Entity information:
Note 12—Income Taxes
The following are the domestic and foreign components of the Company’s income (loss) before income taxes (in thousands):
 
Year Ended 
 December 31,
 
2017
 
2016
 
2015
Domestic
$
(16,583
)
 
$
25,910

 
$
25,627

Foreign
48,848

 
(28,786
)
 
(53,621
)
Income (loss) before income taxes
$
32,265

 
$
(2,876
)
 
$
(27,994
)

The income tax (benefit) provision is comprised of the following (in thousands):
 
Year Ended 
 December 31,
 
2017
 
2016
 
2015
Current:
 
 
 
 
 
Federal
$
(6,397
)
 
$
22,084

 
$
24,524

State
79

 
2,623

 
3,843

Foreign
476

 
580

 
579

Total current
(5,842
)
 
25,287

 
28,946

Deferred:
 
 
 
 
 
Federal
(34,948
)
 
2,008

 
(2,863
)
State
(8,778
)
 
(247
)
 
108

Foreign
33

 
(23
)
 
(122
)
Total deferred
(43,693
)
 
1,738

 
(2,877
)
Total income tax (benefit) provision
$
(49,535
)
 
$
27,025

 
$
26,069



The current tax expense listed above does not reflect income tax benefits of $3.2 million and $3.9 million for the years ended December 31, 2016 and 2015, respectively, related to excess tax deductions on share-based compensation because these benefits were recorded directly to additional paid-in capital. Beginning in the first quarter of 2017, the Company adopted ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting, and subsequently recorded excess tax deductions on share-based compensation as income tax benefit in its income statement. Please refer to “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for additional detail regarding the adoption of this accounting standard and its impact on the consolidated financial statements.
 
A reconciliation of the income tax (benefit) provision at the U.S. federal statutory income tax rate of 35% to the Company’s total income tax (benefit) provision is as follows (in thousands):
 
Year Ended 
 December 31,
 
2017
 
2016
 
2015
Income tax benefit at federal statutory rate
$
11,308

 
$
(1,007
)
 
$
(9,798
)
State and local taxes net of federal benefit
(691
)
 
1,545

 
2,575

Foreign income tax rate differential
(11,878
)
 
5,849

 
11,584

Stock-based compensation
(12,584
)
 
1,412

 
1,571

Net unrealized loss on warrant and other liabilities
—

 
—

 
1,097

Non-deductible items
168

 
267

 
1,314

Uncertain tax positions
789

 
4,033

 
5,523

Return to provision adjustment
167

 
(498
)
 
(25
)
Non-deductible acquisition costs
—

 
199

 
10

Change in valuation allowance
(4,673
)
 
4,911

 
7,957

Research and development credit
(1,098
)
 
(2,170
)
 
(7,684
)
Deferred charge on restructuring
—

 
12,168

 
12,168

U.S. tax reform
(31,063
)
 
—

 
—

Other
20

 
316

 
(223
)
Total income tax (benefit) provision
$
(49,535
)
 
$
27,025

 
$
26,069



The primary driver of the income tax benefit for the year ended December 31, 2017 was the impact on deferred taxes from the reduction in the U.S. federal corporate tax rate beginning in 2018. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law, which, among other items, reduced the corporate income tax rate from 35% to 21%. As a result, our deferred taxes and certain unrecognized tax benefits at December 31, 2017 have been revalued at the reduced 21% rate. The revaluation resulted in a benefit for income taxes of approximately $31.1 million for the year ended December 31, 2017.

The secondary driver of the income tax benefit for the year ended December 31, 2017 was the recognition of excess tax benefits from stock-based compensation as a result of the adoption of ASU 2016-09, Stock Compensation: Improvements to Employee Share-based Payment Accounting in the first quarter of 2017. As a result of this updated guidance, we recorded $12.8 million of excess tax benefits, rather than additional paid-in capital, for the year ended December 31, 2017.
Deferred income taxes reflect the net tax effect 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 (liabilities) are as follows (in thousands):
 
As of December 31,
 
2017
 
2016
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
17,431

 
$
13,084

Research and development credit carryforwards
3,597

 
898

Stock-based compensation expense
3,776

 
5,692

Accrued VAT liability
42

 
68

Alternative minimum tax credit
274

 
274

Allowance for doubtful accounts
384

 
611

Deferred rent
573

 
644

Accrued vacation
623

 
1,035

Unrealized loss on foreign currency
527

 
—

Other, net
1,691

 
1,418

Total deferred tax assets
28,918

 
23,724

Less valuation allowance
11,021

 
13,839

Total net deferred tax asset
17,897

 
9,885

Deferred tax liabilities:
 
 
 
Depreciation
(6,850
)
 
(6,618
)
Global corporate restructuring liability
(33,783
)
 
(64,460
)
Unrealized gain on foreign currency
—

 
(1,059
)
Other liabilities
(891
)
 
