Entity information:
Income Taxes
The domestic and foreign components of loss before income taxes were as follows for the years ended December 31, 2017, 2016 and 2015:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Domestic
$
(124,727
)
 
$
(112,904
)
 
$
(101,453
)
Foreign
30,440

 
2,682

 
3,376

Loss before income taxes
$
(94,287
)
 
$
(110,222
)
 
$
(98,077
)

The (provision for) benefit from income taxes is comprised of:
 
Year Ended
December 31,
 
2017
 
2016
 
2015
Current tax expense:
 
 
 
 
 
Federal
$
—

 
$
—

 
$
—

State
80

 
72

 
54

Foreign
5,923

 
795

 
514

Total current
6,003

 
867

 
568

Deferred tax expense:
 
 
 
 
 
Federal
(12,268
)
 
411

 
105

State
(266
)
 
—

 
(45
)
Foreign
(3,419
)
 
(292
)
 
7

Total deferred
(15,953
)
 
119

 
67

(Benefit from) provision for income taxes
$
(9,950
)
 
$
986

 
$
635


As the result of adopting ASU 2016-09, the Company recorded excess tax benefits on a prospective basis starting January 1, 2017 (Note 1). The reconciliation of income tax expense (benefit) at the statutory federal income tax rate of 34% to the income tax provision (benefit) included in the consolidated statements of operations for the years ended December 31, 2017, 2016 and 2015 is as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
Tax at federal statutory rate
$
(32,058
)
 
$
(37,476
)
 
$
(33,346
)
Foreign income tax rate differential
(3,076
)
 
(187
)
 
(270
)
State, net of federal benefit
(3,378
)
 
(3,478
)
 
(2,952
)
Stock compensation charges
(32,150
)
 
3,517

 
2,393

SubPart F and other permanent items
2,757

 
1,422

 
1,434

Provision to return and other
2,480

 
1,419

 
749

Research and development credits
(7,713
)
 
(4,464
)
 
(2,920
)
Uncertain tax positions
5,888

 
749

 
561

Impact of Tax Act and other tax law changes
87,495

 
—

 
—

Valuation allowance
(30,195
)
 
39,484

 
34,986

(Benefit from) provision for income taxes
$
(9,950
)
 
$
986

 
$
635


Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryovers and the temporary differences between the carrying amount of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets were as follows:
 
At December 31,
 
2017
 
2016
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
158,535

 
$
119,168

Tax credit carryforwards
24,700

 
13,966

Research expenditures
859

 
2,401

Deferred revenue
14,460

 
13,698

Stock compensation
14,842

 
18,509

Fixed assets
274

 
207

Accruals and other
10,107

 
11,554

Gross deferred tax assets
223,777

 
179,503

Valuation allowance
(194,943
)
 
(141,398
)
Total deferred tax assets
28,834

 
38,105

Deferred tax liabilities:
 
 
 
Intangible assets and other
(12,086
)
 
(8,793
)
Deferred commissions
(7,881
)
 
(9,545
)
Convertible senior notes
(6,857
)
 
(21,541
)
Total deferred tax liabilities
(26,824
)
 
(39,879
)
Total net deferred tax assets (liabilities)
$
2,010

 
$
(1,774
)
Non-current deferred income tax assets (included in other long-term assets)
$
2,543

 
$
2,121

Non-current deferred income tax liabilities (included in long-term liabilities)
$
533

