Entity information:
Income Taxes
 
The following table summarizes our U.S. and foreign income (loss) from continuing operations before income taxes:  
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
US
48,719

 
65,559

 
43,598

Foreign
15,485

 
(67,437
)
 
(53,692
)
Total
$
64,204

 
$
(1,878
)
 
$
(10,094
)

 
The federal, state and foreign income tax provision is summarized as follows:
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
Federal:
 
 
 
 
 
Current
$
18,792

 
$
21,202

 
$
15,161

Deferred
(19,767
)
 
(6,477
)
 
(1,606
)
 
(975
)
 
14,725

 
13,555

State:
 
 
 
 
 
Current
3,975

 
4,580

 
2,644

Deferred
723

 
(938
)
 
(38
)
 
4,698

 
3,642

 
2,606

Foreign:
 
 
 
 
 
Current
1,197

 
266

 
523

Deferred
(519
)
 
(1,597
)
 
(2,101
)
 
678

 
(1,331
)
 
(1,578
)
 
 
 
 
 
 
Total provision for income taxes
$
4,401

 
$
17,036

 
$
14,583



A reconciliation of the provision for income taxes with amounts determined by applying the statutory U.S. federal income tax rate to income (loss) from continuing operations before income taxes is as follows:
 
 
Year Ended December 31,
 
2017
 
2016
 
2015
Federal statutory rates
35
%
 
35
 %
 
35
 %
Federal income tax at statutory rates
$
22,471

 
$
(657
)
 
$
(3,533
)
Revaluation of net deferred tax liabilities due to U.S. tax reform
(19,397
)
 
—

 
—

U.S. tax reform impact on equity income of investee
(1,646
)
 
—

 
—

Change in valuation allowance
2,299

 
9,480

 
3,574

Change in uncertain tax positions
7

 
73

 
(76
)
State income taxes, net of federal benefit
3,203

 
2,396

 
1,785

Difference between federal statutory and foreign tax rate
(1,648
)
 
9,427

 
4,642

Stock compensation
3,400

 
—

 
(184
)
Meals and entertainment
100

 
96

 
81

Amortization of deferred consideration
—

 
—

 
9,444

Transaction costs
159

 
—

 
(447
)
Contingent consideration liability reversal
—

 
—

 
(854
)
Nontaxable income
(1,203
)
 
—

 
(965
)
Tax credits
(354
)
 
(947
)
 
(456
)
Legal expense
(805
)
 
522

 
284

Depreciation
—

 
—

 
649

Equity in net loss of investee
569

 
624

 
366

Sale of joint venture
(6,021
)
 
—

 
—

Asset impairment
—

 
2,353

 
—

Foreign exchange
2,925

 
(7,001
)
 
—

Other
342

 
670

 
273

Provision for income taxes
$
4,401

 
$
17,036

 
$
14,583

Effective income tax rate
7
%
 
(907
)%
 
(144
)%

  
The Company recognized an income tax provision for the years ended December 31, 2016 and December 31, 2015 despite having losses from continuing operations before income taxes. Because of foreign net operating losses (including equity investee losses) for which the future income tax benefit currently cannot be recognized, and non-deductible expenses such as amortization of deferred consideration related to the Ingeus acquisition, the Company recognized estimated taxable income for these years upon which the income tax provision for financial reporting is calculated.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:


 
December 31,
 
2017
 
2016
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
20,496

 
$
17,742

Tax credit carryforwards
486

 
399

Accounts receivable allowance
1,134

 
1,341

Accrued items and reserves
14,371

 
18,669

Stock compensation
1,480

 
4,224

Deferred rent
572

 
915

Property and equipment depreciation
300

 
—

Other
173

 
180

 
39,012

 
43,470

Deferred tax liabilities:
 
 
 
Deferred financing costs
38

 
154

Prepaids
1,440

 
2,103

Property and equipment depreciation
—

 
1,238

Goodwill and intangibles amortization
5,809

 
9,568

Equity investment
42,113

 
59,244

Other
205

 
203

 
49,605

 
72,510

Net deferred tax liabilities
(10,593
)
 
(29,040
)
Less valuation allowance
(26,402
)
 
(27,423
)
Net deferred tax liabilities
$
(36,995
)
 
$
(56,463
)
Net noncurrent deferred tax assets, net of valuation allowance of $26,402 and $27,423 for 2017 and 2016, respectively
4,632

 
1,510

Net noncurrent deferred tax liabilities, net of valuation allowance of $0 and $0 for 2017 and 2016, respectively
(41,627
)
 
(57,973
)
 
$
(36,995
)
 
$
(56,463
)

 
At December 31, 2017, the Company had no federal or state net operating loss carryforwards. The Company had net operating loss carryforwards in the following countries which can be carried forward indefinitely:
 