(2,816
)
Total deferred tax liabilities
(41,524
)
 
(74,953
)
Net deferred tax liabilities
$
(23,627
)
 
$
(65,068
)

 
The Company anticipates generating federal and state income tax NOL carryforwards as a result of its 2017 activity. The NOL deferred tax asset balance additionally includes losses in certain foreign jurisdictions that are currently subject to a valuation allowance.
As of December 31, 2017 and 2016, the Company had approximately $0.3 million and $0.3 million, respectively, of federal alternative minimum tax credits, which may be carried forward indefinitely. As of December 31, 2017 and 2016, the Company had $3.6 million and $0.9 million, respectively, of federal research and development tax credit carryforwards which will begin to expire in 2035 if unused.
The Company has not completed its accounting for the income tax effects of certain elements of the Act. The Act creates a new requirement that certain income such as Global Intangible Low-Taxed Income (“GILTI”) earned by a controlled foreign corporation (“CFC”) must be included in the gross income of its U.S. parent. Because of the complexity of the new GILTI and Base Erosion and Anti-abuse Tax (“BEAT”) rules, the Company is continuing to evaluate these provisions of the Act and whether taxes due on future U.S. inclusions related to GILTI and BEAT should be recorded as a current-period expense when incurred, or factored into the Company's measurement of its deferred taxes. As a result, an estimate of the tax expense or benefit related to these items for the period ending December 31, 2017 has not been included.
The Company assesses the likelihood of its ability to realize the benefit of its deferred tax assets in each jurisdiction by evaluating all relevant positive and negative evidence. To the extent the Company determines that some or all of its deferred tax assets are not more likely than not to be realized, it establishes a valuation allowance. For the year ended December 31, 2017, the Company determined that the existence of a three-year cumulative loss incurred in certain foreign jurisdictions, inclusive of 2017, constituted sufficiently strong negative evidence to warrant the maintenance of a valuation allowance. As a result, a valuation allowance of $11.0 million as of December 31, 2017 has been recorded against certain of the Company’s deferred tax assets. The amount of the deferred tax assets considered realizable is $17.9 million.
The following table summarizes the valuation allowance activity for the periods indicated (in thousands):
 
Year Ended 
 December 31,
 
2017
 
2016
 
2015
Balance as of the beginning of period
$
13,839

 
$
9,540

 
$
1,892

Additions charged to expense
—

 
4,886

 
7,983

Deletions credited to expense
(4,691
)
 
—

 
—

Currency translation
1,873

 
(587
)
 
(335
)
Balance as of the end of period
$
11,021

 
$
13,839

 
$
9,540


 
The Company has not recorded deferred income taxes and withholding taxes with respect to undistributed earnings from its non-U.S. subsidiaries as such earnings are intended to be reinvested indefinitely. The amount of undistributed earnings of non-U.S. subsidiaries at December 31, 2017, as well as the related deferred income tax, if any, is not material.
The following table summarizes the unrecognized tax benefit activity for the periods indicated (in thousands):
 
As of December 31,
 
2017
 
2016
 
2015
Balance as of the beginning of period
$
23,574

 
$
22,229

 
$
398

Additions based on tax positions related to the current year
732

 
1,071

 
21,797

Additions for tax positions of prior years
118

 
274

 
34

Reductions for tax provisions of prior years
(7,411
)
 
—

 
—

Balance as of the end of period
$
17,013

 
$
23,574

 
$
22,229



The amount of unrecognized tax benefits included within other liabilities on the Consolidated Balance Sheets as of December 31, 2017, 2016 and 2015 are $17.0 million, $23.6 million and $22.2 million, respectively. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $17.0 million at December 31, 2017.

In January 2015, the Company implemented an updated global corporate structure to more closely align with its global operations and future expansion plans outside of the United States. The new structure changed how the Company uses its intellectual property and implemented certain intercompany arrangements. The Company believes this may eventually result in a reduction in its overall effective tax rate and other operational efficiencies. The revised structure resulted in the setup of a deferred tax liability in the amount of $66.0 million on the taxable gain created in the transaction. Concurrently, the Company recorded an asset of $66.0 million for the deferred tax charge representing the future income tax on the gain, which would have been amortized into income tax expense through 2019. During the first quarter of 2017, the Company adopted ASU 2016-16, Income Taxes: Intra-entity Transfers of Assets other than Inventory, resulting in a cumulative adjustment to retained earnings for the unamortized balance of the deferred tax charge at December 31, 2016. Please refer to “Note 1—Basis of Presentation and Summary of Significant Accounting Policies” for additional detail regarding the adoption of this accounting standard and its impact on the consolidated financial statements.
The Company is subject to taxation in the United States, New York, and various other states and foreign jurisdictions. As of December 31, 2017, tax year 2014 and later remain open to examination.