stock detriment
406

 
0.1

 
9,755

 
32.6

 
—

 
—

Federal benefits related to prior year tax filings
(3,786
)
 
(0.8
)
 
(2,928
)
 
(9.8
)
 
199

 
0.1

Other, net
(2,773
)
 
(0.5
)
 
529

 
1.7

 
(692
)
 
(0.7
)
Total income tax expense
$
147,340

 
29.2
 %
 
$
14,566

 
48.6
 %
 
$
18,898

 
16.5
 %

The following table presents a reconciliation of gross unrecognized tax benefits (in thousands):
 
Year Ended November 30,
 
2017
 
2016
 
2015
Balance at beginning of period
$
109,527

 
$
107,902

 
$
126,662

Increases based on tax positions related to the current period
18,619

 
5,045

 
—

Increases based on tax positions related to prior periods
7,310

 
1,447

 
2,818

Decreases based on tax positions related to prior periods
(5,912
)
 
(4,520
)
 
(3,883
)
Decreases related to settlements with taxing authorities
—

 
(347
)
 
(17,695
)
Balance at end of period
$
129,544

 
$
109,527

 
$
107,902


The total amount of unrecognized benefit that, if recognized, would favorably affect the effective tax rate was $86.1 million and $73.1 million (net of benefits of taxes) at November 30, 2017 and 2016, respectively.
We recognize interest accrued related to unrecognized tax benefits in Interest expense. Penalties, if any, are recognized in Other expenses in our Consolidated Statements of Earnings. Net interest expense related to unrecognized tax benefits was $9.0 million, $6.5 million and $2.2 million for the years ended November 30, 2017, 2016 and 2015, respectively. At November 30, 2017 and 2016, we had interest accrued of approximately $48.3 million and $39.3 million, respectively, included in Accrued expenses and other liabilities in our Consolidated Statements of Financial Condition. No material penalties were accrued for the years ended November 30, 2017 and 2016.
The cumulative tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below (in thousands):
 
November 30,
 
2017
 
2016
Deferred tax assets:
 
 
 
Compensation and benefits
$
376,642

 
$
285,542

Net operating loss
20,094

 
11,021

Long-term debt
26,476

 
60,707

Accrued expenses and other
121,746

 
124,269

Sub-total
544,958

 
481,539

Valuation allowance
(14,217
)
 
(9,464
)
Total deferred tax assets
530,741

 
472,075

Deferred tax liabilities:
 
 
 
Amortization of intangibles
102,739

 
107,474

Other
17,282

 
21,630

Total deferred tax liabilities
120,021

 
129,104

Net deferred tax asset, included in Other assets
$
410,720

 
$
342,971


The valuation allowance represents the portion of our deferred tax assets for which it is more likely than not that the benefit of such items will not be realized. We believe that the realization of the net deferred tax asset of $410.7 million at November 30, 2017 is more likely than not based on expectations of future taxable income in the jurisdictions in which we operate.
At November 30, 2017, we had gross net operating loss carryforwards of $122.1 million, primarily related to New York State, New York City and various European jurisdictions. A deferred tax asset of $9.7 million related to net operating losses in Europe has been fully offset by a valuation allowance, while $0.3 million of deferred tax assets related to net operating losses in Asia has been fully offset by a valuation allowance. The remaining valuation allowance is attributable to deferred tax assets related to compensation and benefits, capital losses, and tax credits in the U.K.
We have a tax sharing agreement between us and Leucadia.  Refer to Note 19, Related Party Transactions, for further information.
At November 30, 2017 and 2016, we had approximately $232.0 million and $157.0 million, respectively, of earnings attributable to foreign subsidiaries that are indefinitely reinvested abroad and for which no U.S. Federal income tax provision has been recorded. Accordingly, a deferred tax liability of approximately $73.0 million and $55.0 million has not been recorded with respect to these earnings at November 30, 2017 and 2016, respectively.
We are currently under examination by the Internal Revenue Service and other major tax jurisdictions. We do not expect that resolution of these examinations will have a material effect on our consolidated financial position, but could have a material impact on the consolidated results of operations for the period in which resolution occurs. It is reasonably possible that, within the next twelve months, statutes of limitation will expire which would have the effect of reducing the balance of unrecognized tax benefits by $12.6 million.
The table below summarizes the earliest tax years that remain subject to examination in the major tax jurisdictions in which we operate:
Jurisdiction
Tax Year
United States
2007
California
2007
New Jersey
2010
New York State
2001
New York City
2003
United Kingdom
2014
Hong Kong
2011
India
2010
Italy
2012

On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted. The Tax Act has made significant changes to the U.S. Internal Revenue Code, including the taxation of U.S. corporations, by, among other things, limiting interest deductions, reducing the U.S. corporate income tax rate, disallowing certain deductions that had previously been allowed, altering the expensing of capital expenditures, adopting elements of a territorial tax system, assessing a repatriation tax or “toll-charge” on undistributed earnings and profits of U.S.-owned foreign corporations, and introducing certain anti-base erosion provisions. We are currently evaluating the impact that the Tax Act will have on both our Consolidated Statements of Financial Condition and Consolidated Statements of Earnings. At this time, based on information currently available, we anticipate taking a charge of approximately $170.0 million in the first quarter of 2018. Approximately two-thirds of this estimated charge relates to the non-cash write down of our deferred tax asset resulting from the impact of a lower federal tax rate of 21% on the future deductibility of our deferred tax items. The remaining balance relates to a toll charge on the deemed repatriation of unremitted foreign earnings.