Australia
$
41,256

Canada
728

France
3,882

Saudi Arabia
82

UK
40,090


  
Realization of the Company’s net operating loss carryforwards is dependent on generating sufficient taxable income. Although realization is not assured, management believes it is more likely than not that all of the deferred tax assets will be realized, to the extent they are not covered by a valuation allowance. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
 
The net change in the total valuation allowance for the year ended December 31, 2017 was negative $1,021, of which positive $2,299 related to current operations and negative $3,320 related to the adjustment of the beginning balance. The valuation allowance includes $25,929 primarily for Australia, France and UK net operating loss carryforwards, and $473 for state tax credit carryforwards for which the Company has concluded that it is more likely than not that these net operating loss and tax credit carryforwards will not be realized in the ordinary course of operations. The Company will continue to assess the valuation allowance, and to the extent it is determined that the valuation allowance should be changed, an appropriate adjustment will be recorded.

U.S. Tax Reform

On December 22, 2017, the Tax Reform Act was enacted which institutes fundamental changes to the taxation of multinational corporations. The Tax Reform Act includes changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The Tax Reform Act also includes a permanent reduction in the corporate tax rate to 21%, repeal of the corporate alternative minimum tax, expensing of capital investment, and limitation of the deduction for interest expense. Furthermore, as part of the transition to the new tax system, a one-time transition tax is imposed on a U.S. shareholder’s historical undistributed earnings and profits (“E&P”) of foreign affiliates. Although the Tax Reform Act is generally effective January 1, 2018, GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date, which was December 22, 2017.

As a result of the reduction in the U.S. corporate income tax rate, the Company revalued its ending net deferred tax liabilities as of December 31, 2017 and recognized a provisional tax benefit of $19,397. The Company has projected net accumulated deficits in foreign E&P; therefore, no provisional tax expense for deemed repatriation has been recognized. For any future foreign earnings, the Company will generally be free of additional U.S. tax consequences due to a dividends received deduction implemented as part of the move to a territorial tax system for foreign subsidiary earnings. The Company continues to assert indefinite reinvestment in outside basis differences. Determination of the amount of unrecognized deferred tax liability on outside basis differences is not practicable because of the complexity of laws and regulations, the varying tax treatment of alternative repatriation scenarios, and the variation due to multiple potential assumptions relating to the timing of any future repatriation.

The global intangible low taxed income (“GILTI”) provisions of the Tax Reform Act require the Company to include in its U.S. income tax return foreign subsidiary earnings in excess of an allowable return on the foreign subsidiary’s tangible assets. The Company may be subject to incremental U.S. tax on GILTI income beginning in 2018, and has elected to account for GILTI tax in the period in which it is incurred. Therefore, no deferred tax impacts of GILTI have been considered in the Company’s consolidated financial statements for the year ended December 31, 2017.

On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act. In accordance with the SAB 118 guidance, the Company has recognized the provisional tax impacts related to the benefit for the revaluation of deferred tax assets and liabilities in its consolidated financial statements for the year ended December 31, 2017. The final impact of the Tax Reform Act may differ from these provisional amounts, possibly materially, due to, among other things, issuance of additional regulatory guidance, changes in interpretations and assumptions the Company has made, and actions the Company may take as a result of the Tax Reform Act. In accordance with SAB 118, the financial reporting impact of the Tax Reform Act will be completed in the fourth quarter of 2018.

Unrecognized Tax Benefits
  
The Company expects no material amount of the unrecognized tax benefits to be recognized during the next twelve months. The Company recognizes interest and penalties as a component of income tax expense. During the years ended December 31, 2017, 2016 and 2015, the Company recognized approximately $65, $19 and $27, respectively, in interest and penalties. The Company had approximately $83 and $52 for the payment of penalties and interest accrued as of December 31, 2017 and 2016, respectively.

A reconciliation of the liability for unrecognized income tax benefits is as follows:
 
 
December 31,
 
2017
 
2016
 
2015
Unrecognized tax benefits, beginning of year
$
1,108

 
$
271

 
$
347

Balance upon acquisition/disposition
—

 
764

 
—

Increase (decrease) related to prior year positions
22

 
37

 
(47
)
Increase related to current year tax positions
101

 
139

 
48

Statute of limitations expiration
(116
)
 
(103
)
 
(77
)
Unrecognized tax benefits, end of year
$
1,115

 
$
1,108

 
$
271


 
The Company is subject to taxation in the U.S. and various foreign and state jurisdictions. The statute of limitations is generally three years for the U.S., two to five years in foreign countries and between three and four years for the various states in which the Company operates. The Company is subject to the following material taxing jurisdictions: the U.S., UK, Australia, France, Saudi Arabia and Korea. The tax years that remain open for examination by the U.S. and various foreign countries and states principally include the years 2013 to 2017.