Entity information:
Income Taxes

The components of our loss before benefit for income taxes were as follows (in thousands):

 
Year Ended December 31,
 
2015
 
2016
 
2017
United States
$
(6,041
)
 
$
(6,638
)
 
$
(30,139
)
Foreign
435

 
885

 
972

Loss before provision for income taxes
$
(5,606
)
 
$
(5,753
)
 
$
(29,167
)


The benefit for income taxes consisted of the following (in thousands):

 
Year Ended December 31,
 
2015
 
2016
 
2017
Current:
 

 
 

 
 

Federal
$
(584
)
 
$
(948
)
 
$
(275
)
State
(457
)
 
(214
)
 
(1,433
)
Foreign
97

 
178

 
179

Total current
(944
)
 
(984
)
 
(1,529
)
Deferred:
 

 
 

 
 

Federal
121

 
104

 
(2,169
)
State
10

 
24

 
(43
)
Foreign
(30
)
 
(15
)
 
(14
)
Total deferred
101

 
113

 
(2,226
)
Benefit for income taxes
$
(843
)
 
$
(871
)
 
$
(3,755
)


On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the “Jobs Act”, was signed into law resulting in significant changes to the Internal Revenue Code. The Jobs Act reduces the federal corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, changes U.S international taxation from a worldwide tax system to a territorial system, and imposes a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Jobs Act also includes provisions for the elimination of the Alternative Minimum Tax ("AMT"), among other changes. We calculated our best estimate of the impact of the Jobs Act in our year end income tax provision in accordance with our understanding of the Jobs Act and guidance available as of the filing date of this annual report on Form 10-K and recorded $2.3 million as additional income tax benefit in 2017, the period in which the legislation was enacted. Of the $2.3 million, we recorded a provisional benefit amount of $1.8 million related to the reversal of AMT credits which are now refundable credits under the provisions of the Jobs Act. We have also remeasured the deferred tax assets and liabilities based on the rate at which they are expected to reverse in the future and recorded a $0.5 million benefit as a result of this remeasurement. The effects of other provisions of the Jobs Act are not expected to have a material impact on our consolidated financial statements, however, the final impact of the Jobs Act may differ from our estimates, due to, among other things, changes in our interpretations and assumptions, additional guidance that may be issued, and resulting actions we may take.
.
The following table provides a reconciliation of the federal statutory income tax rate to our effective tax rate:

 
Year Ended December 31,
 
2015
 
2016
 
2017
Tax provision (benefit) at U.S. statutory rate
35.0
 %
 
35.0
 %
 
35.0
 %
State income taxes, net of federal benefit
1.1

 
(4.6
)
 
9.2

Non-qualified stock option windfalls (shortfalls), net
(31.6
)
 
(15.9
)
 
0.5

Stock-based compensation
(23.0
)
 
(12.6
)
 
(2.8
)
Lobbying
(5.5
)
 
(6.2
)
 
(2.6
)
Research and development credits
20.1

 
14.1

 
(0.4
)
Changes in valuation allowance
21.8

 
14.5

 
(3.4
)
Tax reform - tax rate change
—

 
—

 
(23.7
)
Foreign income tax and income inclusion
—

 
(7.5
)
 
0.8

Other
(2.9
)
 
(1.7
)
 
0.2

Effective tax rate
15.0
 %
 
15.1
 %
 
12.8
 %


    
Our effective tax rate in 2015 and 2016 differ from the federal statutory rate primarily due to the reversal of previously recorded reserves related to federal and state tax credits. Our effective tax rate in 2017 differs from the federal statutory rate primarily due to reversal of previously recorded reserves related to federal and state tax credits, reversal of the valuation allowance related to AMT credits and tax rate change resulting from tax reform legislation passed in 2017.