 
$
3,895


The Company records net deferred tax assets to the extent that Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. The valuation allowance increased by approximately $53,545 and $39,489 during the years ended December 31, 2017 and December 31, 2016, respectively. The change in valuation allowance for the year ended December 31, 2017, includes an increase of $79,336 related to the prospective adoption of ASU 2016-09, an increase of $2,554 related to 2013 convertible notes conversion, and an increase of $1,525 related to the Cloudmark acquisition.
In December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act significantly impacts the future ongoing U.S. corporate income tax by, among things, lowering the U.S. corporate income tax rates from 34% to 21%, providing for unlimited net operating loss carry-forward periods, and implementing a territorial tax system. The reduction of the U.S. corporate tax rate required the Company to revalue its U.S. deferred tax assets and liabilities to the recently enacted federal rate of 21%. This transitional impact resulted in a provisional deferred tax benefit of $2,024 in the period ended December 31, 2017 related to a reduction in a US deferred tax liability on certain long-lived acquired intangibles. This transitional impact also resulted in a $87,621 provisional reduction of certain of the Company’s US deferred tax assets which are offset by a full valuation allowance.
During the year ended December 31, 2017, the Company recorded a deferred tax benefit of $7,904 and $4,440 related to changes in the Company’s US valuation allowances as a result of the Cloudmark and WebLife acquisitions, respectively.
As of December 31, 2017 and December 31, 2016, the Company had net operating loss carry-forwards for federal income tax purposes of $659,587 and $533,825, respectively. The federal net operating losses will expire between 2018 and 2037. As of December 31, 2017 and December 31, 2016, the Company had federal research credit carry-forwards of $16,122 and $9,231 respectively. The federal research and development credits will begin to expire in 2022.
As of December 31, 2017 and December 31, 2016, the Company had net operating loss carry-forwards for state income tax purposes of approximately $323,013 and $305,493, respectively. The state net operating losses will continue to expire between 2018 and 2037. As of December 31, 2017 and December 31, 2016, the Company had research and development credit carry-forwards for state income tax purpose of $18,362 and $11,195, respectively. The state research and development credits have no expiration period.
As of December 31, 2017, the Company had no net operating losses carry-forwards in non-U.S. locations. As of December 31, 2016, the Company had net operating losses carry-forwards in non-U.S. locations of approximately $7,045. The non-US operating losses carry-forwards have no expiration period. In addition, as of December 31, 2017 and December 31, 2016, the Company had research and development credit carry-forwards in its non-U.S. locations of approximately $2,375 and $2,010, respectively. The non-U.S. research and development credits will begin to expire in 2031.
Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Analyses have been conducted to determine whether an ownership change had occurred since inception. The analyses have indicated that although ownership changes have occurred in prior years, the net operating losses and research and development credits would not expire before utilization as a result of the ownership change. In the event the Company has subsequent changes in ownership, net operating losses and research and development credit carryovers could be limited and may expire unutilized as a result of the subsequent ownership change.
The Company recognizes interest and penalties related to uncertain tax positions within the income tax expense line in the consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets. During the year ended December 31, 2017, the Company reduced income tax benefit by $90 from interest and penalties related to tax contingencies and has $288 of interest and penalties recorded as a long-term income tax liability as of December 31, 2017. During the year ended December 31, 2016, the Company reduced income tax expense by $45 from interest and penalties related to tax contingencies and had $182 of interest and penalties recorded as a long-term income tax liability.
As of December 31, 2017, the Company had recorded unrecognized tax benefits of $4,700 that if recognized, would benefit the Company’s effective tax rate. As of December 31, 2016, the Company had recorded unrecognized tax benefits of $922 that if recognized, would benefit the Company’s effective tax rate.    
The Company is currently under audit by the Israel Tax Authority for tax years 2013 through 2017. Related to the audit by the Israel Tax Authority it is reasonably possible that the Company’s uncertain tax positions could change within the next 12 months. An estimate of the range of any change cannot be made. The Company believes it has recorded all appropriate provisions for all jurisdictions and open years. However, the Company can give no assurance that taxing authorities will not propose adjustments that would increase its tax liabilities. The Company is not currently under audit by the IRS or any similar taxing authority in any other material jurisdiction.
Because of net operating loss and credit carry-forwards, all of the Company’s tax years dating to inception in 2002 remain open to tax examination in U.S. and certain state tax jurisdictions. For other major non-U.S. jurisdictions, tax years from 2010 to present remain open to tax examination. The Company is not currently under audit in any material jurisdictions.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows:
Balance as of December 31, 2014
$
4,229

Increase in balances related to tax positions taken during the current period
806

Increase in balances related to tax positions taken during the prior period
—

Decrease in balances related to tax positions taken during the prior period
(130
)
Decrease in balances related to statute expirations during the current period
(85
)
Balance as of December 31, 2015
4,820

Increase in balances related to tax positions taken during the current period
1,262

Increase in balances related to tax positions taken during the prior period
20

Decrease in balances related to tax positions taken during the prior period
(17
)
Decrease in balances related to statute expirations during the current period
(239
)
Balance as of December 31, 2016
5,846

Increase in balances related to tax positions taken during the current period
8,160

Increase in balances related to tax positions taken during the prior period
45

Decrease in balances related to tax positions taken during the prior period
(2
)
Decrease in balances related to statute expirations during the current period
(188
)
Balance as of December 31, 2017
$
13,861


As part of the transition to the new territorial tax system, the Act imposes a one-time repatriation tax on deemed repatriation of historical earnings of foreign subsidiaries. Based on the current evaluation of the Company’s operations, no repatriation tax charge is anticipated due to negative earnings and profits in the Company’s foreign operations.
The Company continues to appropriately refine such amounts within the measurement period allowed by Staff Accounting Bulletin No. 118, which will continue through the end of 2018. In addition, further interpretations from U.S. Federal and State governments and regulatory organizations may change the accounting treatment of the provisional tax liability.