Effective the British Columbia provincial corporate tax rate increased from to starting The overall increase in tax rates in will result in an increase in the Company’s statutory tax rate from in to in and to in forward. The rate increase resulted in an additional deferred tax expense of in the year-ended

 

On President Trump signed the Tax Cuts and Jobs Act (the “Act”) into law. The new legislation decreases the U.S. corporate federal income tax rate from to effective The Company does expect any impact on recorded deferred tax balances as the remeasurement of net deferred tax assets will be offset by a change in valuation allowance. Since the Company has a fiscal year end, its U.S. subsidiaries will have a blended tax rate of for the fiscal year and thereafter on any current U.S. federal taxes payable. The Act also includes a number of other provisions including the elimination of loss carrybacks and limitations on the use of future losses, repeal of the Alternative Minimum Tax regime and the introduction of a base erosion and anti-abuse tax. These provisions are expected to have immediate effect on the Company.

 

Given the significant complexity of the Act and anticipated additional implementation guidance from the Internal Revenue Service further implications of the Act be identified in future periods.

 

The Company’s Income tax expense consisted of:

 

		Years ended November 30,
		2017				2016				2015
Current:
Canada		$	—			$	—			$	—
Foreign			350				346				155
			350				346				155
Deferred:
Canada			382				(69	)			(2	)
Foreign			—				—				—
			382				(69	)			(2	)
Income tax expense		$	732			$	277			$	153

 

The Company’s Loss before income tax consisted of:

 

		Years ended November 30,
		2017				2016				2015
Canada		$	(20,501	)		$	(18,912	)		$	(14,775	)
Foreign			(17,783	)			(14,657	)			(17,024	)
		$	(38,284	)		$	(33,569	)		$	(31,799	)

 

The Company’s Income tax expense differed from the amounts computed by applying the Canadian statutory corporate income tax rates for the following reasons:

 

		Years ended November 30,
		2017				2016				2015
Loss before income taxes			(38,284	)			(33,569	)			(31,799	)
Combined federal and provincial statutory tax rate			26	%			26	%			26	%
Income tax recovery based on statutory income tax rates			(9,954	)			(8,728	)			(8,268	)
Reconciling items:
Effect of future statutory tax rate change			(1,679	)			—				—
Non-deductible expenditures			2,485				2,607				1,906
Foreign accrual property income			(439	)			862				1,269
Effect of different statutory tax rates on earnings or losses of subsidiaries			(2,690	)			(2,218	)			(2,619	)
Effect of tax losses expired			8				6				3,878
Change in valuation allowance on deferred tax assets			13,025				7,668				3,264
Other			(24	)			80				723
Income tax expense		$	732			$	277			$	153

 

Components of the Company’s deferred income tax assets (liabilities) are as follows:

 

		At November 30,
		2017				2016
Deferred tax income assets:
Asset retirement obligation		$	75			$	89
Net operating loss carry forwards			233,885				222,036
Capital loss carry forwards			33,666				31,352
Mineral properties			17,887				16,503
Intangible assets			494				456
Property and equipment			224				203
Investment in affiliates			44,484				42,743
Share issuance costs			74				137
Unpaid interest expense			3,044				3,044
Unrealized loss on investments			329				319
Investment tax credit			3,044				2,921
Other			1,200				1,137
			338,406				320,940
Valuation allowances			(297,770	)			(282,698	)
			40,636				38,242
Deferred income tax liabilities:
Investment in affiliates			(39,058	)			(36,110	)
Mineral properties			(12,174	)			(11,251	)
Investment tax credit			(822	)			(760	)
Unrealized gain on investments			(22	)			—
Capitalized assets and other			(177	)			(859	)
			(52,253	)			(48,980	)
Net deferred income tax liabilities		$	(11,617	)		$	(10,738	)

 

These amounts reflect the classification and presentation that is reported for each tax jurisdiction in which the Company operates.

 

Net deferred income tax assets and liabilities consist of:

 

		At November 30,
		2017				2016
Long-term deferred income tax:
Assets		$	9,761			$	9,397
Liabilities			(21,378	)			(20,135	)
		$	(11,617	)		$	(10,738	)

 

Net operating losses available to offset future taxable income are as follows:

 

Year of Expiry		U.S.				Canada
2024		$	1,032			$	—
2025			1,246				—
2026			13,382				25,382
2027			18,493				4,077
2028			85				538
2029			11,223				12,679
2030			10,916				18,242
2031			16,580				17,115
2032			309,772				29,984
2033			14,529				22,423
2034			15,607				10,383
2035			16,383				6,872
2036			14,764				9,433
2037			14,198				11,016
		$	458,210			$	168,144

 

Future use of U.S. loss carry-forwards is subject to certain limitations under provisions of the Internal Revenue Code including limitations subject to Section  which relates to a change in control over a -year period, and are further dependent upon the Company attaining profitable operations. Ownership changes occurred on and on and the U.S. tax losses related to NOVAGOLD Resources Alaska Inc. and its investment in Donlin Gold LLC for the prior -year periods prior to the change in control be subject to limitation under Section  Accordingly, the Company’s ability to use these losses be limited or they expire un-utilized. Losses incurred to date be further limited if a subsequent change in control occurs.

 

The Company has recognized ( ) of deferred tax assets that are dependent on the reversal of existing taxable temporary differences. The Company has suffered a loss in the current and prior period in the tax jurisdictions to which the deferred tax assets relate. The Company has undertaken a tax planning strategy in the current and prior period to merge Canadian entities when required to access the deferred tax assets to offset future increases in taxable income of the Canadian entities.

 

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax asset. Significant pieces of objective negative evidence evaluated included the cumulative loss incurred as of Such objective evidence limits the ability to consider other subjective evidence such as management’s projections for future growth. On the basis of this evaluation, as of a valuation allowance of ( ) inclusive of valuation allowance for investment tax credits has been recorded in order to measure only the portion of the deferred tax asset that more likely than will be realized. The amount of the deferred tax asset considered realizable; however, could be adjusted if estimates of future taxable income during the carry forward period are reduced or if objective negative evidence in the form of cumulative losses is longer present and additional weight be given to subjective evidence such as management’s projections for growth.

 

 

There were unrecognized tax benefits at and The Company recognizes any interest and penalties related to uncertain tax positions, if any, as income tax expense. At and there were interest and penalties related to uncertain tax positions. The Company is subject to income taxes in Canada and the United States. The Company is currently under audit by the Canada Revenue Agency regarding transactions undertaken by of the Company’s Canadian subsidiaries. With few exceptions, the tax years that remain subject to examination as of are to in Canada and to in the United States.