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, together with net operating loss and tax credit carry forwards. Significant components of our deferred tax assets were as follows (in thousands):

 
December 31, 2016
 
December 31, 2017
Deferred tax assets:
 

 
 

Accruals and reserves
$
2,242

 
$
2,499

Stock-based compensation
2,960

 
2,443

Intangible assets
1,464

 
448

Net operating losses
9,337

 
12,055

Tax credits
4,399

 
3,569

Other
70

 
178

Total deferred tax assets
20,472

 
21,192

Valuation allowance
(19,430
)
 
(20,426
)
Total deferred tax assets net of valuation allowance
1,042

 
766

Deferred tax liabilities – intangible assets
(1,281
)
 
(551
)
Deferred tax liabilities – fixed assets
—

 
(55
)
Net deferred tax assets (liabilities)
$
(239
)
 
$
160



Assessing the realizability of our deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. We forecast taxable income by considering all available positive and negative evidence, including our history of operating income and losses and our financial plans and estimates that we use to manage the business. These assumptions require significant judgment about future taxable income. As a result, the amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. As of December 31, 2017, the valuation allowance was $20.4 million, which represents a full valuation allowance against our federal and state deferred tax assets. The valuation allowance was recorded as a result of increased uncertainty regarding our future taxable income and a lack of sources of other taxable income.
 
The valuation allowance increased by $8.9 million during the year ended December 31, 2016 and increased by $1.0 million during the year ended December 31, 2017.

We had net operating loss carry forwards at December 31, 2017 of approximately $39.7 million and $60.0 million
for federal income tax and state income tax purposes, respectively. Federal and state net operating loss carry forwards begin expiring in 2034 and 2020, respectively. At December 31, 2017, we had tax credit carry forwards of approximately $3.0 million and $4.2 million for federal income tax and state income tax purposes, respectively. The Federal tax credit carry forwards begin expiring in 2021. The state tax credits carry forward indefinitely.

Utilization of the net operating loss ("NOL") carryforwards and credits may be subject to a substantial annual limitation due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, (the "Code"), and similar state provisions. These ownership change limitations may limit the amount of NOL carryforwards and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points (by value) of the outstanding stock of a company by certain stockholders. Our ability to use the remaining NOL carryforwards may be further limited if we experience a Section 382 ownership change as a result of future changes in our stock ownership.
A reconciliation of the beginning and ending amount of our unrecognized tax benefits is as follows (in thousands):
 
Unrecognized Tax Benefits
Balance at December 31, 2014
$
6,756

Increases based on tax positions related to the prior year
344

Decreases based on tax positions related to the prior year
(24
)
Lapse of statute of limitations
(1,301
)
Additions based on tax positions related to the current year
409

Balance at December 31, 2015
$
6,184

Lapse of statute of limitations
(1,236
)
Additions based on tax positions related to the current year
305

Balance at December 31, 2016
5,253

Decreases based on tax positions related to the prior year
(862
)
Lapse of statute of limitations
(1,637
)
Additions based on tax positions related to the current year
342

Balance at December 31, 2017
$
3,096



Tax positions are evaluated in a two-step process. We first determine whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

As of December 31, 2017, the total amount of gross unrecognized tax benefits was $3.1 million, of which a nominal amount, if recognized, would impact our effective tax rate. As of December 31, 2016, the total amount of gross unrecognized tax benefits was $5.3 million, of which $1.6 million, if recognized, would impact our effective tax rate.

We record interest and penalties related to unrecognized tax benefits in income tax expense. At December 31, 2017, we had only a nominal amount accrued for estimated interest related to uncertain tax positions. We did not record an accrual for penalties.

Included in the balance of income tax liabilities, accrued interest, and accrued penalties at December 31, 2017 is a nominal amount related to tax positions for which it is reasonably possible that the statute of limitations will expire in various jurisdictions and income tax exams will close within the next twelve months.

We are subject to taxation in various jurisdictions, including federal, state and foreign. Our federal and state income tax returns are generally not subject to examination by taxing authorities for fiscal years before 2007 due to our net operating losses. The examination of our 2009 and 2010 California income tax returns by the California Franchise Tax Board was completed in the first quarter of 2017. We assessed the impact on our unrecognized tax benefits for all open years and recorded any necessary adjustments in the first quarter of 2017.