Entity information:
Income Taxes
Loss before income taxes consisted of the following (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
United States
 
$
(131,996
)
 
$
(289,783
)
 
$
(324,805
)
Foreign
 
(167,063
)
 
(199,067
)
 
(210,320
)
Total
 
$
(299,059
)
 
$
(488,850
)
 
$
(535,125
)

The provision for (benefit from) income taxes consisted of the following (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Federal:
 
 

 
 
 
 
Current
 
$
—

 
$
—

 
$
—

Deferred
 
(310
)
 
(10,941
)
 
—

State:
 
 
 
 
 
 
Current
 
2

 
49

 
(160
)
Deferred
 
—

 
(1,384
)
 
—

Foreign:
 
 
 
 
 
 
Current
 
5,917

 
3,156

 
5,604

Deferred
 
(977
)
 
399

 
(1,354
)
Total
 
$
4,632


$
(8,721
)

$
4,090


Reconciliation of the federal statutory income tax rate to the effective tax rate is as follows:
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Federal statutory rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
Effect of:
 
 
 
 
 
 
State taxes, net of federal tax benefit
 
—

 
0.3

 
—

Change in valuation allowance
 
7.4

 
(16.3
)
 
(21.0
)
Research and development tax credit
 
1.0

 
1.1

 
1.1

Stock-based compensation
 
0.5

 
(2.8
)
 
(1.1
)
Impact of foreign tax differential
 
(20.6
)
 
(14.7
)
 
(14.1
)
Non-deductible/non-taxable items
 
(0.4
)
 
(0.8
)
 
(0.6
)
Impact of 2017 Tax Act
 
(24.0
)
 
—

 
—

Other, net
 
(0.5
)
 
—

 
(0.1
)
Total
 
(1.6
)%
 
1.8
 %
 
(0.8
)%

The components of the deferred tax assets and liabilities are as follows (in thousands):
 
As of December 31,
 
2017
 
2016
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
143,791

 
$
216,397

Accruals and reserves
8,289

 
15,335

Stock-based compensation
22,345

 
48,212

Fixed assets
7,727

 
14,025

Deferred revenue
43,902

 
64,691

Research and development credits
37,474

 
30,852

Other deferred tax assets
1,325

 
673

Gross deferred tax assets
264,853


390,185

Valuation allowance
(185,068
)
 
(233,783
)
Total deferred tax assets
79,785


156,402

Deferred tax liabilities:
 
 
 
Acquisition related intangibles
(45,521
)
 
(93,151
)
Convertible senior notes
(31,877
)
 
(61,811
)
Other deferred tax liabilities
—

 
(7
)
Total deferred tax liabilities
(77,398
)

(154,969
)
Total net deferred tax assets
$
2,387


$
1,433


On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code. The changes include, but are not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%, imposing a mandatory one-time transition tax on certain unrepatriated earnings of foreign subsidiaries, introducing bonus depreciation that will allow for full expensing of qualified property, eliminating the corporate alternative minimum tax (“AMT”) and changing how existing AMT credits can be realized.
In accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 118, we provided our best estimate of the impact of the Tax Act in the period ended December 31, 2017 based on our understanding of the Tax Act and guidance available as of the date of this filing. We remeasured our existing net U.S. deferred tax assets using the enacted tax rate and other known significant changes to the tax code. This remeasurement resulted in a total decrease in these assets by $71.7 million which was fully offset by the decrease in valuation allowance. In addition, we recorded a $0.3 million tax benefit related to the release of valuation allowance on AMT credit carryovers because under the Tax Act, existing AMT credits are refundable from 2018 through 2021.
A valuation allowance is provided when it is more likely than not that the deferred tax asset will not be realized. Our valuation allowance decreased by approximately $48.7 million during the year ended December 31, 2017, primarily as a result of the reduction of the Company’s valuation allowance based upon the new enacted federal tax rate and partially offset by additional deferred tax assets recorded during the year as a result of acquisition intangible amortization and net operating loss carryforwards.
As of December 31, 2017, we had federal and state net operating loss carry forwards of approximately $631.5 million and $719.1 million, respectively, available to reduce future taxable income, if any. If not utilized, the federal net operating loss carry forwards will expire from the years ending December 31, 2024 through 2037 while state net operating loss carry forwards will expire from the years ending December 31, 2020 through 2037.
We also have federal and state research and development tax credit carry forwards of approximately $24.7 million and $15.7 million, respectively. If not utilized, the federal credit carry forwards will expire in various amounts from the years ended December 31, 2024 through 2037. The state credit will carry forward indefinitely.
Utilization of the net operating loss carry forwards and credits may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.
As of December 31, 2017, we had $39.4 million of unrecognized tax benefits, of which if recognized, $1.6 million would affect our effective tax rate. We file income tax returns in U.S. federal, state and foreign jurisdictions. As we have net operating loss carry forwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years. For foreign jurisdictions, the tax years open to examination include the years 2013 and forward. We do not expect the unrecognized tax benefits to change significantly over the next 12 months. We recognize both interest and penalties associated with uncertain tax positions as a component of income tax expense. During the year ended December 31, 2017 we recognized interest and penalties of $36,000. During the years ended December 31, 2016 and 2015, we recognized a $31,000 decrease and $183,000 increase to interest and penalties, respectively. As of December 31, 2017 and 2016, our total accrual for interest and penalties was $403,000 and $367,000, respectively. The ultimate amount and timing of any future cash settlements cannot be predicted with reasonable certainty.
A reconciliation of gross unrecognized tax benefits is as follows (in thousands):
 
 
Year Ended December 31,
 
 
2017
 
2016
 
2015
Unrecognized tax benefits at the beginning of the period
 
$
43,637

 
$
31,902

 
$
21,264

Additions for tax positions related to the current year
 
10,780

 
12,435

 
10,614

Increases related to prior year tax positions
 
—

 
561

 
24

Decreases related to prior year tax positions
 
(14,955
)
 
(1,213
)
 
—

Decreases based on settlements with taxing authorities
 
—

 
(48
)
 
—

Lapse of statute of limitations
 
(75
)
 
—

 
—

Unrecognized tax benefits at the end of the period
 
$
39,387

 
$
43,637

 
$
31,902


As of December 31, 2017, we have not made any tax provision for U.S. income taxes and foreign withholding taxes on approximately $31.1 million of earnings in foreign subsidiaries, which we expect to reinvest outside of the U.S. indefinitely. If we were to distribute these earnings to the U.S., we could be subject to U.S. income taxes and foreign withholding taxes. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.